LSB on collision course with Law Society and Bar Council over regulators’ lay majorities

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By Legal Futures

23 July 2010


Kenny: waiting for terms to expire is not acceptable

The Legal Services Board (LSB) is on a collision course with the Law Society and Bar Council after demanding that both introduce lay majorities on the boards of their regulatory arms sooner than planned, Legal Futures can reveal.

If the LSB gets its way, then the boards of the Solicitors Regulation Authority (SRA) and Bar Standards Board will be reshaped before the end of the current members’ terms in January 2013 and January 2012 respectively.

If the Law Society and Bar Council fail to act or convince the LSB of their position, the LSB has said it will move to “formal enforcement”. The battle marks the first real test of the LSB’s authority.

The Institute of Trade Mark Attorneys and Chartered Institute of Patent Attorneys are also facing the same demand, as they have indicated professional majorities would be in place until 2013.

The Institute of Legal Executives is the only regulator already compliant with the LSB’s requirement for a lay majority.

Newly published letters from LSB chief executive Chris Kenny said that while the board understands the reasons with the current non-compliance with its requirement for a lay majority, it does not feel that waiting until 2012 or 2013 “is an acceptable outcome”. He asked the regulators to provide an action plan by the end of August “that will deliver compliance on a much earlier timescale. If you do not believe this to be possible, please provide a justification for why it might be reasonable to move to a lay majority by a later date alongside a detailed plan for reaching compliance”.

All the approved regulators are also under scrutiny for having professional majorities on many of their sub-committees, and are being asked to explain how they will mitigate the risk that the “spirit and perception of independence [of the main boards] is compromised” if a significant proportion of the advice provided to the boards comes from groups “seen to be dominated by the provider interest”.

The Law Society has further been asked to explain the “complexity of arrangements” between itself and the SRA, characterised by “numerous lines of accountability between structures and committees”. The LSB said it has “a real concern that complex decision making and scrutiny arrangements mayprovide and/or hide levers of control that could prejudice the ability of the SRA to deliver its strategy without (undue) hold up or disruption”.

The LSB was responding to the regulatory independence certificate submitted by each of the regulators (see story here). The certificate certifies compliance with the LSB’s internal governance rules for regulators which have both regulatory and representative functions, or indicates how the regulator will become compliant. Neither the Council for Licensed Conveyancers nor Faculty Office (which regulates notaries) was required to provide a certificate as they are purely regulatory bodies, while the Association of Law Costs Draftsmen submitted a plan for how it will separate its functions.

The LSB board will consider the regulators’ responses at its meeting on 30 September, at which it will either give them a clean bill of health, accept that they have a “proportionate plan” to become compliant by a set date or having provided a legitimate justification for a slower timetable, or “move to formal enforcement where informal resolution has failed”.

In previous weeks Legal Futures has received strong indications from both the Law Society and Bar Council that they have no intention of changing their boards’ make-up before their current terms expire. The Legal Services Consumer Panel has made clear its desire to see lay majorities sooner.

Responses from the regulators will be published here as they are received.

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