Are we under-represented and over-regulated?
Viv Williams: The same body cannot represent and regulate your profession, but just how many regulators should be involved?
First off, we have the so-called 'super regulator', the Legal Services Board (LSB), responsible for overseeing the various regulators. Everyone is jockeying for position, whether it is the Bar Standards Board, the Solicitors Regulation Authority (SRA), or numerous others.
As we know, the SRA is currently funded by the profession; however, the intertwined SRA and Law Society, acting as the regulator and the body representing the profession respectively, lead an uncomfortable existence.
The government is now suggesting the representative be split from the regulator - not many would argue with that principle. However, how would this work in practice?
Needs of the profession
Does the Law Society actually represent the profession in a way the profession requires? Catherine Dixon, CEO of the Law Society, has clearly laid out the case for solicitors to support and ultimately fund this representative body, but is this what solicitors actually need?
The Magic and Silver Circle firms have their own agenda - and it is not represented by the Law Society. And when discussing the challenges facing thousands of smaller independent law firms, it becomes apparent they believe the Law Society cannot justify its existence.
We have an organisation clearly out of control - trying to justify the Veyo fiasco is inexcusable. Veyo is the ultimate scandal, for which previous presidents and a previous CEO may have been responsible, yet trying to justify the investment by making claims of changing market conditions is complete nonsense. It is rumoured that the final sum wasted on this project was close to £13m, when you include the closure costs.
Would you trust an organisation to represent you that is still justifying this position? No one has lost their job and we are yet to see a formal apology for the mismanagement of the investment.
The SRA, on the other hand, is fast becoming an organisation focused on regulating the profession. Gone are the business support teams that effectively avoided interventions for the past few years. The Solicitors Disciplinary Tribunal (SDT) reported a 69 per cent increase in cases for the first half of 2015 compared to the same period in 2014, admittedly from very low numbers.
Some would argue that this is the regulator's purpose. Outcomes-focused regulation (OFR) has been adopted from the Financial Conduct Authority (FCA) originally in whole, but is now being re-written to be sector-specific.
We have seen a number of recent interventions, yet we have no budget to manage them. Some failures when a suspected fraud is involved will prove extremely expensive. In a recent case, where the senior partner had allegedly removed over £2m from client accounts over a ten-year period, the SRA insisted on freezing the client account until the hole was filled.
Because the alleged fraud had been over a number of years, it was impossible to identify which accounts had been affected. Despite a forensic accounting investigation going back over ten years, there were still gaps, and either the professional indemnity insurers or all the innocent partners had to make good the shortfall. The practice was financially sound with cash in the bank, yet the remaining partners are now tarnished by the actions of one person. This stopped any potential merger, as the SRA was adamant that the client account of the acquihiring firm would be infected.
Needless to say, no purchaser would risk this challenge and the firm will now be intervened or broken up. Where does this leave the partners of the firm? The SRA's view is that even if you did not know you had a rogue partner, you should have done - the managing partner may have been in control and responsible for the alleged fraud, yet all the other partners, including any salaried partners, should have known what had been happening.
So, where does this leave partners? We are all aware of cybercrime, but does this change the implications for partners? If we do not have specific, designated client accounts, how can we be sure that all partners are responsible for the actions of others?
The SRA's view, although not tested, brings into play the 'should have known' element for the actions of partners, staff, and fraudsters. The regulator could be wrong in its opinion, but who is prepared to challenge it?
I cannot stress the importance of taking regulation seriously - it is no longer just the responsibility of the person or persons involved; every partner or owner of a law firm will be held accountable.
The law is one of the oldest and noblest of professions,
but I question how many new potential owners would want this responsibility.
We are moving into a world where regulation is taken more seriously. The question is, do we have an effective body to represent the profession? I will leave you to draw your own conclusions. SJ
Viv Williams is legal services director of SIFA 360