Frequently asked questions about the Legal Services Act 2007


How does the LSA 2007 affect the Law Society?

The act specifies the Law Society as an ?approved regulator' for solicitors, and will carry out both representative and regulatory functions.

The act also established the Legal Services Board (LSB), a new regulatory body that will supervise the Law Society, Bar Council and other legal professional bodies in the exercise of their regulatory roles.

The Legal Services Board and its chair, David Edmonds have been appointed

What is the legal status of the Solicitors Regulation Authority?

The SRA is a committee of the Law Society Council and the regulatory function of the Law Society.

Are there conditions imposed on the rule-making power of the SRA?

Yes, the Law Society has imposed conditions relating to consultation and notification.

In addition the impact to the regulated community of any rules proposed by the SRA must be assessed.

The Law Society will also ensure that the SRA complies with the requirements of the Legal Services Board.

As the Legal Services Board has the power to issue directions and impose fines on the Law Society, not the Solicitors Regulation Authority, the Law Society needs appropriate supervisory powers over the SRA.

Will lawyers be regulated by the Legal Services Board (LSB)?

No. Lawyers will continue to be regulated by the Solicitors Regulation Authority (SRA), the regulatory arm of the Law Society, and by equivalent professional bodies such as the Bar Standards Board.

These bodies will in turn be regulated by the Legal Services Board, but the board will have no direct involvement with individual lawyers or firms, except as a last resort if regulatory gaps emerge in the future.

How independent is the LSB?

The LSB is fully independent - not only from the profession but also from Government.

Its chair and members have been appointed by the Lord Chancellor in line with prescribed procedures for public appointments, and in consultation with the Lord Chief Justice.

These are important safeguards to the board's independence, and the Law Society was influential in ensuring that they were properly reflected in the final legislation.

Will the LSB be able to interfere with approved regulators?

Responsibility for regulating the professions rests with the approved regulators, including the Solicitors Regulation Authority, the regulatory arm of the Law Society.

The board should not intervene in the decision of an approved regulator, except where its actions were unreasonable.

How will complaints about solicitors be handled?

Once the Office of Legal Complaints (OLC) becomes established in 2010, it will act as a single gateway for all complaints against all legal services providers.

The Legal Complaints Service (LCS) will continue to handle complaints about solicitors until 2010.

The OLC will not have a disciplinary role. Professional conduct and discipline will continue to be handled by the Solicitors Regulation Authority and Solicitors Disciplinary Tribunal.

Will the act mean more regulation for solicitors?

The SRA will aim to regulate on risk-based principles.

The SRA will have new powers to require information from firms, but only where this is necessary to enable it to regulate more effectively, and does not create unnecessary burdens on firms.

It will also have new powers to rebuke, reprimand and fine solicitors and firms in misconduct cases, but this should reduce rather than increase regulation, because fewer matters will need escalating to the Solicitors Disciplinary Tribunal.

 

What is the difference between Legal disciplinary practices (LDPs) and Alternative business structures (ABSs)?

Legal disciplinary practices are practices where up to 25 per cent of partners or equivalent managers are non-lawyers, without any external ownership.

However, ABS practices will not be limited to a minority of non-lawyer managers, and they will be able to take advantage of external investment and provide a wider range of non-legal services.

ABS firms will also have to comply with more rules, particularly where external shareholders are involved.

When will LDPs and ABSs be possible?

Legal disciplinary practices (LDPs) will be introduced from 2009.

Alternative business structures (ABSs) cannot be introduced until after the Legal Service Board is in place, so there are unlikely to be externally owned firms until at least 2011.

The SRA and other regulators will also need to be approved by the LSB as ?licensing authorities' before they are able to regulate ABSs, which will mean producing new rules to deal with external shareholders and other new practice elements.

Will LDPs be viable for smaller firms as well as larger ones?

Yes, provided they have at least 4 partners, as firms will need to maintain a lawyer majority of 75%.

The SRA will give a grace period to practices to deal with any unexpected management departures. This is so that smaller firms are not automatically in breach of the rules should their lawyer majority fall below 75%.

Will ABSs mean more commercialisation and a reduction in access to justice?

All regulators of alternative business structures (ABSs) will have to actively consider the specific impact on access to justice of individual ABS licences, without compromising the importance of the other regulatory objectives.

New commercial providers could improve access to justice, for example, by reducing prices, operating longer opening hours or providing more services via internet and phone.

However, there is also a risk that consolidation in particular sectors such as conveyancing or insurance could eliminate smaller firms that rely on these areas to substantiate less profitable lines of work, for example family or immigration.

The SRA will monitor its own regulated firms, and attach conditions to licences as necessary, to ensure that this does not happen.

Will some firms have more than one regulator?

No. Day-to-day regulation of each practice will be handled by a single regulator. In a mixed partnership each individual will remain accountable to their own professional body for conduct and disciplinary matters.

Depending on the services they want to provide, these firms might have a choice of practice regulator, but once authorised by a particular body, the firm will be subject to that body's rules, which will prevail over any conflicting standards that might be applied by individual regulators.

The position will be more complicated with ABSs, as non-legal regulators like the FSA are more likely to be involved. However, this will not alter the duty of ABS firms to comply with the relevant licensing rules.

Should smaller firms feel threatened by ABS?

Alternative business structures may prove to be a valuable an opportunity for smaller firms to reinvent themselves in an increasingly competitive market.

ABS will create new sources of capital for firms seeking to expand or diversify, and the opportunity to form partnerships with other professionals could be ideal for solicitors practising in niche areas such as tax or intellectual property.

At the same time, there is no reason why firms operating through traditional structures should feel any need to change if they have already found a model which works for their practice and its clients.

Will solicitors' firms be able to go public?

Once the ABS provisions are in force, there is nothing to prevent a law firm from seeking a listing on the stock exchange (LSE) or alternative investment market (AIM), or from being bought over by an existing Plc.

It will also depend on the appetite from regulators for authorising listed companies, given the extensive regulatory requirements that already apply to these companies, combined with the demands placed by the ABS regime on external shareholders.

Further information

Read about the Legal Services Act
Read more about the reform of legal services
Read the practice note on legal disciplinary practice
Read the practice note on firm based regulation