Ministry of Justice's call for evidence leads to cry for fully independent regulation from SRA
The Solicitors Regulation Authority (SRA) has responded to the Ministry of Justice's (MoJ) call for evidence on the regulation of legal services in England and Wales demanding truly independent regulation.
They have also suggested that reforms be introduced to address the deficiencies within the current legislation, specifically the Legal Services Act 2007 (LSA 2007), which provides for multiple regulators. Whilst the SRA currently has operational independence, they argue that structural independence is also required to avoid interference from the Law Society (an approved regulator under the LSA 2007).
The SRA is the independent regulatory body of the Law Society, regulating (and acting in the public interest) solicitors, law firms, and employees, as well as acting as a licensing body for alternative business structures. Praising the initiative of the MoJ in their "timely" call for evidence, the SRA noted that the current arrangements for regulation of the sector were borne out of a report provided by the Office of Fair Trading back in 2001. Therefore the current regulatory framework was introduced prior to the changes brought in by the LSA 2007, which have dramatically altered the landscape of the legal services market given that non-regulated individuals and non-legal professionals can now offer legal advice.
The SRA's submission to the MOJ advances the case for a truly independent regulator, independent from both the government and the profession, which would be accountable to Parliament. They contend that the current regulatory framework which underpins it remains "clumsy, complex, costly and obscure." Within their response, the SRA have considered the benefits of the current situation (which include clear objectives, adherence to principles of better regulation and independence of regulation from Government) against the flaws. These include inflexibility and over-prescription, the complexity of primary legislation (as the approved regulators work under a multiplicity of legislation), inadequate and irrational foundations for regulation (i.e. the fact that legal services regulation is founded on the six "reserved" activities), the multiplicity of regulators (8 in total all governed by the LSB) and finally the fact that regulation is not fully independent, which adds cost and results in a lack of flexibility.
The SRA also calls for the inconsistencies within the current legislation to be addressed by advocating for a "single statutory framework for entity regulation in the legal services market with a common set of statutory regulatory powers". However one of the main messages to be taken away from the SRA's response is their demand for both operational and structural independence stating that the "SRA's experience has been that the delegation of operational independence from the Law Society has been given grudgingly and constant vigilance is required, backed up by the prospect of intervention by the LSB, in order to ensure that the SRA is able to operate independently as required by the LSA 2007." The SRA are also critical of the costs to the sector which arise from the current settlement, stating that such high levies (to fund for example the SDT, the Legal Ombudsman, the LSB etc.) cannot be justified in the face of a more effective alternative. Whilst their call for reform is progressive, the SRA does not go as far to advocate for a single regulator, recognising that all options, which include having a number of regulators, should be considered.
More generally, responses to the MoJ's call for evidence have been varied, with the Legal Services Consumer Panel suggesting that a single independent regulator should replace the current system. Elisabeth Davies, chair of the Panel said; "A single regulator, entirely independent of the profession, is most likely to give consumers confidence that regulation is protecting them, not lawyers." The Law Society criticised the current system arguing that it is "too detached" from the profession. However in direct contrast to the SRA's calls for reform, the Law Society suggests only "relatively minor changes" which they anticipate would provide "a more proportionate regime which retains accountability and builds on the expertise of the profession." They do not go as far to argue for an independent regulator, given the anticipated cost of such change.
This potential restructuring of regulation is occurring at a time of unprecedented change in the legal profession, as practitioners struggle to get to grips with the new outcomes focused regulation which provides that firms must nominate compliances officers for legal practice and finance and administration. The fact that reform of regulation is also now subject to review demonstrates that this area is rapidly changing and generally unsettled.
It is unclear how the MOJ will respond to the different suggestions received from a cross section of the legal sector in relation to their call for evidence. It does however appear certain that reform to the regulation of the legal services market is enviable in the near future; how the reforms will be implemented however and in what form remains to be seen.
A copy of the SRA's full response can be accessed here.