SRA Consults on New Litigation Funding Rules for Consumer Claims

SRA Consults on New Litigation Funding Rules for Consumer Claims

The Solicitors Regulation Authority has opened a consultation on new rules for law firms that use or arrange third-party litigation funding in consumer claims. Announced in July 2026, the proposals would place fresh obligations on solicitors who work with outside funders and would give clients more information before they sign up. The consultation closes on 17 September 2026. For solicitors and the firms that support them, this is one of the more significant regulatory moves of the year.

Why the SRA is looking at litigation funding

Third-party litigation funding lets an outside party pay the costs of a claim in return for a share of any award or settlement. It has grown quickly in high-volume consumer work, and the regulator has concerns about how some firms in that market operate. At the end of June 2026 the SRA had 94 open investigations involving 68 firms that handle high-volume consumer claims, and it has already closed seven firms in the sector. The consultation forms part of a wider consumer protection review aimed at spotting problems earlier and protecting clients who may not fully understand how their claim is being paid for.

What the litigation funding proposals would require

The consultation sets out several new duties. At the top level, the SRA proposes fundamental obligations that would apply to all solicitors and firms involved with third-party funding. These include maintaining independence from the funder, acting in the client’s best interests, disclosing confidential information only with the client’s consent, and telling clients that funders are not regulated by the SRA.

On top of those core duties, firms handling funded consumer claims would face more specific requirements:

• Give clients a prominent funding information document, in clear and plain language, that explains other available options such as redress schemes and legal expenses insurance.
• Notify the SRA when they use or arrange funding for consumer claims.
• Prepare a third-party litigation funding risk assessment and make it available to the SRA on request.
• Where certain conditions are met, produce and keep a plan showing how the firm would achieve an orderly closure of its business if that became necessary.

Taken together, the measures are designed to make funding arrangements more transparent to clients and more visible to the regulator.

What it means for solicitors and their partners

If the proposals are adopted, firms that rely on litigation funding will need to review their client-facing materials, their internal record keeping and their contingency planning. The notification duty and the risk assessment in particular would create a paper trail that the SRA can ask to see, so accurate documentation from the outset will be important.

There is a practical due diligence point too. Independence from a funder and acting in the client’s best interests both depend on understanding who is really behind a claim and whether the parties involved are what they appear to be. Solicitors weighing a funded matter, or defending against one, often need to establish the assets, background and connections of the people concerned before they commit. Reliable investigation and asset tracing work supports that judgement. Our guide to the ABI code of conduct for solicitors explains how compliant enquiries should be carried out, and our private investigations service sets out the support available.

The full proposals are set out in the SRA’s consultation announcement, with further coverage from the Law Society Gazette. Responses can be submitted until 17 September 2026.

If you are handling funded litigation and need dependable background checks and asset tracing to support your client’s best interests, fill in the form below to get in touch with the Tremark team.

Frequently Asked Questions

What is third-party litigation funding?

It is an arrangement where an outside party pays the costs of a legal claim in exchange for a share of any damages or settlement recovered. The funder is not the client and is not regulated by the SRA.

When does the SRA consultation close?

The consultation was announced in July 2026 and is open for responses until 17 September 2026.

Who would the new rules apply to?

The fundamental obligations would apply to all solicitors and firms involved with third-party funding, while the more detailed duties focus on firms handling funded consumer claims.