Guidance related to Rule D9.2: Prohibition on the sharing of fees

Rule D9.2 prohibits solicitors and others from sharing "with any unqualified person any profits or fees or fee derived from any business transacted by you of a kind which is commonly carried on by regulated persons in Scotland in the course of or in connection with their practice"; with certain limited exceptions. Those exceptions are, broadly, (a) payment of overheads (as defined in the rule) and (b) retired partners ("managers" in the rule) and their executors, heirs or representatives; employees who are wholly employed in the practice unit; public officers in respect of work done in the course of their duty; and other lawyers - including lawyers in other jurisdictions - and law centres, citizens advice bodies and licensed legal services providers and those within them.

The Professional Practice Committee take the view that the principal type of arrangement which the rule prohibits is an arrangement to pay commission for the introduction of business on a case by case basis. Solicitors are entitled to pay for the cost of marketing or promoting the practice unit as part of their overheads. They are entitled to pay a fee to be included on a panel to whom referrals will be made provided that that fee is not expressed as a specific sum per referral or as a percentage of the fees chargeable for referred business. A flat fee is not in breach of the rules and that may be a fee which is reviewed periodically.

You are entitled to pay for the provision of services to the practice unit as part of overheads. Even if the service is provided by the person who introduces the client, you are entitled to pay for the service. However the service must be a real service and not merely the introduction of the client. The Committee has also decided that the carrying out of a money laundering check by the introducer would not, however, be a service for which payment could be made as that is an obligation on solicitors themselves in terms of the Accounts Rules (Rule B6). Services which have been accepted as not breaching the rules have included carrying out hearing tests; taking statements of witnesses; obtaining photographs of a locus; and completing a detailed client questionnaire relating to the particular matter in which the solicitor is instructed. The introduction of capital in return for a percentage of fees would be regarded as breaching the practice rules, but the provision of loan funds with a variable rate of interest expressed as a percentage of the funds advanced would not.

The inclusion of a commission paid to an introducer as an outlay in a solicitor's fee note - and not a hidden part of the fee - would not be in breach of the rules however the position would have to be made clear to the client at the outset in the terms of business.

Finally solicitors and others are of course entitled to receive commission from third parties for the introduction of business, but the existence of such arrangements should be disclosed to the client although the actual amount of commission does not need to be disclosed unless the client specifically seeks that information. Such commission received must relate to any work undertaken by the solicitors in connection with the business referred. If no work has been undertaken, unless the commission is of a nominal amount it should be accounted for to the client.

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