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SRA slams interventionist LSB

LSB puts unjustified emphasis on economic liberalisation at the expense of other regulatory objectives

6 March 2013

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The Legal Services Board has been overstepping its role and constantly been shifting the goalposts for frontline regulators, according to damning submissions made by the SRA in its response to the LSB’s consultation on its draft business plan.

The response highlights “significant concerns” about the LSB’s approach to regulatory objectives, “which tends to see the Legal Services Act in terms of narrow economic liberalisation, rather than the carefully balanced approach which the Act was designed to achieve”.

The SRA also criticised the LSB’s tendency to “seek to intervene in the frontline regulators’ exercise of their discretion, thus risking undermining the regulators’ independence”.

SRA chief executive Anthony Townsend emphasised the complexity of the challenges presented by the Legal Services Act that needed to be resolved before the frontline regulator could move to a longer-term programme focusing on operational issues and systems improvements.

Townsend was also critical of the LSB’s lack of understanding of the how the SRA worked.

“We have limited resources and sometimes we have to make difficult decisions about priorities,” he told Private Client Adviser’s sister title Solicitors Journal. “The LSA had a big liberalisation agenda; we’ve done the heavyweight lifting in policy terms, now we need to recalibrate our approach.

“When looking at what we need to do we may need to readjust priorities on a risk basis – for instance, if more firms are starting to collapse; the LSB doesn’t have this understanding of the totality of our work.”

An overly liberal approach favouring competition in the market and overlooking other regulatory principle was a cause for further concern.

Economic liberalisation

According to the SRA’s response, the drafting of the LSB’s plan, and the SRA’s own experience of the LSB’s approach, demonstrated that “contrary to [the LSB’s] assertion, there is clearly a strong, and often theoretical, emphasis on economic liberalisation of the legal services market at the expense of a balanced consideration of all of the regulatory objectives as required by the LSA.”

“The point we’ve made,” Townsend commented, “is that greater competition is not the answer to everything. Take the separate business rule, for instance, which can be seen an anti-competitive measure, but if it was lifted, there could be some real risks for consumers.”

The SRA also criticised the LSB for its interventionist tendencies, a criticism regularly articulated by the Bar Council.

“The LSB’s propensity for interventionism and micro-management (both past and planned) gives rise to more significant risks to independent public interest regulation because […] there are factors that can and have caused the LSB’s interventions to be misdirected,” it said.

Only yesterday – the day the LSB’s consultation closed – the Bar Council repeated its long-standing concerns about the LSB’s approach, in particular “the costs and scope of the LSB’s plans”.

Bar Council chair Maura McGowan QC said the LSB “ought to focus on its core duties of regulatory supervision and avoid mission creep and avoid duplication of what is already being done by frontline regulators”.

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