The regulation of both residential conveyancing and corporate law, as well as general legal advice, is set to be reviewed by the Legal Services Board (LSB) as it begins a major investigation into the boundaries of regulation.
Work to improve the regulatory framework will go hand-in-hand with the LSB – which says the current pattern of reserved and unreserved work is “unsatisfactory” – considering whether Parliament needs to undertake a “root and branch overhaul of the current system”.
A discussion paper published today begins the process of reviewing the scope and nature of regulation in legal services, and lays out the process the LSB will follow to decide whether areas of practice should be added to or deleted from the list of reserved legal activities. It emphasises that this will not necessarily lead to greater regulation.
Though reservation is the main regulatory tool provided by the Legal Services Act 2007, the LSB describes it as a “very blunt instrument” that protects consumers by establishing “professional monopolies, the existence of which might well have greater disbenefit through negative effects on access to justice, competition and other aspects of the regulatory objectives” set out in the Act.
Further, the “current sharpness” of the boundary between reserved and unreserved work can leave consumers unprotected, particularly when it comes to accessing redress.
The LSB is clear that where possible it would prefer the existing law and infrastructure to deal with problems, and says that even if reservation is required, this will not necessarily trigger “the full range of regulatory requirements” currently seen. “The precise obligations triggered will depend on the nature of the risks presented.”
The minimum regulatory arrangements will have to include access to proper redress and the Legal Ombudsman; adhering to relevant professional principles; and having the right level of systems and controls to ensure the work is properly handled and consumers appropriately protected.
The LSB is consulting on which areas it should prioritise for review between 2012 and 2015; it will look not only at whether and where reservation is required but also at the type of regulation needed. It has already begun the process of investigating whether will-writing, powers of attorney and estate administration need to be reserved.
Those other areas the LSB has identified are services delivered by special bodies (not-for-profit providers, community interest companies and trade unions), residential conveyancing, corporate law (including banking and finance), immigration and “general legal advice”, which it notes is increasingly being given directly by specialists with no formal legal qualifications, such as HR advisers, accountants and welfare advisers.
On corporate law the LSB says the equality of arms between lawyers and clients could mean some deregulation is appropriate, while it identifies general legal advice as “perhaps the most difficult area”. The LSB says there is a case to consider what protection exists for consumers outside of statutory regulation and the extent to which it is adequate.
LSB chairman David Edmonds said: “Liberalisation is already happening with regard to ownership of law firms, external investment and control. That liberalisation will accelerate as these proposals begin to take effect. But it needs to be underpinned by the right consumer protections and oversight, in particular proper redress from firms and the Legal Ombudsman. Whichever direction we take, the objective is simple: the legal services market must work for the consumer and the public, for it is they to whom we all, regulators and professionals alike, are accountable.”