Casino morals in legal practice
Accepting the fact there are rogue solicitors is one thing, but what we have at the moment is a systemic regulatory failure, says Kerry Underwood
Without naming names – we all know who we are talking about – it is obvious that the concept of commoditising and cheapening legal work, and having it performed by large factory firms, has been a disaster for clients, the failed firms, and their redundant staff.
It has also been a disaster for the whole legal profession, severely damaging its reputation and threatening its very existence. There will always be the odd rogue solicitor, teacher, police officer, or whatever; everyone understands that. But there is a world of difference between that and the systemic failure that we have at present.
Now we have the spectacle of a huge, stock exchange-listed law firm apparently controlled by a foreign hedge fund while the Solicitors Regulation Authority stands paralysed, like a rabbit caught in the headlights. Would anyone at the SRA know how to intervene and deal with the financial issues arising out of such a situation? Has it the resources to do so in relation to a firm of that size?
Another firm, constantly the subject of negative and worrying press reports, is finally intervened in by the SRA, but rises phoenix-like from the ashes, apparently run by people closely connected with the owners of the original firm.
Hedge funds, phoenix companies, pre-pack administrations – is this really the way the legal profession should work? If some law firms are effectively incapable of being regulated, and if lawyers can walk away from their responsibilities, then it is not a profession at all. Maybe now is the time to revert to the former system of law firms only being able to operate through the medium of a partnership – that is to say, there should be no limited liability.
That does not stop businesses taking out insurance to protect themselves and their clients. It would act as a reality check on some of the more hare-brained schemes that some operators of limited liability firms have come up with.
Until recently the maximum number of partners in a firm was 20, which meant that no business was ever too big to fail, or rather, too big to be intervened in by the regulatory body. I suggest that the maximum now be 30. In reality, even the biggest firms rarely have more than 30 true equity partners.
A profession operating by the casino morals of the stock exchange will die, and deservedly so.
Kerry Underwood is senior partner at Underwoods Solicitors