LSB retreats from ban on professional bodies 'influencing' regulatory arms

The Legal Services Board (LSB) has launched a further consultation on proposed amendments to Internal Governance Rules (IGR) following an earlier consultation which prompted a number of objections for choosing wording that went beyond the requirements of the Legal Services Act 2007. 

In its 2018 consultation, the LSB sought to amend Rule 1 of the IGRs, which deals with frontline regulators’ overarching duties, proposing to stop designated bodies trying to “influence” their regulatory arms.

The LSB is now proposing to use the word “prejudice”, which it says “more closely reflects the terminology of Section 30 of the Act” – the provision which requires approved regulators to ensure the separation of regulatory and representative functions.

Redrafted, the new Rule 1(1) would read: “Each approved regulator has an overarching duty to ensure that the exercise of its regulatory functions is not prejudiced by any representative functions it may have.”

The initial wording using the term ‘influence would have directly affected bodies such as the Law Society, the Bar Council and the Chartered Institute of Legal Executives, which have opted to comply with the regulatory independence requirements in the act by setting up arm’s length regulators. 

In its response to the original consultation, the Law Society objected to the choice of word on the basis that it would prevent Chancery Lane from merely criticising the Solicitors Regulation Authority.

The LSB acknowledged the response, saying in its further consultation, published yesterday (2 May 2019): “It was argued that seeking to influence the regulatory body is a legitimate exercise of representative functions, and the LSB is prohibited from interfering with representative functions by Section 29 of the Act”. 

The super-regulator also said respondents argued that the approved regulators should not be left in a worse position than third-party stakeholders in terms of their ability to influence the regulatory body. 

“We recognise that, where an approved regulator has both representative and regulatory functions, the approved regulator may have a legitimate role in influencing the regulatory body,” the LSB explained in its consultation. 

“In this situation, as the representative body for the regulated profession, the approved regulator may hold key practical experience of how a policy would affect its members or have relevant data or information that should be considered as part of the decision making of the regulatory body.” 

Law Society president Christina Blacklaws (pictured) welcomed the LSB’s change of approach, saying IGRs “should not hamper legitimate influencing activities by professional bodies, so we’re pleased the LSB appears to have taken our views on board.”  

“The LSBs proposals seem to acknowledge that it is more appropriate that the rules preclude ‘prejudice’ rather than ‘influence’,” Blacklaws continued. “This clarification would support both approved regulators and frontline regulators in discharging their roles effectively, which will in turn improve and underpin public confidence in legal regulation. We look forward to working with the LSB and the SRA to this end.”

The LSB’s move is part of a wider strategy to achieve greater autonomy for legal regulators after it became clear there was little government interest in legislating to ensure regulators were structurally independent from the representative bodies. 

To date, of the larger approved regulators, only Cilex has announced its intention to ensure complete structural independence for its regulatory body. In its response to the LSB’s first IGR consultation, Cilex said it wanted to “take the new rules as far they would go, with no dual roles and shared services only where a compelling case exists.”

Talking to Solicitors Journalearlier this year, LSB chair Dr Helen Phillips said it became obvious in 2016 that “there was no appetite in government for any fundamental reform, so the answer was to make the best of the currently available levers”. 

One of these levers is the internal governance rules, which the LSB is now looking to use in its drive to ensure “effectiveness and appropriate independence”, “if not full, then at least appropriate separation”, Phillips said at the time.

LSB chief executive Neil Buckleysaid the oversight regulator had listened to feedback but remained “committed to setting a new framework which delivers the highest level of regulatory independence”.

The consultation will end at 5pm on 12 June 2019 and the LSB expects to finalise its decision in the summer.

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