Who regulates 'the unregulated?

One of the many unfathomable requirements of applying to the Solicitors Regulation Authority (SRA) ?to become an alternative business structure (ABS) is that you have to state which of the reserved legal activities your new firm will be undertaking. 

For many applicants the true answer is ‘none’ but they are required, in order to have their application succeed, to pretend that they will be conducting probate, or one of the other reserved activities. The SRA wants to stop this but has just been told by the Legal Services Board (LSB) that the farce must continue. What is really going on here?

The Legal Services Act ?sets out, in one of its many schedules, the definitions ?of the reserved legal activities and which of the approved regulators has power for its members to undertake them. ?As far as the SRA is concerned, that means conveyancing, probate, conduct of litigation, rights of audience, and administration of oaths. 

That list has remained broadly the same for as long as anyone involved in legal regulation can remember and does not necessarily bear any relation ?to what many solicitors actually do. City solicitors, in particular, may go their whole careers without touching a reserved activity. 

The SRA states: ‘[O]ur experience tells us that for most authorised firms and in-house teams, the majority of work carried out is non-reserved’. It is also true that lawyers do not design their practices around the distinction between reserved and non-reserved work, and consumers certainly do not recognise the distinction in deciding which firm to use.

Will writing?

In 2012, readers will recall a great deal of publicity following a Panorama investigation into will writing and whether it should become regulated. ?A sceptical LSB was eventually persuaded, mainly by sheer weight of evidence, to recommend to the Ministry ?of Justice that will writing be regulated. 

The Lord Chancellor, however, was far from convinced and the recommendation was rejected. Most observers took the view that if will writing were not reserved then it was highly unlikely that any other legal activity could make the transition. In other words, the list of reserved activities was, in effect, closed.

When the SRA board met in September it approved a raft of ‘deregulatory’ rule changes. Tucked away among these was the simple proposition that ABS applicants did not have to carry out some reserved activity in order to be authorised. This would have been introduced on 1 November had the LSB not put a block on the plans. 

The LSB issued a warning notice which gives it a further year to consider the application of the rules. The super regulator’s strategy director, Caroline Wallace, set out its position: ?‘The LSB must consider if it has the legal authority to facilitate the regulation of legal services that do not currently need to be regulated under the Act.’ 

Wallace went on to look at whether primary legislation might be needed if the change were to go ahead, and also as ?to whether change would be in the interests of consumers, ?who would end up paying for regulation. The LSB’s suspicion is that a rule change which appears to be common sense and harmless is actually some sort ?of Trojan horse, introducing ‘accreditation rather than authorisation’, with a detrimental impact on consumers.

High stakes?

Both the Law Society and SRA would probably agree that the list of reserved legal activities should have been extended on a number of occasions in the last 50 years. They would certainly want to extend it significantly now because, as the LSB has clearly demonstrated, the disconnect between reserved and non-reserved legal work leaves them exposed to challenge at a basic level. 

With Michael Gove having announced his review of legal regulation, the lead regulators are trying to shore up their positions before the fighting starts. Given that the most likely outcome of the review is a single legal regulator, the stakes are high. The government is not likely to be terribly interested in maintaining the role of the SRA in future regulation. The LSB is equally unlikely to allow the SRA to extend its remit by the back door until the outcome of the review is settled.

Stuart Bushell is a former director of the Law Society and SRA