Hunt calls for further separation between representation and regulation at Law Society
Lord Hunt, the Conservative peer and Beachcroft consultant commissioned by the Law Society to undertake a review of the regulation of legal services, has called for clearer separation between the representative and regulatory arms of the Law Society.
Lord Hunt, the Conservative peer and Beachcroft consultant commissioned by the Law Society to undertake a review of the regulation of legal services, has called for clearer separation between the representative and regulatory arms of the Law Society.
In his long-awaited review, Lord Hunt recommended the Law Society should engage in 'a concerted campaign to establish the concept of separation of functions within the minds of everyone involved in legal services'.
'The Law Society,' he said, 'must now establish a clear and distinctive identity for its professional body, independent from that of the corporate Law Society, which also includes the SRA and the shared services functions.'
Ultimately, the former Beachcroft senior partner said, the society should establish a corporate board bringing together representatives of the legal profession, representatives of the operationally independent regulatory pillar, and lay members, all of whom would be appointed 'by means of a suitably transparent, independent and rigorous appointment process'.
If taken up by the Legal Services Board, Lord Hunt's recommendations would result in the representative council no longer acting as approved regulator.
He also recommended that the corporate board should oversee the appointment of the chairman and board of the SRA.
Among other significant recommendations, Lord Hunt endorsed the findings of the Smedley report advocating a separate regulatory framework for City and large commercial firms. He said the SRA should gradually move from a rules-based to a principles-based regulation and that 'the best legal firms' should be allowed to self-regulate, starting with corporate firms.
The Conservative peer said the SRA should allow firms to adopt the so-called Authorised Internal Regulation approach if the regulator believed their risk, compliance and governance processes were sufficiently sophisticated and robust.
'The first wave of AIR firms should consist largely of larger, corporate firms, but also that the system, if successful, should ultimately be rolled out right across the profession,' he said.
One of the more visible changes under this new approach would involve elevating Rule 1 to a rule with 'superior status'.
'Once the terms of a revised Rule 1 have been settled,' Lord Hunt said, 'if any legal practitioner can demonstrate clearly that he or she has abided by the core duties set out in Rule 1 there should be a strong presumption in their favour so far as the regulator is concerned.'
City firms welcomed the recommendations, with David McIntosh, chairman of the City of London Law Society, saying they 'looked forward to working with a renewed SRA towards improved and more effective regulation of the practice of corporate law with the emphasis on internal regulation and compliance: not recrimination'.
Looking ahead at the arrival of ABSs, Lord Hunt said the regulatory regime for ABSs should be 'very rigorous indeed'.
'ABS must not be an 'ethics-free, consumer protection lite' model, but neither should it face unnecessary regulatory shackles that prevent it taking off at all,' he said.
The former Beachcroft's senior partner also suggested a new 'fit and proper person' test should be imposed on senior non-lawyers in ABS firms, and that ABSs should have suitable indemnity insurance to cover all the services they provide.
In addition, he said the regulatory 'net' should be extended to cover will writing and all probate work, and that the claims management regulator should come fully under the aegis of the LSB as soon as is practical.