13.1 SRA Regulation, Reserved Activities and PII

Where this sits on SQE1

Legal Services is an FLK1 subject. Annex 4 of the SQE1 Assessment Specification (assessments from 1 September 2026) weights it at 12–16% of FLK1. Ethics and professional conduct are examined pervasively on both papers. Together with money-laundering questions they can make up to 20% of a sitting, and anti-money laundering itself is assessed in FLK1 only. Financial services and funding are also Legal Services topics; they are taught in the next OpenExamPrep chapter. This chapter is independent study material by OpenExamPrep covering the SRA's regulatory role, reserved work, professional indemnity insurance (PII), other authorised providers, and overriding legal obligations. It is not an SRA or Kaplan product and does not claim official approval.

Official starting points: Legal Services Act 2007, s.12; SRA Indemnity Insurance Rules; FLK1 Legal Services in the specification from 1 September 2026.

Principles and risk-based regulation

The Legal Services Act 2007 (LSA 2007) is the statute that rebuilt how legal services are regulated in England and Wales. Section 1 sets the regulatory objectives: protecting and promoting the public interest; supporting the constitutional principle of the rule of law; improving access to justice; protecting and promoting the interests of consumers; promoting competition in authorised persons' services; encouraging an independent, strong, diverse and effective legal profession; increasing public understanding of citizens' legal rights and duties; promoting and maintaining adherence to the professional principles; and, after the Economic Crime and Corporate Transparency Act 2023, promoting the prevention and detection of economic crime. The professional principles in s.1(3) are that authorised persons should act with independence and integrity, maintain proper standards of work, act in the best interests of their clients, comply with their duty to the court to act with independence in the interests of justice, and keep clients' affairs confidential.

The Legal Services Board (LSB) is the oversight regulator. Front-line approved regulators authorise people and entities to carry on reserved legal activities. For solicitors, the Law Society is the approved regulator. It has separated representation from regulation, and the Solicitors Regulation Authority (SRA) is the independent body that authorises, supervises and enforces.

The SRA's Standards and Regulations — including the current Principles in effect from 11 April 2025 — are principles-based and risk-based. They are not a return to the 2011 Handbook's dense tick-box code. The seven SRA Principles and the Codes of Conduct for individuals and for firms set the outcomes. The SRA's enforcement strategy then concentrates resources where the risk of harm to the public is greatest: dishonesty, lack of integrity, abuse of trust, sexual misconduct, serious criminality, and control failures such as anti-money laundering breaches. An isolated technical breach that causes little harm may attract engagement or a warning rather than a Solicitors Disciplinary Tribunal reference. A newly qualified solicitor who hears "risk-based" and concludes that the Principles are optional on a small file has misunderstood the model. Risk-based regulation decides how the SRA deploys supervision and enforcement. It does not decide whether you may ignore a Principle because the fee is modest.

Authorisation is part of the same model. The SRA authorises individuals (solicitors with practising certificates, plus RELs, RFLs and RSLs) and firms: recognised sole practices, recognised bodies (lawyer-owned partnerships, LLPs and companies) and licensed bodies (alternative business structures with non-lawyer ownership or management, licensed under Part 5 of the LSA 2007). Authorised firms must appoint a Compliance Officer for Legal Practice (COLP) and a Compliance Officer for Finance and Administration (COFA). Managers remain accountable. Tools include practising-certificate conditions, thematic reviews, AML supervisory visits, interventions, financial penalties, and referrals to the Tribunal. Service complaints about poor service, as opposed to misconduct, go to the Legal Ombudsman (Office for Legal Complaints), not to the SRA as the first destination.

SQE1 will ask for the next step on a live file, not an organogram. Typical wrappers: a start-up that wants non-lawyer investment (licensed-body territory); a partner who treats an Accounts Rules breach as too small to mention; a supervisor who says the SRA "only cares about dishonesty" so the Equality Act can wait.

Reserved legal activities

Section 12 LSA 2007 lists six reserved legal activities. Schedule 2 tells you what each actually is. Carrying on a reserved activity when you are not entitled is a criminal offence (s.14). Entitlement is only as an authorised person in relation to that activity or as an exempt person (s.13) — a litigant in person on their own case is the everyday exemption. Immigration advice is separately restricted by the Immigration and Asylum Act 1999, s.84; s.13(4) LSA 2007 leaves that restriction in place.

Legal activity in s.12(3) is wider than reserved activity. It includes legal advice and assistance, and representation, in connection with the law or the resolution of legal disputes. Will-writing, most general advice, and much tribunal work are legal activities but not reserved. Unregulated will-writers may draft wills; they may not prepare the probate papers that found a grant unless they are authorised or exempt for probate activities. Acting as a mediator is expressly not a legal activity (s.12(4)).

Worked example. A newly qualified solicitor in Cardiff is asked to (1) draft a will, (2) complete a TR1 for a registered freehold, (3) swear the executor's oath and lodge the probate application, and (4) appear at a county court possession hearing. Item (1) is not reserved. Items (2) and (3) are reserved (reserved instrument; probate). Item (4) is a right of audience the solicitor may exercise in the county court. An unregulated estate agency that offers to "do the conveyancing and the grant of probate in-house" is offering reserved work it cannot lawfully carry on.

Professional indemnity insurance

Clients who suffer loss from negligence or similar civil liability need a defendant with insurance behind them. The SRA Indemnity Insurance Rules require every authorised body carrying on a practice in an indemnity period beginning on or after 25 November 2019 to take out and maintain qualifying insurance with a participating insurer — an insurer that has entered into a participating insurer agreement with the SRA. The policy must comply with the SRA Minimum Terms and Conditions (MTC).

MTC clause 2.1 is the figure SQE1 expects you to use. The sum insured for any one claim, exclusive of defence costs, must be at least £3 million where the insured firm is a relevant recognised body or a relevant licensed body (for activities the SRA regulates under the licence), and at least £2 million in all other cases. The lower figure is the usual minimum for unincorporated recognised sole practices and traditional partnerships. There must be no monetary limit on defence costs. An excess may be agreed, but it must not reduce the MTC limit of liability and must not apply to defence costs. Cover is any one claim: the minimum must be available for each claim, not shared as a yearly aggregate.

On cessation, the MTC require run-off cover for six years, indemnifying on the same minimum limits. If a firm cannot obtain a replacement policy at renewal, an extended policy period and then a cessation period exist so it can obtain cover or close in an orderly way. It must not simply continue practising uninsured.

These Rules do not apply to solicitors, RELs, RFLs and RSLs who practise outside SRA-authorised firms. In-house solicitors, solicitors in non-commercial bodies such as law centres, and genuine freelance solicitors who meet the SRA freelance conditions must still maintain adequate and appropriate indemnity insurance for the services they provide. Freelance reserved work is not automatically on the MTC, and clients must be told if they will not have MTC cover. A recognised sole practice, by contrast, needs qualifying MTC insurance (minimum £2 million). Do not mix the two routes.

PII is not the Compensation Fund. The Fund is a last-resort discretionary fund, typically aimed at dishonesty or failure to account for money. It is not a substitute for insuring negligence. SQE1 likes that distinction.

Other regulated providers of legal services

Reserved work is not a solicitors' monopoly. Other approved regulators authorise other professionals for some or all reserved activities.

Immigration advice and services remain subject to the Immigration and Asylum Act 1999, s.84. An SRA-authorised solicitor may give immigration advice. An unregulated "advisor" generally needs Office of the Immigration Services Commissioner (OISC) registration. OISC registration is not a general licence to conduct litigation or conveyancing.

A newly qualified solicitor who refers a client to "my friend who does cheap conveyancing from a kitchen table" must check whether that friend is an authorised or exempt person for reserved instrument activities. If not, the referral risks assisting a s.14 offence and undermines public trust (Principle 2).

Overriding legal obligations

Client instructions and confidentiality do not displace the criminal law, court orders, or other statutory duties. Code paragraph 6.3 already allows disclosure where it is required or permitted by law. Overriding obligations include: not being complicit in crime or fraud; Proceeds of Crime Act 2002 and terrorism-financing reporting (section 13.3); financial sanctions; the Equality Act 2010 (section 13.2); UK GDPR and the Data Protection Act 2018; and duties to the court. Principle 7 (best interests of each client) gives way when public-interest Principles or the criminal law pull the other way. A client cannot waive a reporting duty, authorise you to mislead the court, or instruct you to discriminate.

Code paragraphs 7.7 and 7.8 also require you to report to the SRA facts or matters you reasonably believe should be brought to its attention as a serious breach. That reporting duty is another obligation the client does not own.

Exam traps

• Treating will-writing as reserved, or treating Land Registry applications as unreserved "admin".
• Assuming every solicitor may appear in the High Court or Crown Court.
• Applying the £3 million MTC figure to every sole practitioner, or the £2 million figure to every licensed body.
• Treating PII and the Compensation Fund as interchangeable.
• Sending a pure service complaint to the SRA as if it were the Legal Ombudsman.
• Letting a client's waiver override AML, Equality Act, or court duties.
• Treating this independent OpenExamPrep section as an SRA publication. It teaches the published statutory and SRA rules; it is not an SRA product.