Focusing regulation on risk

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25 May 2016

Posted by Sheila Kumar, chief executive of the Council for Licensed Conveyancers

Kumar: time is long overdue for a thorough review of legal services regulation

Kumar: time is long overdue for a thorough review of legal services regulation

The Council for Licensed Conveyancers (CLC) has long argued that the scope of regulation of legal services is a muddled patchwork. The system of ‘reservation’ of legal services has grown up over time on no systematic basis and needs to be reviewed to ensure it is genuinely protecting consumers and supporting innovation and growth.

The services currently ‘reserved’ to qualified and regulated lawyers are few in number. But that does not mean the resulting regulation is narrow in scope. All legal work undertaken by solicitors, for example, is regulated by dint of their professional status.

The chair of the Costs Lawyer Standards Board has now floated the idea of two-tier regulation, differentiating between those lawyers who hold client money and those who do not. It’s an important point that must be explored and understood. I have another consideration to add into the mix.

With increasing specialisation in the provision of legal services, there is ever-clearer differentiation between firms’ clients. Many firms will have either overwhelmingly private clients or overwhelmingly business clients. (For these purposes micro and small businesses without in-house legal functions should be treated as private clients.)

If a law firm is providing services to a corporate entity with a general counsel and in-house team, is the full panoply of regulation proportionate or even needed at all? If a firm’s clients are all individuals making very infrequent use of legal services (and who may be entrusting that firm with management of large sums of money – possibly life savings) can anything less than a comprehensive regulatory regime be contemplated?

There was widespread surprise and concern in May 2013 when the then Lord Chancellor rejected the views of the legal professions and consumer groups that will-writing should be regulated. The widely held perception is that poorly written wills cause significant problems and that the nature of the service, and vulnerability of its consumers, demand tighter oversight than at present.

A lack of concrete evidence, though, made that argument difficult to sustain. In any event, a piecemeal approach to these questions will only continue the muddle and compromise of the past.

The time is long overdue for a thorough review of the purpose and scope of legal services regulation. Professor Stephen Mayson has undertaken some work on that but there seems to have been little appetite to address these fundamental questions. The Legal Services Act, based on the Clementi report that I had the pleasure to work on, addressed the framework for the delivery of regulation, governance and complaints handling.

It’s time now to look under the hood of that regulation to see how it can be reshaped to continue protect those clients who need protection and better promote innovation and competition for the good of the whole economy. I hope that the various government initiatives around legal services will do just that.

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