Peter williamson looks at how the role of the solicitors regulation authority will be affected by the enactment of the legal services act


It is good to see how the government is presenting the enactment of the Legal Services Act. Its statements emphasise the importance of the new Office for Legal Complaints, the new Legal Services Board and the new business structures that will be allowed.



The headlines are all about the better deal for consumers, who will be able to get their legal services in a more competitive environment. The government talks about ‘restoring consumer confidence’ with the reforms that have been introduced.



But how does the Solicitors Regulation Authority (SRA) see its role now that these momentous changes are on the way? And how should the profession get ready for the new regulatory regime that will follow?



First, the SRA fully supports the principles of the Act. More competition and choice for the consumer and greater flexibility in how services are provided are essential if solicitors are to merit public confidence.



Greater choice and flexibility need to be matched by flexible, proportionate regulation. We welcome the new powers we have been given to make us a more effective regulator. These include the ability for us to regulate firms as well as individuals and to use a wider range of measures to deal with non-compliance. Our current, inflexible powers are not well suited to the needs of a modern, proportionate regulator.



Much of the way we regulate is based on the fact that we set standards of entry to the profession, set a professional code of conduct and then make sure it is upheld. So a number of challenges will arise when the SRA has to regulate organisations that involve a wider range of people, including people who do not belong to one of the branches of the legal profession. Hence the need for the power to be able to regulate the firm as well individuals, which is similar to the regime of the Financial Services Authority.



Some of the changes will simply be implementing the requirements of the Act, but in other areas the SRA will have choices. Given the widespread interest in the future shape of legal services, we are keen to hear your views. We have already issued an invitation to you all to comment on our general direction of travel and the proposed timescale for changes. We hope you will respond.



So what are the regulatory changes on the way? The Act allows two new forms of business practice – legal disciplinary practices (LDPs) and alternative business structures (ABSs). The SRA is seeking views on our proposal to set the challenging target of being in a position to regulate LDPs in 18 months’ time. This timeframe is required to allow for the necessary policy work and rule changes.



LDPs can be owned and managed by different kinds of lawyers. Late changes in the Act mean that LDPs can also include a minority of non-lawyer managers, provided they are working in the firm which is providing legal services and they are not simply external investors.



We have set out some principles that outline our approach to the Act. We will adapt our regulations where possible and only impose restrictions over and above those required by the Act where there is a consumer and public interest in doing so.



We also realise that firms need to be able to plan for the future. We will be as open as possible and consult with interested parties about the changes ahead.



Our approach will be evolutionary and we will minimise unnecessary bureaucracy – where possible we will use ‘passporting’ procedures. If a regulatory burden has to increase, we will look to decrease it in other areas.



There are also changes in prospect for sole practitioners, who will be regulated as entities. We are considering whether existing sole practices could be authorised automatically under transitional arrangements. New sole practitioners will have to obtain approval like any other firm under the new regime.



Another important factor is the timescale for changes and we will only commit to timetables that we think are achievable. For instance, the new oversight regulator the Legal Services Board will not be fully operational until spring 2010. This board will then have to develop its own polices and procedures, so I would be surprised if any licensing of ABSs will be allowed until 2012.



I understand the commercial pressures that must be weighing on firms that are having to think about their future shape and financing. However, I would urge you to be particularly cautious if you are approached by outside interests who want you to commit to changing your business structure. It will be for the regulators and the Legal Services Board to decide what kind of ABSs will be allowed in the future and how licensing arrangements will operate. They may well decide that conflicts of interest might arise with some forms of outside ownership of law firms. There could well be dangers for solicitors who jump the gun.



It is important we keep a dialogue with you while these important changes are taking place. We are dedicating part of our website to the Legal Services Act and I hope you will take the time to look at how we are approaching the regulatory job ahead. Your views are welcome – www.sra.org.uk/LSA.



Peter Williamson is chairman of the board of the Solicitors Regulation Authority