Hayhoe: LSB failing to hold regulators to account
The Legal Services Consumer Panel (LSCP) has called for a single disciplinary process and compensation scheme as part of a major modernisation of legal regulation.
Its chair, Tom Hayhoe, also said the Legal Services Board (LSB) operated in a regulatory framework that was “fragmented, outdated, and structurally incapable of delivering its statutory objectives”.
On a single disciplinary process, he said: “Multiple tribunals and disciplinary bodies with overlapping or inconsistent approaches undermine fairness, transparency, and public confidence.
“A unified disciplinary pathway would strengthen accountability and reduce duplication.”
Calling for a single compensation scheme, or at the least a “coherent strategy for aligning existing schemes”, Mr Hayhoe said: “Fragmented financial protections are indefensible and leave consumers exposed to arbitrary differences in protection depending on which regulator a provider falls under.”
He said no other regulated sector operated multiple compensation schemes for the same type of risk and “the collapses of SSB Law and Axiom Ince have exposed the fragility of the current arrangements and the real-world consequences of fragmented protections”.
My Hayhoe was responding to a call for evidence to inform the review of the LSB instigated last month by the Ministry of Justice [1] (MoJ) and led by Richard Lloyd, a former executive director of Which? and current chair of the Independent Parliamentary Standards Authority.
Mr Hayhoe said the LSB was “expected to oversee multiple regulators with divergent cultures, inconsistent protections, and different risk appetites with a fewer than 50 staff and no coherent regulatory perimeter”.
In his view, the LSB was sufficiently focused on its statutory objectives, as set out in the Legal Services Act 2007, and collaborated “well” with the other legal regulators, professional bodies and consumer representatives.
However, in terms of holding frontline regulators to account, Mr Hayhoe rated the LSB’s performance as “poor”.
While the LSB “attempts to hold regulators to account within the limits of its powers, the pace and effectiveness of that accountability are increasingly questionable”.
As examples he gave the LSB’s failure to deliver a Regulatory Information Service – a database of the regulatory status of all authorised legal providers, as recommended by the Competition and Markets Authority – the restriction of price transparency to non-contentious areas like conveyancing and probate, and “the complete absence of quality indicators”.
Another area where the LSB had “consistently failed to hold regulators to account” was first-tier complaint handling, while the panel did not believe the LSB held the Legal Ombudsman to account effectively.
Mr Hayhoe said the panel also noted that the public had “little visibility” of how the LSB engaged with the Solicitors Disciplinary Tribunal.
He went on: “An oversight regulator with fewer than 50 staff cannot realistically oversee multiple frontline regulators, monitor financial resilience, track emerging technologies, respond to crises, and drive structural reform.
“Other sectors have regulators that are larger, more empowered, and more integrated.
“Legal services are the outlier: it expects a small oversight body to manage a fragmented system that was never designed to be overseen coherently.
“In short, the LSB has the skills, but not the scale, data infrastructure, or structural support necessary to deliver its role effectively.”
The panel said the LSB had to recognise that “outcome-based regulation has its limits and that prescriptive, standardised requirements are necessary to correct entrenched market failures”.
Along with a single compensation scheme and disciplinary process, there should be a “unified vulnerability strategy” and “coherent, sector-wide vulnerability framework” to avoid the current situation where each regulator interpreted vulnerability differently.
There should also be a “cross-sector strategy” on innovation and technology to ensure “consistent standards and anticipatory regulation” and an “independent audit” of the LSB’s own capability.
“Given the scale of recent regulatory failures, an independent capability review is now essential. Other regulators routinely subject themselves to external scrutiny; the LSB should do the same.”
In its response, the Law Society said there was “a clear need for stronger regulatory oversight of frontline regulators’ core compliance activities” following the collapses of Axiom Ince and the SSB Group.
President Mark Evans said: “The LSB’s ‘light touch’ assurance model adopted in 2022 is problematic as it relies on frontline regulators self-reporting the adequacy of their performance, with no absolute requirement for evidence.
“It has also led to the LSB forming an overall positive view of the SRA’s [Solicitors Regulation Authority’s] regulatory abilities based on information provided to it by the SRA, all while major regulatory failures were taking place.
“The LSB should prioritise its core regulatory oversight role by setting expectations, gathering and evaluating independent evidence, and intervening where standards are not met or where new risks are identified.”