LSB presses ahead with plan to regulate ABSs amid concerns over Law Society vote

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By Legal Futures

4 February 2011

October 2011: Law Society needs to apply by mid-March to meet parliamentary timetable

The Legal Services Board is pushing ahead with preparations to regulate alternative business structures itself because of fears that the Law Society council will next month block the Solicitors Regulation Authority’s plan to become an ABS regulator, Legal Futures has learned.

The LSB’s main board was told recently that “some members of the Law Society council are opposed to ABS and/or want to delay its start”.

The Law Society – rather than the SRA – is the approved regulator under the Legal Services Act and so has to make the application to be designated as an ABS licensing authority. If it does not do so by mid-March, the Ministry of Justice would be unable to meet the parliamentary timetable for having it approved in time for ABSs to start on 6 October as planned.

As a result, the LSB is investigating the governance and other arrangements that will be necessary for it to regulate ABSs directly and meet the October date. Legal Futures first revealed last year that the LSB was making such contingency plans.

Though the Council for Licensed Conveyancers also intends to become a licensing authority for October, if the SRA was not in the picture aspiring ABSs would have to apply to the LSB for a licence for those reserved legal activities that the CLC cannot regulate.

This would clearly have major resource implications for the LSB, especially as it would have to ensure clear separation between its current functions and those of an ABS licensing authority.

LSB members were told that depending on the circumstances in which the LSB became a licensing authority, “there could be damage to the LSB’s reputation”.

Writing in this week’s Gazette, Law Society president Linda Lee described the council vote as “the most important decision of my presidential year”. If it decides not to apply and the LSB steps in, she said the Law Society will have to bear up to 90% of the start-up costs, but “the profession will be shielded from any reputation risk” arising from ABSs.

If the SRA did regulate ABSs, it would ensure a level playing field between the new practices and traditional law firms, she said, but if the SRA were to fail, “it would be a significant and damaging mark against the profession”.

Ms Lee added that there were still questions around whether the SRA “can manage the risk of taking on the regulation of ABSs” when it has so many other things on its plate, such as outcomes-focused regulation, the education and training review, indemnity reform, quality assurance for advocates, implementation of a new IT system and “very welcome cultural change within the organisation”.

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