LSB pushes for fully independent regulators to prevent professional bodies resisting reforms

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22 July 2016


Sir Michael Pitt

Sir Michael: current arrangements “distract senior management”

The Legal Services Board (LSB) has argued more strongly than ever that professional bodies, such as the Law Society and Bar Council, must be fully separated from their regulators.

In a letter to the justice select committee, Sir Michael Pitt, chairman of the LSB, argued that there was scope under existing arrangements for them to “resist reforms that could otherwise benefit competition and consumers”.

At last month’s committee meeting, the Law Society told MPs that plans to give the Solicitors Regulation Authority (SRA) and other regulators full independence should be shelved because of uncertainty caused by the EU Referendum.

However, Sir Michael said there was a need to “simplify the complex governance relationships between the regulatory and representative functions of the approved regulators”, such as the Law Society and Bar Council, where they had responsibility for both functions.

“These arrangements do not achieve full independence of regulation and distract senior management time on both sides.”

Sir Michael cited “past examples” of professional bodies resisting reforms, such as opposition to the Institute of Chartered Accountants in England and Wales (ICAEW) application to become a regulator for probate activities and resistance to the Legal Ombudsman establishing a voluntary scheme for unregulated law firms. Both moves were strongly criticised by the Law Society.

Sir Michael added that there was a lack of transparency over the cost of regulation due to the “sharing of resources and cost” between some regulators and their professional bodies and some costs being included within a compulsory regulatory levy.

The LSB chairman took issue with the Law Society again over the issue of education and training.

“We do not agree with the assertion that training and education and professional standards should be matters for the representative body [as the Law Society has been advocating]. To the extent that the right to offer the reserved activities depends on achieving certain required standards of education and professionalism, these clearly have the potential to act as a barrier to entry if not proportionate.

“There could, as pointed out at the hearing, be considerable scope for a conflict of interest to arise if these standards were the responsibility of the representative body.

“In short, there could be the risk of gold-plating of entry standards and less competition and choice for consumers, alongside the opportunity for rolling-back of liberalising reforms in the market.”

 

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