Regulating success: the role of the regulator in the business of law

The Legal Services Act has opened up exciting opportunities for the development of modern legal businesses. How the new legal landscape develops in practice will largely be determined by the unfolding regulatory regime.

Legal businesses and potential investors require regulatory certainty to be able to develop strategies for maximising profits in an increasingly challenging economic climate. At the same time, the regulator faces the challenge of carving out appropriate space within the framework to enable innovative legal enterprises to develop flexible new business models.

David Edmonds, Chair of the newly-established Legal Services Board has stressed the importance of the independence of regulation from government, to protect businesses from short-term party political agendas and create certainty over the medium to long term. His vision for the LSB is based on a proportionate, pragmatic and principle-based approach with thorough consultation.

Targeted approach

One of the key issues for the legal sector is whether a one-size-fits-all regulatory approach will be suitable for a profession serving a range of clients with widely divergent needs and levels of sophistication. The marketplace created by the Legal Services Act may encourage increased commoditisation of consolidated legal services, which may require a different regulatory focus than a large international law firm. Eddie Ryan, Managing Director of Co-operative Legal Services has emphasised the importance of transparent, accountable, consistent and targeted regulation in order to ensure that all forms of legal business can thrive.

In the case of firms operating under external financial control, it is imperative that the regulator monitors performance and behaviour to ensure that appropriate controls are in place to protect the solicitor-client relationship.

Global impact

Large firms operating in multiple jurisdictions are concerned to ensure that the regulatory framework does not affect their international competitiveness. Senior Partner at Simmons & Simmons, David Dickinson, has made the point that more than fifty per cent of the firm?s turnover is generated outside the UK, and the domestic regulatory framework should not act as a disincentive to do business here. For firms with well-established compliance systems, a focus on supervision rather than regulation would allow the necessary flexibility to do business in the global marketplace.

The Law Society has commissioned a review of the future regulation of law firms. Read more about the regulation review.

These policy discussions have been informed by a series of events hosted by the Law Society. Read more about the legal breakfast series.