[1]Paraskeva: practical obstacles to choice of regulator
Real separation of representative and regulatory functions at organisations like the Law Society and Bar Council is “unfinished business” of the Legal Services Act, according to the woman who led the society’s negotiations with the government in the run-up to the Act.
Dame Janet Paraskeva will say today that more work also needs to be done to allow law firms to choose their regulator as the Act envisaged.
Dame Janet, who was Law Society chief executive between 2000 and 2006, became chair of the Council for Licensed Conveyancers (CLC) earlier this year [2].
In her first major speech in that post, to today’s Society of Licensed Conveyancers conference in Derby, and seen in advance by Legal Futures, she says that she is “grateful” for the clarity of purpose the CLC enjoys as a pure regulator.
“Returning to the legal sector, I was surprised to find that there is unfinished business from implementation of the Legal Services Act. That is to ensure that other frontline regulators of legal services are able to enjoy that same clarity that we do. That needs to be through real and effective separation of representative and regulatory functions. The principle seems to have been eroded since passage of the Act in 2007.
“And it’s a matter that we are taking up with the Legal Services Board, which bears the responsibility of ensuring that the Act is being exploited to the full.”
“Some more unfinished business”, she continues, is “ensuring that practices can in fact make their choice of regulator as Parliament envisaged. But there are some practical obstacles to that still – including the supposed need for run-off cover and interruption of access to lenders panels.”
Looking specifically at the CLC’s work, Dame Janet says the regulator is beginning work on a “fundamental review” of its regulatory arrangements. This is not, she stresses, because the CLC is “broken in any way”, but so as to “understand what changes the regulator can make that will not simply reduce the regulatory burden but will actually assist you help you develop your businesses, without putting the interests of consumers at risk”.
The CLC was set up to stimulate competition in the conveyancing market and so it is right for it to look at how regulation can support growth.
Among the issues that need “fresh thought”, she says, is financial protection.
The CLC operates a ‘master policy’ for professional indemnity insurance (PII) but members can opt out of it and this year “the arrival of a new scheme as a direct competitor to the master policy has shaken up the market. And there’s every reason to believe that its impact will grow in the 2016 renewal round”.
Dame Janet says: “I should say now that there is no concern about this increased competition in the market. But that impact is based on price alone so far. There is no difference in terms between the two policies. So what we have seen is not real innovation. It’s not really a different way of providing protection for firms and their clients.
“That’s why we are beginning a discussion with insurers to explore whether in 2015 there is need and scope for significant change. Because the current system has flaws.
“Despite PII being mandatory for current practice and run-off cover being required for closing firms there is still a need for a compensation fund. That places a financial burden on the profession through the contribution that you must all make to that fund.”
She also reiterates the CLC’s support for a single compensation fund across the legal professions. “The big gains would be economies of scales and consistency of approach, bringing benefits to consumers.”
Dame Janet says the CLC will revisit its rules that allow licensed conveyancers to act for both sides in a transaction so as to address those “instances of this freedom being abused”.
“These are in relation, unsurprisingly, to sellers who are vulnerable for whatever reason, though that reason is generally financial,” she explains. “The seller finds themselves in dire straits and may feel pressured to do something that is not in their best interest.”
In relation to joint representation of lender and borrower, she says that though the CLC “understands why lenders want to manage the relationship with firms that act for them”, her starting point is that any regulated lawyer “should have free and unfettered access to the legal services market”.
“So I think there are questions about lender panels that we need to examine. Do they represent an additional quasi-regulatory burden on conveyancers? … Do they limit the client’s choice of lawyer? Do they constitute a barrier to market access?”