BSB unveils blueprint to become specialist regulator of advocacy businesses

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By Legal Futures

27 September 2010

Deech: there could be significant benefits for consumers from reform

The Bar Standards Board (BSB) will become a specialist regulator of entities providing advocacy services, if proposals set out today are approved.

Under the plans, BSB-regulated entities could not have passive investors, would need a majority of managers who can practise as advocates in the higher courts, and could only have a maximum of either 10% or 25% of non-lawyer managers.

While such entities, and also self-employed barristers, would be permitted to conduct litigation – to the extent that it is ancillary to advocacy – they would not be allowed to hold client money.

The BSB would look to regulate barrister-only entities (BOEs), legal disciplinary practices (LDPs) and alternative business structures, but not multi-disciplinary practices. All owners would need to be active managers; the BSB does not propose to regulate entities with external owners who are not also managers.

The cab-rank rule would apply to these entities in the same way that it applies to self-employed barristers now – meaning it would only apply to instructions from professional clients for named advocates – although there would be safeguards to prevent abuse by “cynical clients” looking to conflict the entity out. Other advocates working in the entity, such as solicitors and legal executives, would also be subject to the cab-rank rule.

The alternative figures for the maximum number of non-lawyer managers are drawn from the current 25% limit on LDPs imposed by the Solicitors Regulation Authority (SRA) and the 10% threshold for “low risk” ABSs under the Legal Services Act 2007. “This reflects the fact that the BSB would have less regulatory control over non-lawyers, who might not be separately regulated by any other regulator as individuals,” the consultation said.

Holding client money would introduce “significant risks and high costs, which are likely to be prohibitive [and] such a regime is already available via the SRA for those who need it”. The plan to extend the ban on holding client money is, however, predicated on it being possible to find alternatives which still allow the necessary payments to be made.

The consultation posits that the BSB-regulated entity could contractually specify that its fees and any disbursements are to be paid in arrears or on the basis of a fixed sum paid in advance, or (in the case of disbursements) paid directly by the client. The BSB is considering a possible option for managing court awards and settlements through the use of “custodian” or third-party arrangements. But the consultation asks whether it is feasible to allow entities to conduct litigation without being allowed to hold client money.

The consultation is the third in a series addressing the implications of the 2007 Act and follows a recent YouGov survey for the BSB which indicated that 35% of barristers would be likely or very likely to join a new structure within the next five years if the BSB was to regulate them (see story).

BSB chairwoman Baroness Deech said: “These decisions could have major implications for barristers and those who seek their services, as well as for the BSB as a regulator. There could also be substantial benefits to the public and increased access to justice if we update our regulatory arrangements to reflect the Act. The proposals in the consultation are provisional and we encourage all those with an interest to submit their views and influence the future of legal service provision.”

The consultation closes on 23 December. Click here for the full paper.

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