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Legal Services Board urges move to single regulator

The Legal Services Board has called for the development of timetabled and costed proposals for a new framework for legal services regulation with a single regulator at its core.

In its submission to the Ministry of Justice review, the Board also said the new regulator under this model would be unrelated to any existing regulator – including the LSB itself.

“Such a body would need to be created from scratch, rather than from the LSB or current approved regulators,” it argued. “It should be organisationally, statutorily and culturally fully independent of both government and representative bodies’ vest interests.

“In turn, its own rule book should start from a blank sheet of paper – informed, but not constrained, by current requirements with no ‘passporting in’ of old rules.”

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A new code of ethics and behaviour set by the regulator would cover all individuals offering regulated legal services, “backed by proportionate requirements focused on entities where needed”.

The LSB said professional bodies would play a standard setting role under this core model, rather than control the right to offer services.

Other proposals put forward by the Board – as part of what it described as “a blueprint for incremental, but significant change – included:

  • immediate action by the LSB and existing regulators to target regulation at identified risks, “rolling back rules where this justification does not exist”;
  • simplification of the legislative framework for legal services significantly over the next two to three years; and
  • rights for consumers of all legal services to access the Legal Ombudsman and new freedoms for the Office for Legal Complaints to develop its services.

The submission made a number of suggestions for achieving lower costs and entry barriers.

Like the Solicitors Regulation Authority, the LSB says lower costs could be achieved by the removal of the ability of professional bodies to levy compulsory fees for non-regulatory activities. It said some £20-25m in total was currently levied in addition to the actual costs of regulation.

Other suggestions included having fewer restrictions on in-house solicitors acting direct for the public, “creating more competition and diversity in the market”, and introducing a new simple ‘fit and proper’ test for alternative business structures.

The Board suggested that further reform to the way in which the Legal Services Act 2007 was working was required to “secure a liberalised market which offers greater innovation, choice and value and better supports domestic and export growth for legal services and in the wider economy”.

It also said there was a need to tackle major risks to both public and consumer interest proportionately.

In its submission the LSB argued that greater independence was the crucial element in securing better regulation. The super-regulator rejected a return to pure self-regulation by the professions alone.

“Practical experience has convincingly shown it to be a driver of cost and not to work in either the public, the consumer or the legal services sector’s best interests,” the Board said.

LSB chairman David Edmonds said: “The last five years have seen an unprecedented period of change, with improvements in regulation helping to foster a range of new businesses. The reforms in the Act have allowed new investment in, and non-lawyer management of legal firms. Regulators have increasingly started to express requirements in terms of outcomes, which can be met in many ways.

“But success has shown that radical change is needed to simplify regulation further and target it more effectively. More could have been achieved, faster with a simpler statutory framework and bolder, more market sensitive, more independent and less risk averse regulators.”

He added: “Our prescription does not turn the clock back. More not less change is needed in mechanisms for market entry; regulation needs to be further detached from the influence of the provider towards the consumer; and simplification at every level can be delivered.”

In its submission, the SRA called on the Government to hand it structural – and not just operational – independence from the Law Society.

It claimed that the professional bodies such as Chancery Lane were still capable, within the statutory framework, of exercising, or attempting to exercise, a degree of influence over ‘independent’ regulators.

The Law Society, however, has rejected calls for a single independent regulator, saying the streamlining of processes could be achieved without the creation of such a body. In a statement on its website, it said: "The cost of setting up such a body is likely to be high, the inevitable further changes in regulation (after a period of enormous change) would create an additional burden on firms and there is no evidence that such a regulator would bring any cost benefit."

Chancery Lane said it recognised that the burden of regulation was too high and wanted to see it reduced. It argued that there should be greater professional involvement in regulation, with the professional bodies setting standards and authorising those wishing to practise.

"Professional involvement will mean that the realities of different types of practice are understood by the regulator and that regulation can be more targeted and proportionate cost efficient," it claimed. " We recognise the need for continued oversight but would expect the Legal Services Board to have a much more focused role."

The Law Society added: "While we recognise that the current regulator structure is complex, we do not believe that many consumers are aware of such complexities or that it influences their decisions. The creation of the Legal Ombudsman has allowed a single point of contact for clients of regulated legal services providers thus simplifying the process for clients to complain."

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