The Solicitors Regulation Authority has had some notable successes - and the odd setback. Chief executive Antony Townsend tells Neil Rose how his first year has been and what lies ahead


It all seemed to be going rather well for the Solicitors Regulation Authority (SRA). But the shiny image of a progressive regulator was tarnished last month by its confession that it had overcharged 36,000 solicitors for their contributions to the Solicitors Compensation Fund.



It was certainly the first major setback for Antony Townsend as he marked his first year as SRA chief executive. ‘It was the kind of news that no chief executive likes to hear,’ he confesses. ‘It showed that a system which has been running for many years without incident simply didn’t have the necessary checks in it. We came unstuck, we apologised and now we’re working hard to set it right as quickly as possible. Yes, it’s embarrassing, and yes, it’s taught us lessons.’ The administration of the fund is now set for a thorough review.



Nonetheless, there is an impressive list of achievements for the SRA to point to in its relatively short 19-month lifespan (including the year as the Law Society Regulation Board) thus far: getting most of what it wanted in the Legal Services Bill, the ongoing training reforms, the character and suitability guidelines for prospective solicitors, plans to make public sanctions against solicitors, streamlining the previously confusing SRA decision-making process, proposals to liberalise higher rights of audience, and implementation of the new Solicitors Code of Conduct (although that is a project that started many years before the authority was even conceived of).



Set against that are stumbles like the compensation fund overcharging, the decision to delay the work-based learning pilot, criticism from the Legal Services Complaints Commissioner and the failed prosecution of solicitors over retaining commissions on local searches.



And somewhere in the middle, we have issues such as the continuing debate about referral fees and the struggle to push on with disciplinary action against firms at the centre of the miners compensation scandal.



‘By and large it’s been great fun,’ Mr Townsend reflects. ‘We knew some of the difficulties when we set out. We’re in what’s very much an evolving state as an authority with a legislative framework not through Parliament… One of the tasks of the new authority was to make sure we had high expectations of ourselves and drive ourselves, but that we are prepared to sit back and review where necessary.’



A particularly good example of this, he says, was the delay in piloting alternative ways of qualifying as a solicitor other than the traditional training contract. ‘We had very much hoped that we would be in a position to pilot some new alternative arrangements this autumn. We could have gone ahead, but we didn’t have sufficient confidence that what we were going to pilot would fly.’



It is a sign of maturity on the part of the SRA board that it was prepared to delay the pilot ‘rather than ploughing on regardless for short-term PR advantage’, he argues, ‘even though that does lead to a disappointment in expectations’.



There are those in the profession who argue that there is not much wrong with the training contract system as it is. Why the need for reform? ‘There are many people who have been involved in running very high-quality training contract arrangements and it is very reasonable for them to say there’s nothing wrong with them. I’m sure that’s correct,’ he says.



‘Our problem as a regulator is, frankly, that we cannot put our hand on our heart and say the current arrangements are quality-assured and are uniformly working well. Nor can we say there is no alternative mechanism that would help with the access problem that has been identified.’



Mr Townsend admits to being occasionally frustrated that the reform plans are boiled down to the idea of trainees being able to qualify in a minimum of 16 months, rather than 24 as now. ‘The board has always made it clear that even when we open up training alternatives, there will be nothing to stop the Rolls-Royce training arrangements, which in many firms will continue on the same basis. Our wish is not to undermine the good things that are going on, but to get rid of the bad things and increase access.’



But he accepts that there may be some incentive to rush trainees through, if only so firms can charge them out at a higher rate. ‘That is why we need better quality assurance arrangements than we have. If we are to allow more flexibility, we need to assure ourselves that that flexibility is not being abused.’



By contrast, the minimum salary for trainees is an issue where several board members clearly doubt that the SRA should be involved at all. But following a recent consultation showing overwhelming support for the minimum, the board decided to retain it for the time being.



Mr Townsend denies that the SRA is itching to be rid of it. ‘It would be right to say that the members of the board and probably people like me started with the view that the minimum salary really wasn’t regulatory business. But when we looked at the outcome of the consultation, we thought there were some potential discriminatory outcomes if we removed it. Having asked people for their views and listened to them, the board did not think there was a compelling argument for removing the minimum salary at this stage.’ Those last three words are significant, however. This is clearly not the end of the debate.



Mr Townsend professes himself ‘very happy’ with the current shape of the Legal Services Bill. The government recently accepted the SRA’s two outstanding issues, giving the SRA the ability to fine solicitors, and to regulate sole practitioners as ‘entities’. Though the SRA made ‘common cause’ with the representative Law Society on many issues, he says their separate lobbying has been a great help.



The main remaining concern is the ‘over-complicated’ regime for alternative business structures (ABSs). As it stands, if a legal partnership takes on a non-lawyer partner once ABSs are allowed, it would switch to a different regulatory regime. If that non-lawyer then left, it would switch back. ‘We would like to have run a single legislative regime which would have prevented [this],’ Mr Townsend says. ‘We haven’t quite got that, though I think we will be able to find a way around that with the approval of the legal services board, which means that while things may go under a different banner, as far as possible it’s a seamless regime.’



Unsurprisingly, the government has resisted the major redraft required to give the SRA what it wants, ‘but it is sympathetic to the underlying principle and I think we can work that through’.



But first come legal disciplinary partnerships (LDPs) between the different types of lawyer, which will not be ABSs and will not have to wait for the new ABS regulatory regime to be set up before being allowed. However, it is not as easy as that. ‘The government thinks we can click our fingers and bring LDPs in tomorrow. We are taking a more cautious approach and we are actually working up a project plan now. We would like to do it as quickly as we can and so proposals will be emerging during the second half of this year.’



Will 1 January 2008 be the moment solicitors and barristers finally go into partnership with each other? Mr Townsend has too many years as a regulator to make a promise like that, especially as the focus up until now has been getting the Bill provisions right, rather than implementing them. ‘It would be nice if we could deliver the draft rules by the end of the year, but that’s as far as I’d want to go right now.’



Though LDPs will be a much easier regime to organise than ABSs, the SRA will still have to produce a whole new set of rules. It will also have to work with the regulators of the other legal professions to create a regime in which individuals will be practising under different regulators, but the SRA will regulate the organisation in a seamless way.



‘It’s a big challenge,’ Mr Townsend says. ‘Regulating individuals can be hard enough, but regulating a much bigger commercial entity calls for a whole new set of skills and approaches.’



One cannot talk about the Clementi report and the Legal Services Bill it gave birth to without getting on to the separation of the Law Society into three operational units: the Law Society, SRA and Legal Complaints Service (although the Law Society also remains the corporate umbrella body for all three). So, how has what Mr Townsend describes as ‘the Clementi compromise’ worked?



‘By and large we’ve got through it better than I would have expected. That’s down to goodwill on all sides. The Clementi compromise includes ambiguity, and that leads to legitimate differences of views between, and even within, the organisations as to exactly what separation means. We have forged close relationships at all levels. There have been tensions, which have tended to be practical issues of resources or infrastructure where we have shared facilities, and the extent to which we unpick some of that shared infrastructure to give greater operational control.



‘Where those tensions have emerged, we’ve discussed them and indeed, as was published recently, have agreed there should be a small forum set up to talk out corporate issues before they become a major problem. It would have been remarkable had there been no issues between us, given the oddity of the situation in which we are. It’s to the credit of everyone involved that we have managed those and continue to believe we can make the settlement work.’



Mr Townsend says the Bill will help by formally delegating rule-making powers to the SRA board, meaning rule changes will not have to go through the Law Society Council as now. ‘Having said that, the council has, to date, respected the fact that it may ask the board to look at an issue again, but will pass the rules put forward by the board. In practice, we’ve made the transitional arrangements work quite well.’



Another area of possible dispute is setting the practising certificate fee, but the Law Society and SRA have recently agreed a protocol that in the event the council does not agree the fee sought by the SRA, the dispute would be referred to the Master of the Rolls or, once the Bill is enacted, the legal services board. This would be in the public domain and so, while not quite as much as the SRA hoped for, would meet the requirements of transparency and accountability that it wants in the process.



Nonetheless, the question of total separation will never completely go away. From Mr Townsend’s perspective, this would only happen if the current arrangements were shown not to be working. ‘Our job is to make it work in the public interest. Although there may be the odd tension, there is nothing as yet that tells me the Clementi compromise can’t work.’



But would the SRA not be better off with complete independence? Not necessarily, Mr Townsend replies – the current set-up maximises its chances of gaining the support of the regulated profession. ‘I’m quite old-fashioned in one respect, which is that I continue to think there is merit not in the old pure form of self-regulation, but in a form of regulation where the members of the profession consider they have a major input.’



Speaking to the Gazette after his appointment last year, Mr Townsend caused something of a stir with his talk of competence testing for solicitors. Twelve months on, he says ‘we remain committed to the proposal that we should move more and more to the testing of competence’. That will be taken forward primarily through a review of how the SRA currently accredits practitioners. It’s a project that cuts across the wider move to risk-based regulation, which is a cornerstone of the SRA’s approach. This means the focus is likely to be on those solicitors who are identified as potential risks, rather than on indiscriminately testing all solicitors.



‘One of the lessons we can learn from other professions, particularly medicine, is that if you try a comprehensive approach for everyone in one go, it may be that you bite off more than you can chew. Accreditation schemes which have regular reviews would be one way of doing that, and accreditation schemes tend to concentrate on the areas of greatest vulnerability, so there is an attraction to them being part of the answer.’



In Mr Townsend’s ideal world, he would have a system that would identify, say, three triggers – such as a solicitor’s complaints record – which justifies the SRA making further enquiries. The SRA’s new, on-budget IT system, bringing together several old systems into one, should help with this. He adds: ‘Risk-based targeting is the one that is most likely to be the best use of resources and to produce results most quickly. The notion of getting 100,000 solicitors to fill in elaborate forms in the hope of identifying a few per cent that might need further action is clearly not risk-based.’



Feedback from the roadshows the SRA has been holding up and down the country indicates that solicitors are not questioning the separation that created it, but that may change in December when the board has to make the decision on referral fees. Research done so far as part of the referral fee compliance project found significant non-compliance with the rules among firms selected largely on the basis of risk (see [2007] Gazette, 28 June, 1), but a considerable amount of information and research work is yet to be done.



Mr Townsend is not a betting man and would not like to say which way the board will jump. ‘I think the board is genuinely open-minded. It’s one of those issues where everyone agrees there are problems whichever way you go – all the options are genuinely on the table.’ That includes a return to an outright ban, although Mr Townsend sounds doubtful about that: ‘You could try putting genie back in the bottle. But even before it was let out, there were leaks in the bottle.’



Equally, there is no turning back from the separation of functions that created the SRA. ‘One of the things that’s most pleased me is that gradually we are being seen as on the map,’ Mr Townsend says. ‘It gives me a small bureaucratic thrill when MPs talk about the Solicitors Regulation Authority and recognise that it is now a separate entity from the representative Law Society.’