The SRA Handbook is no longer in effect. It was replaced by the SRA Standards and Regulations on 25 November 2019.

SRA Handbook

Applying to the ARP

Version 5 of the Handbook was published on 01/10/2012. For more information, please click 'History' Above

Rule 10: Applying to the ARP

10.1: Where a firm carrying on a practice has not obtained qualifying insurance outside the ARP in respect of any indemnity period or part thereof to which these Rules apply it must, if an eligible firm, apply in accordance with the procedure set out in this Rule 10 to enter the ARP, subject to Rule 10.2, before the start of the relevant indemnity period.

Commentary:

A firm which for any reason does not have qualifying insurance in place should apply to the ARP before the start of the relevant indemnity period if it is an eligible firm. However, it is important to note that premiums payable to the ARP are intended to be high, and firms would therefore be prudent to seek quotations from qualifying insurers outside the ARP before the start of an indemnity period.

An ARP policy can be cancelled if it is replaced by a policy with a qualifying insurer. A return premium may be payable to a firm which cancels an ARP policy in these circumstances - refer to Appendix 2 for the basis on which the ARP premium and any return premium is calculated.

Firms should also be aware of the other consequences of being insured through the ARP set out in this part of the Rules, including the need to comply with any special measures under Rule 10, and the limitations on eligibility set out in the definition of "eligible firm".

10.2: A firm must not start carrying on a practice without having obtained qualifying insurance outside the ARP.

Commentary:

Any firm wishing to start up a new practice must obtain qualifying insurance with a qualifying insurer other than the ARP, before starting practice. For the avoidance of doubt, a firm which has not previously been regulated by the SRA or a non-SRA firm that elects (and is accepted) for regulation by the SRA must also arrange qualifying insurance outside the ARP in order to commence carrying on a practice. Subject to this requirement, a new firm may start practice at any time during an indemnity period.

10.3

By applying to enter the ARP, the firm and any person who is a principal of that firm agrees to, and (if the firm is admitted to the ARP) the firm and any person who is a principal of that firm shall be jointly and severally liable to:

(a): pay the ARP premium in accordance with these Rules, together with any other sums due to the ARP manager under the ARP policy; and
(b): submit to such investigation and monitoring and to pay the Society's costs and expenses as referred to in Rule 11.2; and
(c): pay any costs and expenses incurred by the Society or the ARP manager incurred as a result of any failure or delay by the firm in complying with these Rules;

and shall be required to implement at the expense of the firm any special measures.

10.4

Any material misrepresentation made in an application for admission to the ARP shall, subject to any waiver under Rule 19.1, render the firm a firm in default for the purposes of Part 4 of these Rules. The provisions of that Part shall apply to the firm as if that firm had not been admitted to the ARP but neither the firm nor any principal of the firm shall be entitled to the refund of any ARP premium paid to the ARP manager. Any amount so paid shall be credited against any sums payable under Part 4 of these Rules.

Commentary:

Although an ARP policy, once issued, cannot be cancelled (unless and until a replacement policy with a qualifying insurer is issued to that firm), a firm which makes a material misrepresentation in its application to be admitted to the ARP will be nevertheless treated in the same way as a firm in default.

10.5: The application for admission to the ARP must be made to the ARP manager on the proposal form provided by the ARP manager.
10.6: The applicant must state on the proposal form the date from which cover is sought. This date must not be earlier than the date on which the application is made for admission to the ARP. The applicant must also provide such other information as the ARP manager requires for the purposes of setting a premium.
10.7: If the applicant is a firm in default it must state on the proposal form that it is a firm in default and give the date of the start of the period of default from which retrospective cover is sought.

Commentary:

The ARP premium is calculated in accordance with a formula set out in Appendix 2, and is linked to the gross fees of the firm concerned. It is important to note that, under Rule 15, any material misrepresentation in an application will result in the firm being treated in the same way as a firm in default, including being liable to pay the ARP default premium.

10.8: The firm, together with each principal of the firm, must ensure that the firm's application has been made and must provide the ARP manager with all information it reasonably requires to process the application.

Commentary:

It is in the interests of the firm and each of the principals of that firm to verify that the application to enter the ARP has been received and that the firm is insured. An application should be made before the start of an indemnity period. Failure to comply with the requirements of this Rule and Rules 14 and 15 will result in the firm becoming a firm in default.

10.9

If a firm has not received a written acknowledgement of its application from the ARP manager 30 days after making the application, or within such other period as is stated on the proposal form, the firm and any person who is a principal of the firm must seek written confirmation that the firm's application has been received by the ARP manager. If that written confirmation is not obtained within seven days after the end of the 30 days, or within seven days after such other period specified on the proposal form, the application shall be deemed not to have been made.

10.10

An applicant whose first application is deemed under Rule 10.9 not to have been made must, within seven days of the day when under Rule 10.9 the first application is deemed not to have been made, make a fresh application. The firm and any person who is a principal of the firm must ensure that the firm is in a position to prove to the reasonable satisfaction of the Society that the firm's fresh application was delivered within those seven days to the ARP manager at the address specified on the proposal form. Provided the firm's fresh application was so delivered, the application shall be treated as having been made at the date when the firm's first application was made. A firm that is not in a position to prove to the reasonable satisfaction of the Society that its fresh application was so delivered shall be deemed not to have made any application.

10.11

Provided that an application or, if necessary, a fresh application, has been made in accordance with Rules 10.5 to 10.10, a firm which is an eligible firm will be covered in the terms of the ARP policy to be issued to it from the start of the relevant indemnity period or, in the case of a firm to which Rule 10.2 applies, the date specified in the application, being the date specified in accordance with Rule 10.6, until whichever is the earlier of:

(a): the end of the relevant indemnity period; or
(b): the date on which the firm obtains qualifying insurance outside the ARP; or
(c): the date when the firm ceases to be an eligible firm.

Commentary:

An eligible firm which should have applied to the ARP before the start of an indemnity period but fails to do so will have breached these Rules by failing to take out a policy from the start of that indemnity period. It may make a later application, but will be liable to pay the ARP default premium for the indemnity period in question. Each principal in an eligible firm which fails to make an application in time commits a disciplinary offence.

10.12: Any firm in the ARP, and any person who is a principal of that firm, is liable to pay to the ARP manager the ARP premium in respect of that firm within thirty days of such premium being notified to it by the ARP manager.

Commentary:

It is a disciplinary offence for a firm and for any principal of that firm to fail to pay the ARP premium (including the ARP run-off premium) to the ARP manager within the required 30 day period. A firm may enter into arrangements with, for example, a premium funding company (whether offered by the ARP manager or arranged independently) to enable it to make payments by instalments, provided that the premium is received in full by the ARP manager from the premium funding company within the required 30 day period.