Shabana Mahmood has demanded ‘specific’ changes to address the SRA’s regulatory failures and prevent a scandal akin to the Axiom Ince debacle from recurring. Public trust in solicitors is damaged, the lord chancellor gravely asserted, as she backed formal action by the Legal Services Board against the frontline watchdog.
But there was a coda. Mahmood urged the LSB and SRA to ‘keep in mind the balance between ensuring appropriate consumer protection while not placing unnecessary regulatory burden [sic] on individuals or firms regulated by the SRA. This is to avoid negative impacts on growth or consumers’ access to justice’.
That message aligns with chancellor Rachel Reeves’ crusade to eradicate compliance barriers that constrain economic expansion. But it rather leaves the SRA hanging. How interventionist is the regulator now mandated to be?
The LSB’s Directions to the SRA are not particularly helpful here. They seem largely to articulate what any reasonable client or layperson would expect a competent regulator to be doing already. ‘Establish a framework for identifying risks’; ‘share market intelligence’; ‘assess the potential for harm arising from firms’ financial stability’.
The board’s to-do list continues in like vein.
What does all this mean, ‘specifically’? Will every law firm merger or acquisition now face enhanced SRA due diligence, or just those involving consolidators or external investors? Will any law firm suitor have to prove its capital adequacy in advance and offer up its latest accounts for inspection? To what extent can the SRA address ‘concentration of ownership’ without inhibiting entrepreneurialism? What is it going to do – and how is it going to superintend – the flood of rootless private equity cash flooding into the sector?
And so on.
Another omission – even occlusion – is any accounting for the LSB’s own role here. Quis custodiet ipsos custodes? Who guards the guards themselves?
A legitimate question, if you’ll forgive the Latin. After all, the SRA’s defective superintendence of Axiom Ince occurred under a regime approved by the LSB. Did the board foul up, too? We have yet to be told of which lessons, if any, the board has itself learned from Axiom Ince. This prompts a question that has been asked before by many Gazette readers. What value does the LSB actually add?
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