The Legal Services Board (LSB) has finalised revised rules to ensure clearer separation of regulatory and representative functions at bodies like the Law Society and Bar Council.
But it has offered a possible way out to the accountancy bodies that regulate probate work, which have opposed the requirement to create separate regulatory bodies along the lines of the Solicitors Regulation Authority.
The internal governance rules (IGR) define the relationship between representative bodies and their regulatory arms where they are part of the same organisation.
Issuing the revised IGR after a process that began in November 2017 and involved three consultations, the LSB confirmed that it had ditched proposed rules  that would not allow representative bodies to try and “influence” their regulatory arms.
After strong opposition from the Law Society and others – on the basis that this would prevent them from either lobbying or criticising their regulatory arms – the rules now only prevent them from taking actions that would “prejudice” regulatory activity.
The majority of respondents to the consultation on the issue earlier this year welcomed the change, apart from one which considered it to be a “weakening of the rule”.
The LSB said other changes it made to the IGR aimed to mitigate the potential risk of the representative body using its influence inappropriately: “The approved regulator may seek to influence the regulatory body’s decisions on its strategy, appointments, budget etc, but only in the exercise of its representative functions and it must not prejudice the independent judgement of the regulatory body in doing so.”
The LSB said the new IGR “provide more clarity which should lead to fewer independence-related disputes and are more readily enforceable for speedier resolution of issues”.
Legal regulators now have a year in which to comply with the new rules – after many warned that six months would not be enough – and the LSB said it was holding to the position it reached last summer  that the Institute of Chartered Accountants in England and Wales (ICAEW) and Association of Chartered Certified Accountants (ACCA) should now be subject to all of the IGR, having up until now been allowed to combine regulatory and representative functions.
“We recognise that there will be some costs and disruption for the accountancy bodies if they have to restructure in order to delegate their regulatory functions to a separate regulatory body,” the LSB acknowledged.
But it said provisions in the new IGR offered all bodies to chance to apply for permission not to comply with particular rules on a temporary or longer term basis, “where they can build a compelling case that compliance would, for example, be disproportionate”.
LSB chief executive Neil Buckley said: “Independent regulation gives confidence to consumers, providers, investors and society as a whole that legal services work in the public interest and support the rule of law.
“Regulatory independence also gives the providers of legal services the certainty they need to grow and innovate.
“The final IGR reflect our commitment to setting a new framework which delivers the highest level of regulatory independence within the current legislative framework.”