WILL THE SRA BECOME A “SUPER REGULATOR?

It is proposed that CILEX members, i.e., legal executives, be regulated by the SRA. Could there be a domino effect – will other legal services regulators follow CILEX? Will the SRA, by far the largest regulator, become a super regulator? Is this sensible consolidation, the first step towards a single fused legal profession or a recipe for disaster ask Jayne Willetts Solicitor Advocate and Bronwen Still Solicitor Consultant both of Jayne Willetts & Co Solicitors Limited.

The proposal

Last year CILEX approached the SRA with a proposal to transfer its regulatory functions from CILEX Regulation Limited (CRL) to the SRA. Both regulatory bodies have now agreed to take this proposal forward and both have recently issued consultations asking their respective members for their views. The SRA consultation runs until 22 November - https://www.sra.org.uk/ sra/consultations/consultation-listing/ regulation-cilex-members/

On the assumption that the proposal will be accepted, the SRA sets out in its consultation how it will incorporate new rules into its Standards and Regulations. These include a new Code of Conduct for individual CILEX authorised lawyers, rules for their education and authorisation and plans for the SRA’s approach to their discipline and enforcement. Existing SRA rules, such as the Accounts Rules and Transparency Rules, would have direct application to them.

The SRA says that the cost of regulating CILEX members and entities will be paid by CILEX members and that there will be no cross subsidisation. It also emphasises that the proposals do not intend to change the distinct identity of solicitors or legal executives. In other words, there is no intention to merge the two.

The background – the current regulatory system for lawyers and how we got there

Most people would agree that the current system put in place by the Legal Services Act 2007 (LSA) is imperfect. Its implementation followed a report produced by Sir David Clementi, who was appointed in July 2003 to review the regulatory framework for legal services in England and Wales. This followed a report by the Department of Constitutional Affairs which concluded that the framework was “outdated, inflexible, over-complex and insufficiently accountable or transparent”. Clementi’s task was, therefore, to suggest a simplification to the system with more transparency and accountability.

He failed in his objective. The result was the Legal Services Act – a huge and complex piece of legislation which has left the legal profession with 8 frontline regulators of greatly differing sizes and an overarching regulator, the Legal Services Board (“LSB”). All regulators have different rules and regulatory regimes and, as an added complication, many lawyers are regulated by two regulators – as an individual by one regulator and as part of a firm, by another.

This was compounded by a failure to open up the debate on which legal services should be subject to regulation and which should not. There was therefore no change to the list of reserved activities (taking oaths, litigation and advocacy, conveyancing, and probate) which had been set out in successive Solicitors Acts over many decades. This spawned an increase in those providing legal services through unregulated entities and by unqualified individuals. The result for the public was the complete opposite of a simplification of the regulation of legal services as envisaged by Clementi.

What impact will the changes have if CRL regulation moves to the SRA– and on whom?

The SRA sees the impact on the solicitors’ profession as being minimal, although one might question the extent to which it could affect the work of the SRA Contact Centre, the Ethics Advice Team and the Supervision, Investigation and Enforcement Teams. All this could have an adverse impact on solicitors seeking help or subject to investigation. This would be a logistical problem for the SRA to sort out but given the current delays over its investigation and enforcement activities the proposal could simply result in more delays. Questions need to be asked about resources and the extent to which these would be sufficient.

The proposals would obviously have a greater impact on CILEX members who would have a new regulator and new rules to contend with. How they will react to this is not yet known. However, statistics show that approximately 75% of CILEX members are already working in SRA regulated firms and are, therefore, subject to its rules. The greatest impact would appear to affect those that work in CILEX regulated entities, of which there were 19 in June 2023. Some, which are eligible, would be automatically passported to become SRA regulated entities. There are also 40 CILEX-ACCA Probate entities –separate limited companies which are set up by accountancy practices authorised and originally regulated by the Association of Chartered Certified Accountants (ACCA). ACCA regulation has now passed to CRL. The proposal is that at present they would retain their own rules.

The changes are largely being sold as beneficial to the public and as a move to greater achievement of the regulatory objectives set out in the LSA. These are set out by the SRA in its consultation in the following way as:

• “Supporting public confidence by simplifying the regulatory landscape to make it easier for consumers to understand and access regulated services, supporting consumer choice and access to justice.

• Enhancing public protection by bringing the regulation of solicitors and authorised CILEX lawyers together, to maintain and enforce standards for two of the key groups of lawyers in consistent ways.

• Bringing efficiencies through reducing regulatory duplication for those authorised CILEX lawyers who work in SRA-regulated firms. This includes around 75% of all CILEX professionals .

• Improving consumer protection by replacing as far as possible the current limited compensation arrangements for clients of CILEX entities with the SRA’s Compensation Fund arrangements, without requiring any cross subsidy from solicitors.

• Providing new opportunities to address the regulation of new and emerging forms of legal services in an integrated way across both professions.”

There are clearly potential benefits from having CILEX members, who largely work in SRA firms, under a common regulator and working with

a common set of rules. It also makes for a clearer picture for the public. One of the risks may be a dilution of both brands – solicitor and CILEX, despite the SRA’s assertion that this will not happen. It would have to be anticipated that CILEX members might be concerned that this could be a first move to eradicating their independent professional status. Success would also depend on the SRA being properly resourced to effectively manage the integration of another group of lawyers into its regulatory regime.

Is this the beginning of the end for small legal services regulators?

The SRA’s consultation paper makes clear that at this stage the SRA only proposes to regulate “authorised CILEX lawyers” which are those who are authorised to conduct, without supervision, a reserved legal activity. If the change is successful, other CILEX members, such as students and paralegals, may be brought into the net.

The consultation is long and complex and sets out new proposed rules as well as looking at how the regulation of indemnity insurance, AML activities and accounts would be dealt with. It represents a significant increase in regulatory responsibility for the SRA and all firms need to give considered thought to the possible consequences to them and the profession.

Finally, what could the future regulatory landscape look like?

If this amalgamation of SRA and CILEX regulation goes ahead will this encourage other small legal professional bodies, such as the Costs Lawyer Standards Board and the Intellectual Property Regulation Board, to follow suit and divest themselves of their regulatory obligations? In ten years’ time, could we be looking at just two regulators – the SRA and Bar Standards Board? Would all legal advisers have common training via the Solicitors Qualifying Examination and be known as a lawyer? At that stage, would the LSB still have relevance? These are intriguing questions but the end result could be something far closer to the objective of simplicity that was set for Sir David Clementi.