A recap of the regulators' current reports and consultations

The legal services world has been quite busy in the run up to its summer holidays.

Developments from the Solicitors Regulation Authority (SRA) and the Legal Services Board (LSB) may have a far reaching impact on the future of the profession. In particular, a number of tenets that the profession has held dear for many years are at risk of being shaken.

From the top, we have the LSB publishing its paper on the future of regulation. Unsurprisingly, the paper itself reaches few actual conclusions in favour of raising issues as discussion points or matters for further investigation. This approach was inevitable, given that the various legal services regulators were unlikely to reach universal agreement on such a key topic. The reform platform (again, perhaps unsurprisingly) leans quite heavily towards reform of the reserved activities on a rational basis rather than preserving what is an accident of history and sector specific regulation. That has been on the general agenda, particularly the LSB’s, for a long time, but is anathema to the approach traditionally adopted by solicitors – work done by a solicitor should maintain the standards of a solicitor, irrespective of who it is done for and whether or not it is reserved work.

The issue of sector-specific regulation ties in quite neatly with the SRA’s continuing focus – outlined in the ‘Risk Outlook 2015/2016’ report – on standards of service, with particular reference to vulnerable clients. The SRA’s comments clearly echo the sentiments expressed in the LSB’s discussion paper to the effect that there is a greater risk (and therefore a greater need for regulatory intervention because of the risk) that vulnerable people are not getting the assistance they need. The LSB’s paper suggests that often the most vulnerable consumers need advice in the most complex areas of law, such as social housing.

It should be noted vulnerability is not just a function of a lack of understanding of legal issues or of a particular issue, for example a disability affecting communication. Consumer groups are keen to emphasise that anyone can become vulnerable as a result of the issues affecting them.

Elsewhere in the Risk Outlook, financial stability has failed to make an appearance for the first time since the Outlook was launched in 2013. Abusive litigation, money laundering, and cybercrime targeting law firms remain high on the list of priority risks, as does the lack of diversity in the legal profession.

Interestingly, the case study focused on by the SRA is not about social mobility or ethnic origin, but concerns instead a female solicitor reluctant to take partnership because of a perception that the firm’s culture would not leave room for allowances to account for childcare requirements. It is a case study with a happy ending, but it is troubling that such perceptions exist 40 years after the passing of the Sex Discrimination Act 1975.

Staying with the SRA, regulatory reform remains high on its agenda. Changes to the separate business rule were approved by the LSB on 20 July and are expected to come into force in autumn, when the next edition of the handbook is due for release. The SRA also approved changes to the form of the ‘Reporting Accountants’ report at its board meeting on 15 July and is continuing its work on the SRA Accounts Rules. Given the complexity of the rules and the suggestion of negative responses to the concept of third-party managed accounts, that project may be ongoing for some time.

The SRA has not given up on the idea that there is no need for a fixed level of minimum indemnity cover. It continues its campaign through its discussion paper launched on 9 July. Initial proposals to reduce the level of minimum cover met with serious resistance from the profession, insurers, and lenders last summer, when proposals were made to reduce it to £500,000.

It strikes me as quite ironic that this discussion paper came out just a week before the SRA launched its Question of Trust campaign, designed to promote effective engagement with the profession and stakeholders and to inform policy development by helping the SRA to get a better idea of the issues that really matter. SJ