Smedley: City watchdog would cost £3m a year

Proposals to create a specialist division to police City law firms would cost the profession an estimated £3m in additional expenses to run.

Commenting on the publication of his report on the regulation of corporate law firms, Nicholas Smedley put the £3m estimate on his key proposal - the creation of a new City division of the Solicitors Regulation Authority (SRA).

Smedley, a former senior civil servant who was commissioned by the Law Society to review legal regulation, has called for the creation of a new Corporate Regulation Group at the SRA, which would be staffed by experienced City professionals.

A number of options have been considered to meet the higher regulatory cost but one option would see large corporate law firms meeting the costs themselves. The other option would see a levy placed on practising certificates, spreading the costs across the profession.

The SRA has separately indicated that it believes such a division would cost £3m-£4m annually to run.

The new group, which would be established as a quasi-autonomous part of the SRA, would consist of senior figures from the world of commerce and corporate law. If adopted, it would be headed up by a group director overseeing account managers each holding portfolios covering approximately five firms.

The report, published today (26 March), also calls for the SRA to offer higher salaries to attract staff for the division with City experience.

Smedley told Legal Week: "I have not done an enormous amount of costs estimation but I expect approximately £3m in running costs for the new group. Staff salaries will be the main element of that."

Smedley spoke to a number of stakeholders to draw up his recommendations including the magic circle and top 50 UK firms Lovells, Ashurst, CMS Cameron McKenna, Wragge & Co and Irwin Mitchell. Clients contacted included Deutsche Bank, Barclays and BP. He also consulted other regulators including the Financial Services Authority.

His findings will be fed into Lord Hunt's ongoing review of the wider framework of regulation in the UK - which was also commissioned by the Law Society.

For more, see Editor's Blog: Will the real legal services regulation review please stand up?

Click here to comment on this article.