The case for a single legal services regulator: why the current system is failing

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Posted by Brian Rogers, regulatory director at Legal Futures Associate Access Legal

Rogers: We need decisive action

The UK’s fragmented legal services regulatory landscape is in crisis. From catastrophic firm collapses to endemic compliance failures, the evidence is mounting that the current multi-regulator model is fundamentally broken.

With over 30 years in legal services regulation, I’ve watched this system deteriorate to a point where radical reform is no longer optional – it’s essential.

A SYSTEM IN FREEFALL

The evidence of systemic failure is overwhelming and cannot be dismissed as isolated incidents.

The SRA’s spectacular failures

The Axiom Ince and SSB Group scandals represent more than regulatory oversights – they demonstrate catastrophic system failure.

In both cases, thousands of clients suffered devastating losses whilst these firms operated under supposedly robust regulatory supervision. The Legal Services Board’s unprecedented formal censure of the SRA following these debacles should have been a watershed moment.

Instead, we’ve seen defensive posturing rather than fundamental reform.

These weren’t failures of individual firms. They were failures of regulatory supervision, early warning systems and intervention protocols. The SRA’s own analysis revealed they missed multiple red flags. When your regulator requires regulating, the system is broken.

The Mazur case: another regulatory blind spot

The Mazur ruling exposed yet another dimension of regulatory failure. The case, which fundamentally challenged established understanding of solicitor supervision requirements, revealed that regulators had failed to identify and address a practice model operating contrary to regulatory principles.

The fact that it took a court ruling rather than proactive regulatory oversight to expose these issues demonstrates how reactive and ineffective our current regulatory approach has become.

This pattern repeats itself: regulators failing to spot systemic problems until external events – court cases, firm collapses, media exposure – force them to act. Effective regulation should identify and address such issues before they require judicial intervention.

The AML compliance crisis

The latest anti-money laundering (AML) report from the SRA showed that of the nearly 1,000 law firm engagements during the reporting period, 32.4% of firms were found to be non-compliant with their AML obligations.

Here’s the truly shocking statistic: 76% of fined firms held Conveyancing Quality Scheme accreditation at the time of their regulatory failure – and continue to hold it.

This isn’t confined to SRA-regulated firms. The Council for Licensed Conveyancers has presided over similar failures within its smaller jurisdiction with 54% of firms being found non-compliant with their AML obligations.

Different regulators, identical problems – suggesting the issue isn’t the regulator but the regulatory structure itself.

Poor regulator performance

The LSB’s most recent regulatory performance report delivered a damning assessment of the Bar Standards Board (BSB) across the three areas it assesses: well-led, effective approach to regulation, and operational delivery.

It rated it as ‘red’ on both well-led and operational delivery, revealing that even specialist sectoral regulation – often cited as justification for separate regulators – fails to deliver superior outcomes.

The SRA was also rated as ‘red’ on operational delivery, with other regulators have a mix of ‘amber’ and ‘green’ ratings. The Costs Lawyer Standards Board was the only one of the eight frontline regulators being rated ‘green’ across the board, but then it only has 710 individuals approved to practice, compared with the SRA that has just under 165,000 and the BSB having just under 17,500.

The lost understanding of the public interest

Professor Stephen Mayson’s supplementary report to the Independent Review of Legal Services Regulation provides crucial context for understanding why our regulatory system fails so comprehensively.

As he observes: “Ultimately, the root of the problem lies in the loss of understanding of the profession’s public interest role.”

The Legal Services Act 2007 places “protecting and promoting the public interest” as its first regulatory objective. Yet this principle has been systematically undermined by the very regulators tasked with upholding it.

Professor Mayson’s work demonstrates that the public interest encompasses two fundamental dimensions: maintaining the fabric of society (including the rule of law and administration of justice) and securing the legitimate participation of all citizens in society.

Our current regulatory architecture fails on both counts. The fabric of society suffers when major firm collapses expose catastrophic supervision failures. Citizen participation erodes when so many firms remain non-compliant with basic AML requirements.

The regulatory system designed to protect the public interest has instead become a threat to it.

Professor Mayson emphasises that lawyers are not merely “ordinary market participants” but members of a “public profession” owing primary duties to society ahead of client interests.

This conception – grounded in centuries of professional tradition – has been progressively abandoned as regulatory policy has prioritised market forces and consumerism over systemic integrity.

WHY MULTIPLE REGULATORS MULTIPLY PROBLEMS

Regulatory arbitrage and the race to the bottom

Multiple regulators create opportunities for regulatory shopping. Where they can, entities gravitate toward the lightest regulatory touch, creating competitive pressure that undermines standards. When one regulator tightens requirements, entities simply move to another’s jurisdiction.

Duplication and waste

Each regulator maintains separate infrastructures: enforcement teams, policy divisions, IT systems, consultation processes, and governance structures. This duplication costs tens of millions annually – money that should protect consumers instead funds bureaucratic redundancy.

Inconsistent standards and enforcement

Why should consumer protection depend on which regulatory body happened to license their legal services provider?

A client defrauded by a solicitor receives different treatment than one defrauded by a licensed conveyancer. Regulatory sanctions vary wildly for identical misconduct. This is indefensible.

Information silos and systemic risk

The Axiom Ince and SSB collapses highlighted how systemic risks span regulatory boundaries. Modern legal businesses operate across multiple service areas and jurisdictions. Our regulators remain trapped in their separate silos, unable to see the complete picture until catastrophe strikes.

Market forces cannot secure the public interest

Professor Mayson’s analysis exposes a fundamental flaw in current regulatory philosophy. The Legal Services Act reforms were intended to unleash market forces and promote consumerism. Yet as he demonstrates, markets alone cannot protect or promote the public interest – particularly in legal services where the rule of law, administration of justice, and systemic integrity are at stake.

The global financial crisis of 2007-9 proved that self-interested profit-maximising behaviour, however effective for some participants, can devastate the institutional fabric of society.

Legal services regulation has learned nothing from this lesson. By prioritising competition and consumer interests without adequate safeguards for higher objective values, we’ve created conditions for the very failures we now witness.

Professor Mayson argues persuasively that when consumer interests conflict with the public interest in maintaining the rule of law or democratic fabric of society, the public interest must prevail.

Our current regulatory structure – with its multiple, fragmented regulators each pursuing slightly different interpretations of their objectives – cannot deliver this necessary hierarchy of values.

THE SINGLE REGULATOR SOLUTION

A unified legal services regulator would deliver:

Consistent consumer protection: One set of standards, one enforcement approach, one level of protection regardless of provider type. Consumers deserve nothing less.

Operational efficiency: Consolidating regulatory functions would eliminate duplication, reduce costs, and allow resources to focus on supervision rather than administration. Technology investments become viable at scale.

Comprehensive risk oversight: A single regulator sees the complete market picture. Cross-sector risks, emerging threats, and systemic vulnerabilities become visible rather than hidden in regulatory blind spots. Proactive oversight replaces reactive firefighting.

Genuine accountability: One regulator means one point of accountability. No more finger-pointing between regulators. No more entities falling through jurisdictional gaps. Clear responsibility drives performance.

Primacy of the public interest: As Professor Mayson emphasises, despite ministerial reluctance to prioritise the regulatory objectives, “protecting and promoting the public interest” must be the predominant objective to which all others are subordinate. A single regulator, properly designed and governed, could embed this hierarchy from inception.

Cultural transformation: Current regulators remain mired in deterrence-based enforcement that manifestly fails. A new regulator, properly designed, could embed cultural compliance from inception rather than retrofitting failed models.

ADDRESSING THE COUNTER-ARGUMENTS

“Specialist expertise would be lost”: The BSB’s poor performance undermines this argument. Specialist knowledge can be maintained within divisions of a single regulator whilst gaining from shared services, intelligence and resources. We need regulatory excellence, not regulatory balkanisation.

“One regulator creates single point of failure”: We currently have multiple points of failure – all failing simultaneously. The oversight role remains critical regardless of whether it supervises one regulator or eight. Proper governance, not regulatory proliferation, prevents failure.

“Professional identity and tradition”: Professional identity derives from competence and ethics, not regulatory apparatus. Barristers and solicitors maintained distinct professional identities before modern regulation existed. A single regulator threatens nothing except regulatory inefficiency.

THE PATH FORWARD

The government’s current consultation on home-buying and selling reform acknowledges regulatory problems whilst proposing superficial fixes. We don’t need another review. We need decisive action.

A single legal services regulator should:

• Consolidate all existing regulatory functions under unified governance with specialist divisions for different practice areas
• Restore primacy of the public interest as Professor Mayson recommends, ensuring market forces serve rather than undermine systemic integrity
• Implement technology-enabled supervision replacing periodic interventions with continuous monitoring
• Restructure compliance frameworks to enable rather than merely police ethical practice
• Establish transparent performance metrics with genuine oversight accountability
• Create a properly funded, resourced, and independent entity free from regulatory capture

CONCLUSION

The current regulatory crisis isn’t temporary turbulence – it’s system failure. The Axiom Ince and SSB scandals, the Mazur case exposing supervision failures, endemic AML non-compliance, poor regulatory performance across the board, and the marginalisation of smaller regulators all point toward one conclusion: the multi-regulator model has failed.

Professor Mayson’s work demonstrates that this failure stems from a fundamental loss of understanding about the profession’s public interest role. Lawyers are not ordinary market participants. They are members of a public profession owing primary duties to society.

Our regulatory structure must reflect and enforce this reality.

Rather than watching it collapse incrementally through crisis after crisis, we should act decisively.

The question isn’t whether we need a single legal services regulator. The question is how much more regulatory failure we’re prepared to tolerate before we implement one.

How many more firm collapses? How many more clients must suffer catastrophic losses? How much further must public confidence in the rule of law erode before we acknowledge that fragmentation and competition between regulators serves no one except the regulators themselves?

After 30 years in this sector, I’ve never been more convinced: the time for a single legal services regulator isn’t coming – it’s overdue.