Regulators will need to present 'sound evidence' for in-house reform

Topics: In-house,Regulation and compliance

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Regulators will have to produce a ‘sound evidence base’ should they wish to reform regulatory arrangements for in-house lawyers, the Legal Services Board has said.

Publishing a ‘statement of policy’ today, the oversight regulator highlighted the key principles it will consider when asked to approve regulatory arrangements in relation to section 15(4) of the Legal Services Act.


Section 15(4) states that an employer who employs someone to carry on a reserved legal activity, does not itself carry on a reserved legal activity unless part of its business is to provide that reserved legal activity to the public. 

The LSB said the principles in the statement were designed to provide ‘additional focus’ on areas identified in the board’s thematic review as important in improving regulatory arrangements for in-house lawyers.

LSB chief executive Neil Buckley (pictured) said: ‘We know some regulators are planning to review their current restrictions. The principles in our statement of policy provide transparency about the issues the LSB considers essential in this reform.’

The Solicitors Regulation Authority outlined its plans to implement a new regulatory approach for in-house lawyers as part of its response to an LSB discussion paper, Are regulatory restrictions in practising rules for in-house lawyers jusitified?, which was published last February.

The LSB will expect an approved regulator that chooses to apply regulatory restrictions additional to those required by the act ‘to justify its approach with a sound evidence base’.

The board said it will be ‘particularly’ important to understand ‘any evidence that informs a decision by an approved regulator to place regulatory restrictions on in-house lawyers providing unreserved legal services to consumers unconnected to the employer’s business’.

Regulators must confirm that they have considered ‘any consequential effects’ of their proposed changes ‘in light of wider regulatory arrangements’.

The impact of alterations on consumers must also be considered.

Where new or revised regulatory arrangements pertain to section 15(4), the board will also consider how regulators ‘communicate and keep consumers informed about the benefits and consequences of different regulatory approaches for in-house lawyers’.

The LSB adds that nothing in the statement ‘should be seen to specifically restrict or deter’ the provision of pro bono services by in-house lawyers within the current legislative framework.

Readers' comments (4)

  • Because they're losing their ability to regulate generally as Solicitors become extinct; they need to justify their existence when the rest of us have gone and therefore, in-house is the obvious answer.

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  • I couldn't agree more. I'm already regulated by the SRA, now I'm going to be regulated by the FCA as well?

    I despise the SRA as it is. One (incompetent) Regulator is more than enough.

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  • Both of the preceding comments are excellent !

    I've said many times that with competition between regulators, and indeed the prospect of consolidation, the SRA, with their draconian approach, deserve extinction.

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  • The SRA Handbook is as it is because post Clementi/Legal Services Act 2007 the SRA realised that it should construct a regulatory framework which would cover all permutations of the practice of law. This was not a bad idea: philosophically it made sense for all lawyers to be subject to the same regulatory requirements and although the sector remained (and remains) diversified, the logic was that it should all come together under one regulatory umbrella.

    In practice however this hasn't happened, and there is little indication that it will happen anytime soon. Meanwhile the SRA continue the logic of their existence, which is to regulate all lawyers, in whatever field, in the event that the government settles on a single independent regulator.

    The trouble is that the government hasn't really thought through what this all may mean. Thus the consumer is left with regulatory choices (which will probably feature low on a consumer's priority list), and regulatory confusion reigns. There may be sound reasons why (for example) the Licensed Conveyancers have a different regulatory regime with different overheads resulting, but it doesn't obviously lead to a fair and transparent market.

    What is required (on the Government's case) is (a) a redefining of 'reserved legal activities' (b) clarity as to the minimum standards in these reserved legal activities, including ethical conduct) of the entities engaged in this sector, and equal treatment for the entities competing in this space.

    This could mean personal sanctions such as solicitors suffer for non lawyer directors of legal service providers.

    As it is, the present regime is a mess: inconsistent, unfair, and anti-competitive.

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