Declaring kickbacks to IVA touts.

The Times recently reported that the Solicitors Regulation Authority (SRA) - the independent arms-length body now in charge of standards and conduct in the profession - has announced a crackdown on solicitors if they do not disclose any “kick-backs” paid to insurance companies, estate agents or others for work referred to them.

The Times interviewed the head of the SRA who said that the authority wanted to take tough action over the abuse of so-called referral fees — sums of up to £600 a case widely paid by law firms to receive work, mostly from insurance companies, to handle accident cases.

The article says that the SRA had decided for now against a ban on such fees. Instead, it would be issuing a warning making it clear that it would take action if solicitors did not disclose the fees to the public.

This rather weak announcement was made despite an earlier and even more alarming Times report which revealed that some lawyers had offered sums of cash as large as £10,000 for the names of injured policyholders to secure motor injury business from life insurance companies.

The report said that some insurers were auctioning the names of policyholders injured in motor accidents to solicitors without the injured parties' knowledge.

Critics are already saying that the SRA should have questioned the ethics of paying 'kickbacks' at all rather than simply insisting that they are declared - but the insistence on the principle of transparency is at last an important step forward.

So, how does this effect Insolvency Practitioners ?

We have previously picked up on the question of undisclosed fees or commissions paid for business referred by IVA touts.

A relatively small number of solicitors are also licensed IPs and they will be required to follow the new instructions from the SRA for all of the business that they undertake - including personal insolvency matters.

There is no specific evidence that any solicitors are paying 'kickbacks' for referral of IVA business but the important point here is that the SRA have established the principle of transparency with regard to referral fees and solicitors are now required to declare them to their clients.

The SRA have taken over the regulatory role of the Law Society and they should also now be the regulatory body for solicitors licensed to act as IPs and, to ensure consistency, the new professional standards that now apply to solicitor IPs should also now apply to all insolvency practitioners.

But what should happen and what will happen are two different things because there is no way of immediately ensuring consistency across the insolvency profession and this exposes the realities of a profession that always claims to be regulated.

It takes seven recognised professional bodies (RPBs) to regulate the conduct of some 1800 licensed IPs operating in the UK and with so many closely guarded vested interests involved it is anybody's guess how long it will take before all IPs are required to follow the standards of disclosure required by the Solicitors Regulation Authority.

It will be interesting to see who objects and protests the loudest when the question arises.