New rules which clearly limit the influence the Law Society can have on the Solicitors Regulation Authority (SRA), and the Bar Council on the Bar Standards Board (BSB), have been published.
The Legal Services Board’s (LSB) revised internal governance rules (IGR) and guidance will apply to all the regulators of legal services, and will force the accountancy bodies that oversee probate work to introduce independent regulation too.
The LSB began the process of revision a year ago and on Friday published a final consultation on the new rules.
The likes of the Law Society, Bar Council and Chartered Institute of Legal Executives are listed in the Legal Services Act 2007 as the approved regulators, but they delegate their regulatory obligations to operationally independent arms – the SRA, BSB and CILEx Regulation respectively.
The requirements tighten up the existing provisions significantly. They introduce a duty of candour under which an approved regulator must “proactively inform the LSB of any issue with compliance which cannot be resolved or has not been resolved in a reasonable time”.
The new rules make clear the “residual role” of the approved regulator, with the consultation noting that “misunderstandings about the residual role have underpinned a significant number of disagreements between approved regulators and their regulatory bodies under the current IGR”.
These include removing any role for the approved regulators in approved their regulatory body’s budget or the appointment of any of its board members.
The reforms also impose a new duty on approved regulators to ensure that all individuals whose roles may be affected by the IGR are aware of and comply with the IGR and the arrangements in place under them.
Under the existing IGR, the Institute of Chartered Accountants in England and Wales and Association of Chartered Certified Accountants can combine both regulatory and representative roles free of the need for regulatory independence.
Despite strong opposition from the accountants, the LSB is ending this exemption, and giving them, and all the approved regulators, a transition period of six months to comply with the new rules. They will then have to provide the LSB with a certificate of compliance.
Though there will be some initial costs to achieve this, the LSB said: “We are of the opinion that the ongoing cost of compliance to regulators and regulatory bodies would be reduced as a result of the proposed IGR.
“This is based on our assessment that the proposed IGR set a clearer framework which should be straightforward to comply with and enable effective enforcement by the LSB.
“This takes account of the net effect of what should be a reduction in the number of issues and disputes that approved regulators and regulatory bodies deal with and which have been historically brought to the LSB.”
LSB chief executive Neil Buckley said: “We believe that regulation which is, and is seen to be, independent is central to maintaining confidence in legal services…
“The proposals reflect the LSB’s approach to regulation – they are principled and outcomes-focused. The rules are targeted at the areas where experience has taught us that action is needed.”
The consultation closes on 21 January 2019.
There have been two LSB investigations finding that approved regulators encroached inappropriately on the independence of their regulatory bodies, first with the Bar Council  in 2013 and earlier this year with the Law Society .