The Solicitor Regulation Authority's (SRA) board has agreed to allow solicitors to make referrals to restricted advisers causing consternation within the industry.
The move follows a recommendation to the board made on Monday following a consultation which took place between July and September 10.
The board's decision overturns the SRA's original position which was to only allow referrals to independent advisers.
This decision will not come as a surprise to anyone in the industry as providing solicitors with the freedom to choose restricted or independent advisers was the body's preferred outcome from the start.
Agnieszka Scott, SRA director of policy, said the move will allow solicitors to refer in the best interests of the client.
"Solicitors need to carefully discuss the referral with the client. They are a qualified professional and they can make their own judgement," she said.
Scott explains that the body's decision was the result of an emphasis on ‘outcome focused regulation'. This would see the solicitor empowered to make the decision on referrals in the best interest of the client. "The current rule is in our view is very prescriptive," she added.
Several industry insiders argue that powerful lobby groups such as the Association of Private Client Investment Managers and Stockbrokers (APCIMS) have contributed to the SRA's decision.
But Scott said that the SRA listened to all the stakeholders involved. "We received a lot of lobbying from both sides. We did meet with APCIMs, but also met with SIFA, a group that helps independent advisers form relationships with solicitors. We met with all the different stakeholders prior to the consultation."
Stuart Bushell managing director at SIFA, and someone that argues that the move is the result of powerful lobbyists pursuading the SRA, said the decision was not in the interests of the consumer.
"In my view, the SRA has been lobbied intensely by the tied side of the industry, and is confused as to what independence means. The body has created a false link between ‘outcome focused legislation' and this decision to refer to restricted advisers.
"I have some sympathy for the view those advisers that are whole of market but specialised and therefore restricted, are acting independently and should constitute an acceptable referral.
However, it doesn't look as though the SRA has been subtle enough to allow solicitors to refer to these restricted advisers and not those restricted working on behalf of third parties."
Scott explained that she felt that even where restricted advisers were working on behalf of a third party, a referral might be in the best interests of the client. "It is possible that they the offer the most suitable price or location, and it is up to the solicitor to determine this," she said.
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