The Legal Services Board (LSB) has put a temporary block on plans by the Solicitors Regulation Authority (SRA) to widen its net to cover providers that do not need to be regulated.
The SRA had proposed removing requirements that currently prevent a legal services provider from seeking regulation if it has no intention of carrying on any of the six reserved legal activities.
It said this “may encourage” some providers to enter regulation for the first time.
The LSB has issued a warning notice that now gives it a further year to consider the application to change the SRA’s rules. Had it been approved, the revision would have come into effect this week.
In a letter to SRA chief executive Paul Philip, the LSB’s strategy director, Caroline Wallace, said the reforms “could be seen as a significant shift in the regulation of legal services”.
She explained: “The LSB must consider if it has the legal authority to facilitate the regulation of legal services that do not currently need to be regulated under the Act. The LSB also needs to ask itself if, through approving the alterations, it is implementing a substantive policy that ought instead to be the subject of public debate and primary legislation.”
As unregulated firms may seek SRA regulation for “commercial or other reputational benefit”, Ms Wallace said the LSB “needs to consider further whether this will create a form of voluntary accreditation scheme.
“Accreditation schemes are typically operated by representative bodies, and do not form part of a regulatory body’s regulatory arrangements.”
Further, while becoming regulated would give the clients of unregulated providers greater consumer protection, “if the cost of regulation is ultimately passed to the consumer, the LSB must consider whether it is in consumers’ interest for firms that do not need to be authorised to be subject to a regulatory framework for which there is a cost.
“The proposed changes could risk, therefore, being prejudicial to the regulatory objectives of protecting and promoting the public interest and protecting and promoting the interests of consumers.”
The period of a year to consider changes subject to a warning notice is set down by the Legal Services Act 2007 and Ms Wallace said “the LSB would aim to conclude its deliberation before then”.