Tuesday, January 14, 2014
COFA Alert: Are you sending monies to a firm that should be closed?
It is hoped and anticipated that, any day now, the Solicitors Regulation Authority will publish a list of those law firms which were to have closed on 29 December because they failed to secure professional indemnity insurance.
The SRA action is likely to be a response to increasing voices of concern among solicitors over the SRA’s admission last week that it was not sure whether all 116 affected firms had actually stopped practising.
These firms are bound, by the SRA's own code, to cease trading but it is feared that some may be waiting for the SRA to formally shut them down.
Firms conducting conveyancing are particularly exposed given the reliance on undertakings. What if you have one or more of these firms on the other side of a conveyancing transaction, but because of the SRA's stance you currently don't not know about it? This could have potentially disastrous consequences not just for your client (in terms of delaying the transaction) but directly to your firm. If you send money to a closed firm or rely on undertakings, you are going to have to explain this to your lender client. Will it affect your panel status?
As a COFA you need to know that you are not trading or sending funds to firms that effectively don't exist.