LSB hits out at “jumble” of disciplinary regimes, but admits it can do little to improve them

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10 March 2014


Justice: some professional misconduct cases require a criminal standard of proof

The sanctions and appeals regimes of the frontline regulators are an inconsistent “jumble” of different powers that may protect lawyers rather than consumers, according to the Legal Services Board (LSB).

But it conceded its own powers under the Legal Services Act were too weak to reform the situation and called on the government to bring in secondary – and if necessary primary – legislation to achieve change.

Meanwhile, the LSB would press regulators to deliver transparency over their sanctions and appeals arrangements.

In an assessment of current arrangements, published this month, key reforms that the LSB backed, but was unable to implement, were that the civil standard of proof should be used throughout legal services regulation, and that the First Tier Tribunal should hear all appeals against regulatory decisions.

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Echoing the recent consultation by the Solicitors Regulation Authority (SRA) that called for its fining powers of traditional law firms to be greatly increased, the LSB urged that financial penalties for non-alternative business structure (ABS) firms should be raised in line with the levels that could be imposed on ABSs (£250m for a firm and £50m for an individual).

Observing that the current sanctions and appeals system was rooted in the historical development of each branch of the profession, but now existed in a legal services market that had been liberalised, the LSB warned that inconsistency over the standard of proof required in disciplinary proceedings could lead to ‘forum shopping’ – for a regulator where poor conduct is harder to prove.

It said: “This has resulted in a jumble of different, title-based powers, processes, sanctions and bodies that appears inappropriate in a liberalising market, a key feature of which is the ability for different types of lawyer, and for lawyers and non-lawyers, to run law businesses together.”

The civil standard of proof was appropriate, the LSB argued, to protect consumers. However, the Solicitors Disciplinary Tribunal (SDT), and the Bar Tribunals and Adjudication Service and Bar Standard Board, when considering professional misconduct cases, use the criminal standard.

The LSB concluded: “We do not consider that it is acceptable for there to be different standards of proof used by different regulators or by the same regulator for different types of firm… The mismatch between the approach of the SRA and the SDT, for instance, carries the risk that firms and individuals subject to SRA decisions could be incentivised to appeal that decision to the SDT because it is likely that the higher standard of proof will be used.”

It deployed a similar argument for fining powers to be equalised for different entities. Consumers would be disadvantaged if ‘regulatory arbitrage’ occurred, “because firms and individuals may be motivated to be regulated by bodies that appear to have less robust powers and sanctions”, the LSB said. This risk would become worse as more regulators became ABS licensing authorities.

On the issue of regulators being transparent about their sanctions and appeals processes, the LSB singled out three regulators – the Intellectual Property Regulation Board, ILEX Professional Standards and the Costs Lawyer Standards Board – for having “clear descriptions” of their arrangements online. But in general it said regulators could be “more transparent and open in publishing information about the sanctions and appeals decisions they make and in exposing the methods for making those decisions – for example, by publishing a schedule of penalties.”

The LSB concluded its assessment saying: “The LSB would like to see more fundamental re-structuring of sanctions and appeals to achieve economies of scale and greater consistency of decision-making through rationalisation of the current arrangements. This would include as a minimum the use of the First Tier Tribunal as the single body for all appeals against regulatory decisions.”

Separately, the LSB warned it could take action against regulators if a ‘thematic review’ of the regulation of immigration advice and services showed they had not taken “action to mitigate the risks to consumers in the provision of immigration advice and services”. It added: “Failure to take action may lead to formal enforcement action by the LSB.”

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