The Legal Services Board (LSB) has told the Solicitors Regulation Authority (SRA) that it needs to complete its review of in-house practice as soon as possible because the current regulatory arrangements are not sustainable.
While approving controversial changes to rule 4 of the SRA’s practice framework rules – on when in-house teams need to become alternative business structures (ABS) – the LSB said the current prescriptive approach to in-house regulation needs to be brought in line with outcomes-focused regulation.
Under rule 4.1, in-house lawyers must not act for clients other than their employer subject to a long list of exceptions. It also now says that organisations whose in-house solicitors provide reserved legal activities to people other than their employer will need first to consider whether section 15(4) of the Legal Services Act 2007 requires them to become an ABS.
Section 15(4) says in-house lawyers offering reserved legal activities to “the public or a section of the public” must do so from an ABS. The SRA’s approach has been criticised by the Law Society.
The SRA has publicly stated its intention to review in-house practice this year, but told the LSB that no firm timetable or a plan for its scope was available. However, early planning work, stakeholder engagement and data collection has started.
In its approval notice, the LSB said it accepted that the change provides in-house practitioners “with some clarity”, but continued: “The LSB would urge SRA to complete the review as soon as possible to provide conclusive clarity on the operation of rule 4 and ensure its consistency with the Act. The LSB does not agree that the current arrangements established by rule 4 are sustainable in the longer term.
“The detailed rules that follow rule 4.1 are prescriptive, increasing the likelihood that they will have to be the subject of subsequent revision as the nature of in-house practice changes and adapts to an evolving legal services market. They also appear at odds with the outcomes-focused nature of the revised rule 4.1 and do not sit well with the better regulation principles.”
The LSB said it expects these points to be addressed in the SRA’s review. “In the LSB’s view, the aim for the in-house review ought to be to deliver a set of high-level, outcomes-focused rules that can be interpreted flexibly as and when new in-house situations arise. The LSB will therefore continue to monitor progress of the review of in-house practice carefully as part of our regulatory standards work.”