How should regulation be paid for?
2 July 2009
Proposals for a new structure for paying for the regulation of solicitors in England and Wales are published today by the Solicitors Regulation Authority and the Law Society. Both organisations believe the case for a new structure is "overwhelming".
The changes in legal regulation brought about by the Legal Services Act 2007, and the advent of new types of law firm enabled by the Act, make a review of new ways of raising the money needed to pay for regulation essential.
Any new arrangements required from 2010 should take account of the shift away from regulating only individuals to regulating law firms, the advent of legal disciplinary practices and the imminent arrival of alternative business structures. They must be easy to administer, enable the approved regulator to predict its income and be as fair as possible.
The setting up and running costs of the Legal Services Board and the Office for Legal Complaints will also have to be met under the new structure.
Today's discussion paper includes possible changes to the regime for funding the Compensation Fund. The purpose of the fund is to ensure no member of the public suffers loss at the hands of a solicitor who is dishonest or has failed to account to a client. This unique level of protection provided by the solicitors profession is something very important.
The project is being managed jointly by the SRA and the Law Society because of the need for wide approval of the new structure and in order to stimulate as much comment as possible. The Law Society itself has not yet reached any conclusions, ahead of this consultation, about what it may recommend to the SRA.
Law Society Chief Executive Desmond Hudson said: "All solicitors accept that they must pay for regulation, some may think their share of the burden is excessive in relation to the risks associated with their kind of practice. With new kinds of business model coming into being, it is vital to ensure that any new fee structure is regarded as fair by as many solicitors as possible. I strongly urge solicitors to let us know their views on this vital topic."
Solicitors Regulation Authority Chief Executive Antony Townsend commented: "Regulation must focus on ensuring high standards and averting risks to the public. The costs and side effects need to be kept to a minimum. We want to achieve a system which is fair to those who pay, and reflects the regulatory demands presented by different kinds of firm. By working with the Law Society on this complex issue, our decision making will benefit from the greatest possible input from the profession as well as from all those with an interest in legal services."
Notes to editors
The discussion paper and questionnaire are at www.sra.org.uk/sra/consultations/3074.article. The paper explains why changes in the fee structure are necessary, and amongst other issues discusses how the cost of regulation might be split between individual lawyers and firms, how non-regulatory activity should be funded, how the fees charged to firms might be structured, the impact of the new regime on private practice, and then puts key questions.