The Legal Services Board (LSB) is pulling back on proposed rules that would not allow bodies like the Law Society and Bar Council to try and “influence” their regulatory arms.
It instead intends only to prevent them taking actions that would “prejudice” regulatory activity.
The LSB issued another consultation yesterday on revising its internal governance rules (IGR), which define the relationship between lawyers’ representative bodies and their frontline regulators, to address concerns raised in the previous consultation it issued last November.
Under section 30 of the Legal Services Act 2007, the oversight regulator has to put in place IGR that ensure “the exercise of an approved regulator’s regulatory functions is not prejudiced by its representative functions”.
This affects those bodies that are listed in the Act as an approved regulator – such as the Law Society, Bar Council and Chartered Institute of Legal Executives – but delegate their regulatory obligations to operationally independent arms, respectively the Solicitors Regulation Authority, Bar Standards Board and CILEx Regulation.
The IGR currently reflect section 30 by requiring that each approved regulator must “have in place arrangements that observe and respect the principle of regulatory independence”, and at all times act in a way which is compatible with it.
The November consultation proposed replacing this with an overarching duty on each approved regulator “to ensure that decisions relating to its regulatory functions are not influenced by any representative functions or interests it may have”.
The LSB said yesterday that a “significant proportion” of respondents said this wording went beyond section 30.
“It was argued that seeking to influence the regulatory body is a legitimate exercise of representative functions, and the LSB is prohibited from interfering with representative functions by section 29 of the Act.
“Respondents said that the approved regulators should not be left in a worse position than third-party stakeholders in terms of their ability to influence the regulatory body.”
In its response to the November consultation, the Law Society said the new rules could largely prevent it from either lobbying or criticising the SRA.
The LSB is now consulting on changing the overarching duty so that each approved regulator has to ensure that “the exercise of its regulatory functions is not prejudiced” by representative functions or interests.
It said: “We recognise that, where an approved regulator has both representative and regulatory functions, the approved regulator may have a legitimate role in influencing the regulatory body.
“In this situation, as the representative body for the regulated profession, the approved regulator may hold key practical experience of how a policy would affect its members or have relevant data or information that should be considered as part of the decision making of the regulatory body.
“However, we remain of the view that the IGRs should ensure that the approved regulator does not use its approved regulator delegation and assurance relationship (which gives it, amongst other things, a number of contact points and communications channels with the regulatory body which are not available to other stakeholders) to prejudice the independent judgement of its regulatory body.”
LSB chief executive Neil Buckley said the oversight regulator has listened to the feedback received in response to the November consultation.
“We remain committed to setting a new framework which delivers the highest level of regulatory independence and are therefore seeking further views on the proposed changes,” he added.
Law Society president Christina Blacklaws welcomed the LSB’s shift. “We believe the IGR should not hamper legitimate influencing activities by professional bodies, so we’re pleased the LSB appears to have taken our views on board.”
She said precluding ‘prejudice’ rather than ‘influence’ “would support both approved regulators and frontline regulators in discharging their roles effectively, which will in turn improve and underpin public confidence in legal regulation”.
Earlier this year, CILEx became the first approved regulator to announce its intention to give its regulatory body complete structural independence.
Meanwhile, the LSB has appointed three new lay members: Catherine Brown, an accountant who is a former chief executive of the Food Standards Agency; Tim Sawyer, a banker who is currently chief investment officer at Innovate UK; and Ian Hamer, a former magistrate who in his executive career was managing director of a number of companies specialising in plastics. All hold various non-executive roles.
In addition, non-lay members Jemima Coleman – a professional support lawyer specialising in employment law at City firm Herbert Smith Freehills – and former Clifford Chance partner Michael Smyth have been re-appointed for second terms of office, as has lay member Catharine Seddon, a film-maker.