The Legal Services Board – reforming legal regulation Alex Roy, Head of Development and Research

The Legal Services Act 2007 and the LSB What organisations did the Act create? The Legal Services Board – LSB The Legal Services Consumer Panel The Office of Legal Complaints – The Legal Ombudsman About the LSB Nine board members 30 Staff Annual expenditure of under £4.6million in 2011/12 Funded by a levy on the profession

The regulatory objectives Protecting and promoting the public interest Supporting the constitutional principle of the rule of law Improving access to justice Protecting and promoting the interests of consumers Promoting competition in the provision of services Encouraging an independent, strong, diverse and effective legal profession Increasing public understanding of the citizen’s legal rights and duties Promoting and maintaining adherence to the professional principles

Standards of regulation, education and training Regulatory activities should be: Transparent Accountable Proportionate Consistent Targeted only at cases in which action is needed The board must assist in the maintenance and development of standards in relation to: The regulation of lawyers by Approved Regulators The education and training of Lawyers

Oversight regulation and our vision Not watching and reacting but involvement and intervention Leadership in new ideas and future directions Vision for the market (the unofficial version) Affordable legal services delivered at the right quality for consumers Delivered by: minimising the burden of regulation reforming regulation so that it encourages innovation

Legal Services in England & Wales The market Legal Services in England & Wales 331k people employed in legal services in UK Unreserved Unknown number of persons offering unreserved services in E&W. In excess of 130,000 people Legal practice NFP E.g. 769 CABs, 56 Law Centres For Profit E.g. – 1,823 members of the Society of Will Writers In House Reserved 147k persons authorised to offer reserved services 80% Legal Practice persons authorised to offer reserved services Solicitors - 87,270 Barristers - 11,706 Others - 9,672 20% In House Solicitors – 23,311 Barristers - 3,040 Others – 1,557

Empowered consumers e.g. Large corporate Regulation of legal services Ministry of Justice Office of Fair Trading European law Legal Services Board Case law Consumer Law Master of the Faculties Trading standards CLSB Consumer Bodies Competition Law Approved Regulators CLC IP RB Empowered consumers e.g. Large corporate Professional bodies/trade associations ILEX PS SRA BSB Custom & Practice Media Other regulators e.g. FSA, ACCA etc.

Number of authorised persons at 1 April 2012 Approved regulator Regulatory body Reserved activities Number of authorised persons at 01 April 2012 and year on year change Number of entities The Law Society, The Solicitors Regulation Authority (SRA) Exercise of right of audience Reserved instrument activities (Conveyancing) The conduct of litigation Administration of Oaths Probate activities 120,202 + 0.47% 10,202 The General Council of the Bar, The Bar Standards Board (BSB) 15,204 - 0.69% N/a Chartered Institute of Legal Executives (CILEX) ILEX Professional Services (IPS) + 5.89% 7,907 The Council for Licensed Conveyancers (CLC), 7Reserved instrument activities (Conveyancing) 1,071 - 3.95% 215 The Faculty Office Notarial activities 858 + 1.54% N/A The Chartered Institute of Patent Attorneys (CIPA) The Intellectual Property Regulation Board (IPReg), Reserved instrument activities 1,745* 3.44% 170 The Institute of Trade Mark Attorneys Reserved instrument activities Administration of Oaths 639* 3.06% The Association of Cost Lawyers (formally ALCD Cost lawyers Standards Board (CLSB), a 565 + 37.47% Association of Chartered Certified Accountants(ACCA) Institute of Chartered Accountants of Scotland (ICAS) The Approved Regulators Approved regulator Regulatory body Number of authorised persons at 1 April 2012 Number of entities The Law Society, The Solicitors Regulation Authority (SRA) 120,202 10,202 The General Council of the Bar, The Bar Standards Board (BSB) 15,204 N/A The Chartered Institute of Legal Executives (CILEX) ILEX Professional Services (IPS) 7,907 The Chartered Institute of Patent Attorneys (CIPA) The Intellectual Property Regulation Board (IPReg), 1,745* 170 The Institute of Trade Mark Attorneys (ITMA) 639* The Council for Licensed Conveyancers (CLC), 1,071 215 The Faculty Office 858 The Association of Costs Lawyers (formally ALCD) Costs lawyer Standards Board (CLSB) 565 * Joint registrants are shared between CIPA and ITMA

Our early priorities Independence of regulation Redress for consumers when things go wrong & ABS liberalising the market to increase competition Results Second round of certifying governance standards against Internal Governance Rules Solicitor and Conveyancer-led Alternative Business Structures opening for trading Successful full year of operation for the Ombudsman, plus progress on first-tier complaint handling

Priorities for 2012-15 The strategic priorities for the LSB for the coming three-year period: Assuring and improving the performance of approved regulators Helping consumers to choose and use legal services with confidence Helping the changing legal sector to flourish by delivering appropriate regulation to address risks

Which means… 3 areas of work. Looking at changes to regulators rules and authorisations Working with regulators to improve their regulation Outcomes Risks Entities Improving the regulatory environment and encouraging innovation Regulatory framework (reserved activities) Workforce (education, diversity, quality) Developing the evidence base and evaluating Which means… 3 areas of work.

Focus on regulatory framework: The Reserved Activities the exercise of rights of audience (i.e. appearing as an advocate before a court); the conduct of litigation (i.e. issuing proceedings before a court and commencing, prosecuting or defending those proceedings); reserved instrument activities (i.e. dealing with the transfer of land or property under specific legal provisions); probate activities (i.e. handling probate matters for clients); notarial activities (i.e. work governed by the Public Notaries Act 1801); and the administration of oaths (i.e. taking oaths, swearing affidavits etc).

Focus on regulatory framework: Structure of regulation Reserved Activity Authorised Person Approved Regulator Regulation Legal advice Existing six reserved activities New activities? Individuals with protected titles Entities Other individuals

Focus on regulatory framework: Possible regulatory tools When? Prevention Conduct Remediation e.g. Minimum service standards e.g. Client money e.g. Ombudsman Scheme Services Tools? Market access and structure Systems and processes Pricing Compensation e.g. Training requirements e.g. Maximum prices Information Behaviour e.g. Code of ethics e.g. Referral fee disclosure

Focus on regulatory framework: Changing the reserved activities Extension of reserved legal activities (s24/ 6 LSA 2007) • Lord Chancellor may extend (or reduce) list of reserved activities • Only upon recommendation of LSB Formal process set out in LSA 2007 Schedule 6 • LSB has powers to investigate whether to recommend list of reserved activities • Consultation and advice are built into process

Call for evidence Surveys Shadow shopping Focus on regulatory framework: Looking at wills Surveys Shadow shopping Call for evidence 97 interviews completed Individual discussions Business Interviews Legal Services Consumer Panel Joint LSB, Consumer Panel, OFT, SRA team Call for evidence Consumer survey 400 case studies and 20 policy submissions 500 consumers surveyed 101 wills assessed All clients submitting wills interviewed Testing will quality Interviews with clients Joint LSB, Consumer Panel, OFT, SRA team

Focus on regulatory framework: Shadow shopping results Execution Pass Quality Pass Solicitor All 98% 78% Complex 95% 81% Simple 100% 75% Specialist will-writer 92% 79% 93% 73% 89% Bank or affiliate group 90% 80% Paper self-completion 63% 50% Online self-completion 56% 86% 43% 91% 64% Total 74%

Focus on regulatory framework: Shadow shopping reasons for failure Inadequacy – where the content of the will does not account for an estate fully, fails to make adequate provision or neglects to take certain outcomes in to consideration. It also includes wills which are legally invalid. Requirements – where the client’s requests have not been met (as specified in the testator questionnaire) through omission or conflicting specification. Legality – where the actions specified in the will are potentially illegal; Inconsistency – where the language, logic and/or content of the will is contradictory; Detail – where items, people and requests are described in insufficient detail; and Presentation – where the language and format of the document is lacking.

Focus on regulatory framework: Will-writing conclusions Shadow shopping demonstrated that quality of wills inconsistent and harming many consumers Case study evidence that arrangements for safe-keeping of wills by will-writing companies inadequate Consumer survey reveals significant concerns over sales practices, particularly by will-writing companies Compensation arrangements patchy and largely unenforceable outside of regulated firms Need for reservation and appropriate regulation

Conclusions LSB is a small, ambitious organisation with potentially a short lifespan The Legal Services Act 2007 has led to a significant drive to reform the legal services market in England and Wales Significant reforms have already been introduced – independent regulation and Alternative Business Structures The next phase of work is challenging but could significantly improve the market for legal firms and consumers You may have some questions...