SRA agrees to take over regulation of CILEX members

Bradley: In the public interest

The board of the Solicitors Regulation Authority (SRA) has agreed to regulate CILEX members if it decides to press ahead with changing regulator.

But the decision is likely to set up a major clash with the Law Society if and when it gets to the point of having to amend the SRA’s articles of association, something only the society – which opposes the move to regulate CILEX members – can approve.

The SRA believes that refusing to do this would be interference with its independence, which the Law Society is not allowed to do under governance rules.

Meanwhile, CILEX’s existing regulator said it would now consider whether to take legal action to stop the move.

The Chartered Institute of Legal Executives first approached the SRA two years ago about taking over from CILEx Regulation Ltd (CRL) on the basis that it offered a more sustainable model.

CILEX and the SRA have since carried out two consultations each and SRA chair Anna Bradley confirmed yesterday that “having explored all the angles… we are as a board very clear that it would be in the public interest” to regulate all CILEX members.

It would “simplify the regulatory landscape”, she argued, making it easier for consumers to navigate, and ensure “more consistent standards and levels of protection”.

“Most people find the current regulatory landscape bamboozling. This change won’t solve all the issues of complexity, but it would benefit the public,” Ms Bradley said.

It would also result in “some quite considerable efficiencies” both for CILEX members and the SRA-regulated firms that employ them – around 75% of CILEX members work in SRA firms.

Briefing the media, Ms Bradley and SRA chief executive Paul Philip were clear that the interests of solicitors were not a factor in the decision, but making life easier for firms employing CILEX lawyers was a “happy consequence”, Mr Philip said.

He added: “It doesn’t in any way disadvantage the solicitors’ profession.”

He also said that while the Law Society “would like to think” there was strong opposition across the profession, the views of others showed the reaction was more mixed.

The SRA announcement said it would make sure that its rules, processes and communications “maintain the distinct identities of CILEX members and solicitors”.

The costs of regulating CILEX members would also be fully recovered from their practising certificate fees, so there was no financial cross-subsidy from solicitors.

Ms Bradley said this separation would be “written like a stick of rock through all the arrangements”.

The move would provide “parity of regulation rather than parity of licence to practise”, Mr Philip explained – it would remain the case that CILEX members would be able only to practise in their chosen speciality.

The full regulatory scheme will now be put to the CILEX board for final approval. “I have to say I’d be surprised if they said no at this juncture,” said Ms Bradley.

CILEX said it would review the SRA’s proposals, “together with stakeholder feedback and updated impact assessments” at its board meeting on 16 July.

“The CILEX board will consider whether any further activity is required before a final decision is made later this year on whether to proceed with making an application to the Legal Services Board (LSB).”

If it goes ahead, both CILEX and SRA will make applications to the LSB. If these are approved, the Law Society would need to agree to amend the SRA’s articles of association.

Law Society chief executive Ian Jeffery argued that the change would cause consumer confusion, “as it will be less clear which profession is which, and where different authorisations for practice areas apply. This is likely to be a particular problem for those with complex legal issues, or vulnerable consumers”.

He stressed that consent to changing the corporate objects of SRA Limited “cannot be assumed”: “This is a matter for the Law Society’s council to decide at the appropriate time when any proposals are made and supported by a persuasive case for change.

Mr Philip said he believed that failing to change the articles would fall foul of the LSB’s internal governance rules, which regulate the relationship between the Law Society and SRA to ensure the latter’s independence.

Mr Jeffery added: “We are concerned that the redelegation of CILEX’s regulatory functions to the SRA could adversely affect the SRA’s ability to meet its duty to regulate the solicitor profession in a way that supports and promotes the regulatory objectives.

“This is of particular concern in light of the collapses of Axiom Ince, Metamorph, Kingly and the SSB Group.”

Minutes of last week’s SRA board meeting show that this specific point was put to Mr Philip, who provided assurance that the regulator had the capacity to handle CILEX members.

A more detailed SRA explanation issued yesterday said that “the relative scale difference of CRL and the SRA means that the operational implementation and business as usual is not expected to pose management or resourcing issues”.

CRL chair Jonathan Rees said the regulator was “extremely disappointed” with the SRA’s decision.

“The CILEX/SRA proposals do not match existing levels of consumer protection and could result in consumer confusion.

“As highlighted by the Legal Services Consumer Panel, CILEX has failed to evidence any positive consumer impacts. CRL believes the evidence underpinning CILEX’s case for change is insufficiently robust and that the interests of consumers and the regulated community is best served by CRL continuing to be the specialist regulator.

“CRL remains concerned that the proposals to redelegate regulatory responsibility in this way are potentially unlawful and, as the justice select committee said, raise serious concerns about the model of the 2007 Legal Services Act in undermining efficient and stable regulation.

“We are therefore considering next steps including recourse to the courts.”

Mr Philip said the SRA was engaging with the consumer panel to reassure it about the benefits of the switch. A legal challenge would slow the process, he acknowledged, but said: “We’re not in a rush to do this. We’re going at a pace that is reasonable.”

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