[1]Will-writers do not now need to conduct reserved legal activity to be regulated by the SRA
Research into the growing trend of law firms switching regulator has begun so as to assess any risks for consumers and whether there may be unintended consequences.
The Legal Services Board (LSB) is undertaking the work and will look, among other things, at the extent to which new regulators check and use a lawyer or firm’s previous regulatory history.
A newly released paper presented to the LSB’s July meeting said: “Over the last 12 months, we have observed that more legal services providers have begun to take advantage of the opportunity to choose their regulator.
“Reasons cited by providers in support of particular choices include easier authorisation processes, more proportionate regulatory arrangements, easier insurance arrangements and better value for money. Regulators have also indicated their interest in competing for providers’ business…
“We know there is not a consistent set of processes across the regulators. Indeed, proportionate and targeted regulation should allow some space for variation in how things are regulated. We would become concerned if these differences could lead to outcomes that had an adverse impact on consumers, for example through tolerance of poor provider performance or lower standards.”
With both the Solicitors Regulation Authority (SRA) and Council for Licensed Conveyancers dealing with the issue of firms switching regulator having to acquire run-off cover as if they were closing down, and more regulatory competition coming on stream.
This includes the Bar Council becoming an alternative business structure licensing authority, the Institute of Chartered Accountants in England and Wales seeking to expand the range of reserved legal activities it is designated to authorise, and the SRA starting to authorise firms under its revised rules that mean firms, such as will-writers, do not need to carry on reserved legal activities to become regulated.
The paper noted concerns that the debate around this issue seemed to focus mainly on the needs and interests of providers and regulators, “and that there had been little discussion about the interests of consumers”.
It suggested that “the potential impact on consumers may require some further assurance”.
The LSB has now started scoping out research to examine the benefits and risks associated with these developments.
It said: “It is expected that this project will consider the main differences between regulators, such as in entry, compliance activities, and exit from the regulated market. It will also consider the differences that may drive mobility between regulators and the processes that govern mobility, such as authorisation checks. We will assess the risks to consumers that may arise from these sources of variation, and how they may be managed.
“One reason for undertaking this project is to support the ongoing development of our risk-based assessment of regulatory performance. It will help us to identify any unintended consequences of the proliferation of authorisation options, and if necessary, areas for further and more detailed review.
“For example, what information do ‘receiving’ approved regulators take into account about the regulatory performance and history of applicant firms and individuals? Is there appropriate information and intelligence sharing between regulators at this stage? How is this information processed and used to inform decisions?”
Minutes of the LSB meeting at which the paper was discussed said that among the points raised in discussion were that the complexity that could arise as a result of competition among regulators “fuels the case for regulatory reform”.
There were also questions raised over the impact on the Bar Mutual insurance model if the number of solicitors looking to be regulated by the Bar Standards Board increased. It was recognised, however, that the fund was not currently obliged to insure entities.