In depth: SRA and CILEX regulation

The Solicitors Regulation Authority (SRA) has formally announced that it wants its regulation of Chartered Institute of Legal Executives (CILEX) members, arguing that this is in the public interest.

But with the Law Society Council holding an effective veto, could the future of legal services regulation be at stake?

The SRA this week formally signalled that it wants to extend its regulatory reach to legal executives. But the SRA board’s decision to go ahead with the plan to regulate CILEX members is by no means the end of the road.

In the short term, the SRA is likely to face significant political and even legal pushback. That could ultimately result in the seams of legal services regulation being pulled apart – and what it means to be a solicitor called into question. A niche regulatory issue, this is not.

Putting aside the recriminations, the facts are simple: two years ago, CILEX approached the SRA about taking on oversight of its members from the existing body, CILEx Regulation. The SRA has always made positive noises about the change but last year consulted on the potential arrangements.

Its analysis, published this week, is that expanding its scope would be in the public interest by simplifying the regulatory landscape, making it easier for consumers to understand and bringing more consistent levels of protection.

The SRA argues that the solicitor and CILEX professions are already melded – 75% of CILEX members work in SRA-regulated firms – and that the public supports one regulator covering both sets of professionals.

SRA chair Anna Bradley said this week:

“In making this decision we are conscious of the strong professional interests that are in play, but the key question for us has always been – is this in the public interest?

“Most people find the current regulatory landscape bamboozling. This change won’t solve all the issues of complexity, but it would benefit the public.”

So, what comes next?

First, the ball goes back to CILEX’s board, which will vote on 16 July on whether to accept the SRA’s plan. The proposal will then go to the Legal Services Board for approval.

This would normally be a rubber stamp. But this time things are more complicated. First, the Law Society Council has to vote on any redelegation of CILEX’s regulatory functions and the signals from Chancery Lane suggest this will be a tall order.

Chief executive Ian Jeffery said the Society was “deeply concerned” by the SRA’s move, arguing it would have a negative impact on clients, the wider public interest and the regulatory objectives.

Jeffery said:

“The change will cause consumer confusion, as it will be less clear which profession is which, and where different authorisations for practice areas apply.

“This is likely to be a particular problem for those with complex legal issues, or vulnerable consumers.”

Jeffery said the SRA had created the wrong impression that the Society’s vote was “no more than an administrative issue”, adding that consent ‘cannot be assumed’.

So, what would happen if the LSB gives the go-ahead, only for the Society to veto the proposal?

As it stands, the change could not go ahead – but the SRA maintains this would not be the end of the matter.

Bradley told the Gazette that refusal would be a “difficult decision for the Law Society to make”.

SRA chief executive Paul Philip suggested any resulting stasis might prompt a fresh look at the Legal Services Act which underpins the whole regulatory landscape.

Philip added:

“If the Society decides because of a constitutional issue they should get in the way of [the SRA and LSB], that is most definitely impeding our independence.”

The SRA does not accept the Society’s view that solicitors are overwhelmingly opposed to this proposal, saying views among the profession are “mixed”. The regulator also stresses that the protection of the solicitor brand is not in its remit and does not form part of its decision-making.

As with all break-up stories, there is also the jilted ‘ex’ – in this case CILEx Regulation, which would effectively have no one to regulate if the SRA parks tanks on its lawn.

Predictably, the organisation was “extremely disappointed” with the SRA’s decision and pointed to a lack of evidence supporting the case for change.

But the CILEx Regulation statement went further, saying that all options are being explored, including legal action.

The statement added:

“CRL remains concerned that the proposals to redelegate regulatory responsibility in this way are potentially unlawful.”

The sense from all parties is that SRA approval was firing the starting gun – and wider reforms that may spring from it – rather than signalling if and when it would happen.