Restrictions on alternative business structure can be lifted now they have shown to pose no greater risk than traditional law firms, the Legal Services Board has said.
The oversight regulator told the Ministry of Justice that no evidence has emerged to show non-lawyer ownership of or investment in legal businesses requires special rules.
The LSB was responding to the government’s proposals for lifting certain requirements on ABSs imposed by the Legal Services Act.
These include requiring ABSs to report only ‘material’ failure to comply with rules, as opposed to ‘any’ failure as at present.
In the response, the LSB says this particular requirement adds to the cost of reviewing reports of misconduct not deemed substantial and prevents regulators from targeting more serious cases.
‘There is no evidence in support of this additional burden on ABS, and it would be more proportionate and consistent if the same arrangements applied to all firms,’ states the response.
The LSB backs in principle the proposal to give regulators such as the Solicitors Regulation Authority more discretion on the necessary checks for approving an alternative business structure. This could, it suggests, allow the regulator to approve more applications and take decisions more quickly.
The present rules, says the LSB, were developed on the assumption that ABSs ’would more risky than traditional legal services providers’.
The response adds that this position was not supported by evidence gathered from almost five years of ABS licensing.
‘[Licensing authorities] should be given greater discretion under the act to make their own rules around ownership.’
In an accompanying letter to the Ministry of Justice, LSB chief executive Neil Buckley (pictured) said the proposals will have a net deregulatory effect on legal services, allowing regulation to be more targeted and proportionate.
‘We agree that experience since 2011 has indicated there is nothing inherently riskier about ABS that requires a more stringent or inflexible approach to authorisation than that in place for a traditional law firm,’ he said. ‘The support for a level playing field for legal services firms seeking authorisation is a positive development and promises benefits for competition, innovation and growth.’