English regulator predicts high profile ABS 'failure'
A senior official at the body regulating English law firms threw a grenade into the debate over legal profession reforms yesterday, suggesting that it is almost a certainty that one of the newly-minted alternative business structures will fail.
Ann Morgan, the head of the Solicitors Regulation Authority team assessing ABS applications, told the Financial Times: ‘I’m sure there will be an ABS that fails.’ But she firmly maintained that it was for market factors to drive the success of alternative structures and that it was not the authority’s role to intervene in the process.
Her comments come at a sensitive time in the evolution of ABSs. Earlier this week, the SRA doled out two of the three most significant licences so far – the first multiple award to Sheffield-based national law firm Irwin Mitchell, and the other being the first to a firm with private equity backing, Parabis Law. In May, the authority granted a licence to the first high street retailer, the Co-op, and up to now it has granted a total of 20 licences.
ABSs continue to spark debate within the English and global legal professions. Many consider the ability of law firms to accept injections of external capital as compromising the integrity of lawyers’ independence, with professional bodies in the US and Europe adamantly opposed to the structure.
Ms Morgan told the newspaper it was not the SRA’s job to ‘say this firm isn’t a suitable firm because it may fail in the future. It is for us to challenge the firm, and for them to come up with appropriate arguments’. She continued to say that if there is a high-profile ABS failure, the SRA will ‘get looked at to see whether or not we could have prevented it, but I don’t think that’s the nature of the market’.
The SRA official also confirmed that the English authority is currently reviewing the recent spectacular downfall of New York-based global firm Dewey & LeBoeuf. According to the report, the regulator is involved on the UK side of the Atlantic because the bankrupt firm’s London office was guarantor to the worldwide practice’s bank debt and private placement.