SRA taken to task over enforcement and IT failures

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11 May 2016

Sir Michael Pitt

Sir Michael: “much more that needs to be done”

The Legal Services Board (LSB) has strongly criticised the Solicitors Regulation Authority (SRA) over failures in its enforcement work and IT systems – and also warned about the risk that the overhaul of the Handbook “may be too much” for firms and the regulator to cope with.

In its overview report on regulatory standards and performance reviews of the eight legal regulators, published yesterday, the LSB welcomed the “substantial progress” they had made since the first set of reports appeared in 2012.

However, the LSB warned in its overview report that enforcement work “generated a significant amount of public interest and media attention” and “confidence in the regulator can be damaged by repeated public criticisms about the quality of its decision-making and case preparation”.

The LSB went on: “The SRA has recently faced such public criticism from the Solicitors Disciplinary Tribunal and the High Court in relation to its case preparation, the drafting of its allegations and the quality of the evidence presented.

“We strongly encourage the SRA to take account of the criticisms when carrying out its review of its enforcement work and the other regulators to consider what they can learn from the SRA’s experiences.”

In its individual performance review of the SRA, the LSB said it was “satisfied” with the progress made over the past four years, and welcomed “the ambitions” of the SRA’s reform programme. “It is also important, however, that the SRA maintains its focus on continuing to improve the performance of its core operational functions.

The review said the LSB had received feedback that the regulator could be more “proportionate and transparent” in its intervention activity.

The oversight regulator said the different sanctions and appeal arrangements for ABS and non-ABS firms worked “against the consumer interest”. In particular the LSB said it was more difficult to make a finding of a Handbook breach against a non-ABS firm and called for the civil standard of proof to be used for both types of firm, as the SRA had itself suggested.

On IT, the LSB said the development of an “effective IT solution” for the SRA’s operational work should be a priority.

“A new IT system to support the SRA operational functions has been in development for some time. However, following a recent review of the project, as part of a wider review of the corporate services shared by the SRA and the Law Society, the SRA has concluded that it would be more cost effective to stop the development of the new IT system and start again.

“We understand that an external consultancy firm will assist the SRA to map out what IT is in place, what activities are undertaken and what IT is needed to carry out these activities effectively and efficiently. In the meantime, the SRA is making small improvements to the current IT system where it can.”

The LSB rated the SRA as “satisfactory”, the second highest of the grades it uses, in only one category – risk assessment. In all other areas it was said to be “undertaking improvement and work is well under way” – the third of the five grades.

On the Handbook review, the LSB said concerns that the SRA’s direction of travel could be unclear to solicitors highlighted “a risk that a wholesale review of the Handbook may be too much for firms (and the organisation) to cope with. The SRA will need to consider carefully how it manages this risk”.

By comparison, the Bar Standards Board (BSB), was rated in its performance review as “satisfactory” in two categories – supervision and enforcement. Neither regulator was ranked as “good” in any category.

The LSB said the BSB had “managed to achieve significant improvement because it set itself an ambitious programme of change”.

However, there had been “delays in the progression of some projects” and it was “important that the BSB is realistic about what it can achieve in the timescales available and the need to ensure that it maintains its core activities”.

The LSB did not mince its words when dealing with some of the the smaller regulators. On the Costs Lawyer Standards Board (CLSB), it said: “The CLSB considers that it has a proactive, proportionate, risk and evidence-based approach to supervision. It argues that the low risk presented by the regulated community means that its compliance approach is sufficient to supervise the profession. We disagree.

“We have noted in its individual report that we consider it imperative that it reviews and improves its approach to supervision”.

The LSB said CILEx Regulation “must start thinking about how it can supervise individual practitioners in an evidence-based and proactive manner”.

In contrast, the Council for Licensed Conveyancers received a “satisfactory” grade in all areas and was praised for its “good corporate governance processes”, despite the need for more transparency.

The Institute of Chartered Accountants in England and Wales was ranked as “satisfactory” in its supervision and enforcement, “undertaking improvement” in risk assessment and capability, and needing improvement with work recently started on outcomes-focused regulation.

The Intellectual Property Regulation Board was praised for its “sophisticated approach” to risk assessment, while the Faculty Office, which regulates notaries, had a “proactive, risk-based approach” to supervision.

Sir Michael Pitt, chairman of the LSB, said: “We have seen evidence of substantial progress since our last review.

“The areas where improvements have been made include developing outcomes-focused approaches to regulation, risk assessment processes and risk-based approaches to supervision.

“But there is much more that needs to be done. This varies depending on the regulator and we will be working with each of them to develop tailored action plans which address their specific areas of improvement.”

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