Legal Services Board fires warning shot over how Law Society spends practising fees

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By Legal Futures

20 August 2010

Hudson: commercial revenues reduce PC fee

The Legal Services Board (LSB) has fired a warning shot across the bows of the Law Society over the way the practising certificate (PC) fee is divided up.

Under the Legal Services Act, the society is only allowed to apply money raised through PCs to “permitted purposes”, the definition of which is set out below.

However, it has emerged that the society is technically applying PC fee money raised for 2010/11 to non-permitted purposes, although the money is being made up elsewhere. The distinction is aimed at ensuring that purely representative activities are not funded through the compulsory levy.

Last month the LSB approved this year’s PC fee (see story), but in the letter informing Law Society and Solicitors Regulation Authority chief executives Des Hudson and Antony Townsend of this, LSB chief executive Chris Kenny revealed that the board had earlier expressed concerns that some of the revenue was being allocated to functions that are not permitted purposes.

However, he said a subsequent letter from the Law Society “provided reassurance that the value allocated to non-permitted purposes is off-set by the contribution made from Law Society commercial revenue/reserves to permitted purposes”.

Mr Kenny continued that whilst this had “satisfactorily resolved the issue for this round… we remain concerned about the policy and legal acceptability of applying some of the practising fee monies to costs associated with purposes which are not permitted purposes and will consider this further in the context of next year’s round”.

Mr Hudson told Legal Futures: “The Law Society’s arrangements fully satisfy both the letter and the spirit of the law. Indeed, the cost of practising fees is subsidised by the surpluses which the society makes on its commercial activities.”

What are “permitted purposes”?

The Legal Services Board last year made the Practising Fee Rules 2009 under sections 51(3) and (6) of Legal Services Act 2007. These state that the permitted purposes are:

(a) the regulation, accreditation, education and training of applicable persons and those either holding themselves out as or wishing to become such persons, including:

(i) the maintaining and raising of their professional standards; and

(ii) the giving of practical support, and advice about practice management, in relation to practices carried on by such persons;

(b) the payment of a levy imposed on the Approved Regulator under section 173 of the Act and/or the payment of a financial penalty imposed on the Approved Regulator under section 37 of the Act;

(c) the participation by the Approved Regulator in law reform and the legislative process;

(d) the provision by applicable persons, and those either holding themselves out as or wishing to become such persons, of legal services including reserved legal services, immigration advice or immigration services to the public free of charge;

(e) the promotion of the protection by law of human rights and fundamental freedoms;

(f) the promotion of relations between the Approved Regulator and relevant national or international bodies, governments or the legal professions of other jurisdictions;

(g) increasing public understanding of the citizen’s legal rights and duties.

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