SRA under fire over ABS approvals

The SRA has come under fire over the slow pace of ABS authorisation as other frontline regulators have given the strongest hint that they will be vying to take a slice of the regulatory market.

The ABS authorisation process was perhaps not the “shambles” some had anticipated this time last year – when ABSs were given the go ahead – but “the perception was that we’re proceeding with a slow-burning motion,” said Stephen Mayson (pictured).

“It is disappointing that we’re not moving more quickly. I don’t know if it’s because the regulators don’t have the capacity, capability or because of risk aversion, but the expectation was that it would have been faster, and personally I am disappointed that it hasn’t been,” Mayson told the Westminster Legal Policy Forum ABS conference last week.

The slow pace of authorisation was also commercially damaging to organisations that had lined up “funding, jobs and governance arrangements” but had been unable to roll out their plans because of the delay, he said.

Challenged by Sir Mark Potter about the risk that speed of authorisation would be at the expense of quality of regulation, Mayson said the two were not in conflict.

Regulators shouldn’t cut corners but there was “some evidence” that the exploration of risk was “commercially excessive”, he said, suggesting that where there was no obvious consumer risk it should be possible to speed up the process without compromising quality.

In a separate intervention, Legal Services Board chief executive Chris Kenny urged regulators to “clear out the baggage”.

Proper supervision had nothing to do with “regulation by permission”, in which legal services providers could only act with the regulator’s say-so.

“Do firms that decide to change into LLPs really need permission?”, he asked, before suggesting in relation to ABSs specifically that “the focus needs to be – and increasingly is – on ensuring rapidly that fit and proper person tests are met … rather than seeking to interrogate business plans in minute detail.”

SRA chief executive Anthony Townsend rejected accusations that his organisation has been too slow in approving ABSs, saying the SRA had carefully balanced the need for robustness and speed.

Townsend said he was mindful that the vetting of ABS applicants shouldn’t result in “throwing a lighted match in a petrol station” – a reference to a comment made earlier this year by an official at the Hungarian legal regulation authority.

“It’s not a simple authorisation process,” Townsend went on. “The more important question is whether we can supervise it effectively.”

He also predicted the number of ABS authorisations would rise sharply in the next twelve months: “This time next year I expect ABS authorisations to be in three figures rather than two.”

Commenting on the nature of the applications, Townsend said that there had still not been any application by “a genuine MDP”.

It echoed Stephen Mayson’s surprise earlier on in the proceedings that all but two of the 30 or so SRA-licensed ABSs were authorised to practise in all five reserved areas, with none of them appearing to intend to use the ABS vehicle to deliver services differently.

Meanwhile, representatives from other professional regulators made clear their intention to regulate legal services and attract organisations interested in becoming ABSs.

Anna Bradley, chair of the Council for Licensed Conveyancers – which has authorised 11 ABSs – said regulation of professional legal services was “not a new field” for the CLC.

Bradley said the CLC, just like the SRA, had embraced outcomes-focused regulation and that while their aim wasn’t to engage in a regulator shopping contest, they were keen to “work with new entrants from the retail market”.

“People come to us because of our knowledge of the market”, she said, but admitted surprise that none of the applications involved estate agents.

In a warning shot to conveyancing solicitors, she said that online services would shake the legal services market.

The biggest costs for online providers were not people but investment in technology, so that these businesses will be keen to expand their model to other areas, she said.

Already two of CLC’s ABSs were large online businesses and Bradley said CLC will apply to regulate advocacy and will writing.

Felicity Banks, head of the representative arm of the Institute of Chartered Accountants (ICAEW) led a similar charge.

With a charter awarded 130 years ago ICAEW had “an old and proud history” and the duty to act in the public interest has been a long-standing guiding principle.

“Public interest is inherent in what we do”, Banks said as she insisted that clients of ICAEW-regulated businesses received the same quality of legal advice as that provided by law firms.

She said she looked forward to the first ICAEW-licensed ABS but added that ICAEW would expect solicitors in ICAEW-authorised ABS to continue to comply with their professional ethics.

“It would we better if solicitors in these ABSs remained regulated by SRA”, she said.

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