“Lessons for other legal regulators” from Faculty Office review

Hill: Faculty Office has responded positively

The Legal Services Board (LSB) has said other legal regulators could learn lessons from a highly critical review it has published on the Faculty Office (FO), the regulator of notaries.

The review found “insufficient transparency around processes for decision making and of decisions that are taken”.

Further, among other things, there was “very little documentation” to support governance arrangements at the FO, staff appointments were made through “direct contact” rather than openly, and insight into the issues facing notaries and consumers was limited.

A lack of an appointments policy and one on conflicts of interest also made the membership of the two notarial representative bodies on the FO’s advisory board a matter of concern.

LSB chief executive Matthew Hill said the review found shortcomings in the regulator’s governance procedures and “no evidence of how it took the regulatory objectives into account when making decisions”.

Mr Hill said the FO had “responded positively to the findings and immediately sought to begin addressing the issues”.

He went on: “Our report contains learning that we think can help us all improve the effectiveness of regulation in the legal services sector.

“We encourage the other legal service regulators to consider their decision-making processes in the light of our findings.”

The LSB said it was concerned about the potential conflict of interest arising from the 100-year-old relationship between the FO and the law firm Lee Bolton Monier Williams (LBMW).

The FO, which dates back to 1533 and the English Reformation, is responsible for issuing special marriage licences and awarding Lambeth degrees, degrees awarded by the Archbishop of Canterbury for services to religion, not just Christianity, or academic achievements.

The LSB said the FO employed staff from LBMW to carry out both its notarial regulatory and ecclesiastical work, and the FO’s senior officers, the registrar and deputy registrar, were both partners in LBMW.

This resulted in a “lack of clarity” in the separation between their responsibilities to the law firm and their notarial regulatory work.

The LSB said a documented policy was needed to provide clarity, given that the “largest component” of the FO’s expenses was the management fee to LBMW; a “contract or service-level agreement” between the FO and LBMW was also required.

The LSB said the head of the regulator, the Master of the Faculties Morag Ellis QC, should consider holding “regular open tendering processes” for the provision of notarial regulatory services.

There was insufficient assurance too that the FO “understands the resources it needs to perform its regulatory duties and that it manages its finances accordingly”.

The oversight regulator said the FO’s regulation of notaries should be “paid for by the notaries it regulates” and not subsidised by its ecclesiastical work, which has historically been the case. The regulator also needed to be transparent about its approach to reducing the deficit.

The LSB said the FO did not have a recruitment policy for its officers, who were generally appointed by LBMW. However, staff who worked wholly or mainly on FO matters were generally appointed through an open, advertised process.

The FO “should do more to rectify” its lack of engagement with the people who used notaries and needed to develop a strategy on this issue.

Turning to the market for notarial services, the LSB said the FO took a “largely reactive” approach to gathering information about the issues facing notaries and should “proactively undertake horizon scanning and research”.

The LSB concluded that the FO currently failed to meet two of its standards for “well-led” regulators – that it understood the resources and organisational structure it needed to effectively carry out its functions and these were implemented, and that it communicated with a “diverse range of stakeholders”, such as consumers and government.

It added that the FO had committed to an action plan and was considering introducing documented governance arrangements for delegating powers, improving transparency of decision making − particularly on recruitment and finance − and developing the “ability to gather information about the issues facing notaries and consumers”.

The LSB said it had written to the other legal regulators to “share learning from the report that will help improve the effectiveness of regulation in the legal services sector”.

At the same time as the FO, the LSB also investigated the Bar Standards Board’s governance and reported in July that it places “a disproportionate weight on the impact of its work on the profession” and pays insufficient regard to the impact on the public.

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