Legal regulators have urged the Legal Services Board (LSB) to use its review of the internal governance rules (IGR) to give them greater independence from their representative bodies.
The Solicitors Regulation Authority (SRA) said the LSB should rewrite the rules “to support the maximum regulatory independence possible” and allow it to become a “separate legal entity” from the Law Society.
The Council for Licensed Conveyancers agreed that the IGRs should allow the “maximum possible separation” between regulatory and representative bodies, which it too said would require the frontline regulators to become separate legal entities.
The IGR review has taken on greater importance since the government made clear that there was no prospect of legislative change to the Legal Services Act 2007 in the foreseeable future.
This means that any moves to greater independence for regulators – which the LSB supports – can only be done through the IGR.
This limits what can be done as the Act names the likes of the Law Society and Bar Council as approved regulators. They then delegate their regulatory functions to the SRA and Bar Standards Board (BSB) as the frontline regulators.
The SRA’s response to an LSB consultation on what it should do with the IGR said the current definition of regulatory independence was too narrow, and it should be defined positively, “in terms of the freedom to operate autonomously and without influence or control”.
It argued that once an approved regulator delegated regulatory functions to an independent body, it should have “no residual involvement in or oversight” of those functions.
The SRA urged the LSB to clarify this in the IGRs, “making it clear that the approved regulator’s role is ‘assurance’ rather than oversight”.
The Council for Licensed Conveyancers said being a separate legal entity would “increase transparency of the relations between approved regulators and their children, and support clearer financial reporting, in particular. It will also be a useful stepping stone for the complete independence that we and the LSB agree is the ideal end state”.
The Law Society’s response insisted that Chancery Lane has to retain “an oversight responsibility in relation to the performance of regulatory functions”.
It said “refinements” to the IGRs should provide more clarity about the oversight role of approved regulators and the transparency required in disclosure and reporting by frontline regulators.
Further, there should be “more pro-active involvement of the LSB in ensuring appropriate accountability of frontline regulators and monitoring of complaints about the performance of regulatory functions”.
The society added that the timing of the rules review was “unfortunate”, given the LSB’s ongoing investigation of its governance arrangements with the SRA.
The BSB put forward its own demand for greater independence, highlighting the issue of shared services with the Bar Council, leading to “poor use of senior leadership time”, as well as “insufficient control of and accountability” for the quality of the services.
“For stakeholders, the joint arrangements, which in the present case also extend as far as shared premises and occupation of adjacent floors, contribute to a perception that the regulatory body is not independent of the representative body.”
The Bar Council stood alone in calling for no changes to the rules, saying the LSB had not provided “the evidence or any analysis” of their failings.
“Our position, informed by our experience operating under the IGRs, is that the existing arrangements work well.
“The structural set-up and working relationship between the Bar Council and BSB currently serve effectively to secure regulatory independence, and we are concerned that revising the rules wholesale or adding greater prescription or formality would undo all this and reverse years of good practice.”
CILEx was the approved regulator apparently keenest on greater independence, despite reporting that, “in general, there are infrequent disagreements on regulatory independence matters” with CILEx Regulation.
“CILEx supports the revision of the IGRs and the greater degree of regulatory independence that this may facilitate.
“However, we believe that this must be combined with an improved regulatory performance assessment process, a revision of, or greater specificity of, the LSB’s future role as a mediator or arbiter and redrafted complementary statutory guidance.”
CILEx Regulation was actually more circumspect, supporting “greater clarity around the residual role” of the approved regulators.
Rewriting the IGR “would offer a platform to start afresh and focus the IGR on the ‘gateways’ [to information and assurance] and areas of legitimate oversight”.