We regulate 170,000 solicitors and 10,400 law firms in England and Wales. We work in the public interest, protecting the users of legal services, setting and enforcing high professional standards and supporting the rule of law and the administration of justice.
Our role
We regulate the conduct of solicitors and law firms to ensure high, professional standards of competence, skill and integrity in the delivery of legal services.
Primarily, we do this to:
- protect people who use legal services
- support the operation of the rule of law and the proper administration of justice.
For the public and small businesses, choosing and using legal services can be daunting, so making sure people have confidence in the services they receive from solicitors, and have protection if things go wrong, is important. And, because people entrust solicitors with the details of their lives and their businesses, they have to be sure their trust is well placed.
The quality and professional and ethical standards of legal services not only impacts on the user of those services. The professional standard of legal services and the actions of solicitors and firms also has an impact on:
- public confidence in the rule of law
- the overall effectiveness of the operation of the legal system
- the courts
- third parties, often, but not solely, those involved in a dispute with the direct consumer of the legal services in question.
In all our work we consider the eight regulatory objectives set out in the Legal Services Act 2007.
These are:
- 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.
Our regulation helps make sure that the wider public interest in there being accessible, high quality, professional and ethical legal services is met. This also contributes to the strength and reputation of the legal system in England and Wales, public confidence in that system and its international reputation.
Our work
We meet our responsibilities through a range of core activities.
Setting high professional standards
We make sure that those entering the profession are fit to practise and meet the high professional standards the public expects. We do this by overseeing professional education and training, setting the entry standards, and checking that applicants are of a suitable character before allowing them to become a solicitor.
Similarly, we assess law firms and other types of legal businesses to make sure they are fit to offer legal services, before allowing them to do so. And, once those individuals and firms are in practice, we provide guidance and rules, such as requiring continuing professional development, to make sure that those standards are maintained.
Information and guidance
We provide information about solicitors, their work and the standards the public is entitled to expect. We are working towards increasing the availability of relevant and timely information to help people make good choices when purchasing a legal service.
Safeguarding the public
We make sure the public is protected by taking action when things go wrong. We set and monitor indemnity insurance requirements and we operate a compensation scheme. The fund exists to provide reimbursement to people who have lost money because of the dishonesty or incompetence of an individual or law firm that we regulate.
Disciplinary action
We monitor and supervise the conduct of solicitors and firms against the standards we have set. If solicitors or firms do not meet these standards, we investigate their practice and compliance with our rules, where necessary taking regulatory action, such as issuing a fine or reprimanding the solicitor. We prosecute when we have serious concerns about a solicitor or a firm’s conduct at the independent Solicitors Disciplinary Tribunal. When necessary, we take possession of a firm’s files and money to protect clients and the wider public, and return papers and monies to their owners.
Our values
All our activities are underpinned by our five core values, which were developed by our people.
Independent: we act impartially, making objective and justifiable decisions based on evidence.
Professional: we have the knowledge and skills to deliver high standards; striving for excellence.
Fair: we treat people equally; without favouritism or discrimination.
Inclusive: we work together, valuing difference, to deliver common goals.
Progressive: we listen, respond and proactively develop and improve the way we work.
In delivering our regulation, we also adhere to the better regulation principles, which say that regulation should be:
- proportionate
- accountable
- consistent
- targeted
- transparent
This means that wherever possible we work to reduce the burden of regulation, while maintaining public protections. A sharp focus on high professional standards and the reduction of prescriptive bureaucracy, and its associated cost, also supports law firms to grow, compete and provide accessible, affordable legal services.
The legal services market and wider environment
We regulate the largest proportion of the legal services market in England and Wales. Regulated legal services in the UK are worth approximately £30bn per year (around 1.5 percent of UK GDP). It is estimated that £18bn of that income, or 60 percent, comes from firms we regulate.
The UK legal services market as a whole is the largest in Europe, taking a 7 percent share of the entire global legal market. The individuals and firms we regulate provide a complete range of legal services to individuals of every type and from every community, and to businesses of all sizes in the UK and worldwide.
In this section we address some of the key issues we think will have a particular influence on our strategy.
A changing market
Recent years have seen significant changes in both the regulated and so called unregulated sectors of the legal services market and in the balance between the two.
Before the provisions of the Legal Services Act 2007 were implemented, legal services were overwhelmingly provided by the regulated sector. Individual solicitors primarily worked in traditionally structured solicitors' firms or as employed solicitors undertaking legal work solely for their employers.
That is not the environment in which we now regulate. The legal sector is far more diverse and will, in our view, become more so. We now regulate a broader range of businesses. Individual solicitors practise and deliver services to the public through a vast range of organisations and channels. Some of these businesses are regulated by other regulators, and others are not regulated by legal services regulators at all. The pace of this change will increase as other legal services regulators expand the range of activities they cover, and as an increasing proportion of the market operates outside of legal services regulation altogether. Much of this change has been enabled by the Legal Services Act, but much has also been driven by innovation within the sector. This includes, for example, increased use of technology, as well as the public appetite for accessible legal services provided in ways they can afford.
Just as the delivery of legal services has changed, so have people’s expectations of professional services. Driven by developments in other sectors and new media, people and businesses have greater expectations of services being instant, agile and responsive to individual requirements.
Meeting the need for accessible, affordable legal services
Although the legal services market has grown and the number and range of providers has increased, research commissioned by the Legal Services Board (LSB) and others has shown that many individuals and small businesses do not access the legal services they need. The market is clearly not working for everyone. We need to consider steps that support firms to provide more accessible and affordable services, meeting the needs of people and businesses from every community, including vulnerable people.
Firms have responded to the new opportunities provided by the reformed legal services market. However, there is much more to do in specific areas. For example, in some areas where services were principally delivered using public funding, new provision has been relatively slow to emerge.
Better information for the public
The increasing diversity of the legal services market increases choice – particularly for individual members of the public and small businesses. In order for people, whatever their circumstances, to make informed choices about the services they need, there is a pressing need for reliable and readily available information that is also well structured, clear and easily understood. This is one of the most significant issues identified by the Competition and Markets Authority (CMA) in its December 2016 Legal services market study.
The need for more proportionate and less burdensome regulation
We have made important changes to our regulatory requirements in recent years. For example, the introduction of alternative business structure (ABS) licensing, enabling a wider range of multi-disciplinary partnerships – one stop shops – and freeing up traditional solicitors firms to expand their range of professional services.
The government has challenged all regulators to remove unnecessary regulation and reduce the burden on businesses. In the legal services sector, both the Ministry of Justice and the LSB have emphasised how important this is.
Just as the indirect burdens of regulation, including the cost and time needed to comply with our requirements, are a matter for public scrutiny, so is the direct burden of the cost of regulation, through the fees levied on those we regulate. Throughout the period of this plan we will rightly be challenged by those we regulate and the LSB to make sure that our costs are necessary, proportionate and deliver the best possible value for money.
Innovation
To compete, thrive and improve services for people who need them, firms in the legal services market have been developing and innovating. We have seen significant innovation in the sector in recent years and we expect the pace and scale of development to increase. We welcome innovation that helps to improve services for the public and small businesses, offering new services in new ways and increasing choice. We need to make sure that our regulatory requirements and approach do not become an unnecessary barrier to these positive changes in the market. Our regulatory approach must be agile, keeping pace with market developments.
The need for regulation to work for all types of firm
The market, the individuals and the range of firms we regulate are becoming increasingly diverse. We regulate firms ranging in size, from a single solicitor to global firms with annual turnovers in excess of £1bn. That diversity is important for the users of legal services, for the health of the legal services market and for the economy as a whole. Our regulation must allow that diversity of delivery to thrive and flourish. It must be as relevant for the sole practitioner as it is for the global giant. Although our approach to regulation has become more flexible in recent years, we have more to do to make sure that our rules and approach to regulation work for all solicitors and all types of firm, however and wherever they choose to practise.
Improving diversity and ensuring equality of opportunity in the market
A diverse legal workforce is important, as firms need to access the best talent from every background. The profession also needs to reflect the wider community, and solicitors are part of the pool from which the judiciary is drawn. Diversity is a key component in public confidence. Many firms have made real strides in improving their diversity. However, there remain significant challenges, particularly in making sure that all solicitors, and others working within law firms, have an equal opportunity to progress their careers in the way they want, to work at senior levels and to work within all types of firm. We are committed to promoting diversity in the legal workforce and will be working closely with a wide range of stakeholders as we support law firms and the profession.
EU membership and constitutional development in the UK
We regulate many firms with offices in other countries. Many lawyers qualified in other jurisdictions work within firms in England and Wales. In addition, we regulate a number of firms who operate across England and Wales, Scotland, Northern Ireland and the Republic of Ireland. A significant number of solicitors are qualified in more than one of the separate jurisdictions in England and Wales, Scotland, Northern Ireland and the Republic of Ireland.
In our view, these arrangements operate to the benefit of the public and businesses, who often need to access legal services across a number of countries.
As the future relationship between the UK and the EU is established, we will need to assess the impact on existing cross-border recognition arrangements for those we regulate and for European lawyers practising in the UK. Firms in England and Wales have benefited from open markets in Europe and from the ability to employ and work with lawyers from other jurisdictions. We will need to make sure that our regulatory requirements maintain this benefit as far as possible within any new relationship between the UK and the EU. We will also need to assess any impact within the UK and share with other stakeholders.
Leaving the European Union does not mean that specific commitments will change. The new General Data Protection Regulations come in to force in 2018 and will work with others including ICO, TLS and firms to understand the changes and any risks associated with them for the legal sector from GDPR.
We regulate solicitors and firms in England and in Wales. We already work closely with Welsh bodies, law firms and the public to make sure we reflect local needs – for example, we provide practising certificates in Welsh. We must continue to work together to make sure our requirements, and the way in which we operate, works well within both countries. This will become increasingly important as the Welsh Assembly continues to develop a distinct body of Welsh law.
Increasing complexity and risks
Just as the firms we regulate have become more complex and diverse in terms of size, structure, business model and range of activities, so have the risks that they have to manage. This is particularly the case with risks arising from the use of technology and the risk of law firms being targeted by criminal activity that ultimately damages the wider community and individual clients. Our ability to work with other regulators and with those we regulate to help them identify and manage these risks has to continue to improve to meet these challenges. As does our ability to share concerns and information with the public, raising awareness and helping people avoid difficulties.
Financial crime and money laundering
The period of this plan will cover a review of UK anti-money laundering arrangements by the international Financial Action Task Force (FATF). We will need to engage closely with this inspection and address any issues FATF identifies that need our action and the action of those we regulate.
In addition, the government and the Financial Conduct Authority are challenging the outcomes and impact of regulatory activity in identifying and tackling financial crime and money laundering across all relevant professional services sectors. In 2017 the Treasury consulted on new arrangements for the supervision of professional bodies responsible for regulating relevant sectors. The outcome of these proposals will have an impact on our approach to the regulation of a range of activities within law firms.
The demand for professional regulation with excellent levels of service
The public, businesses and those we regulate expect an excellent level of performance and customer service from us. Service expectations across all sectors have rightly increased and continue to do so. We are funded through levies on those we regulate, and the cost of our regulation is, ultimately, met by clients through the fees they pay to firms to receive the legal services they need.
One component of increasing public and professional expectations is that both groups want open and transparent communication and engagement in a way that suits their needs. We, like others, know we have more to do to be accessible and responsive.
We have a clear responsibility to demonstrate the effectiveness and efficiency of all we do, to justify the use of resources and to deliver good levels of service.
The structure of legal services regulation
Over the past two years the government, the CMA and the LSB have all raised the issue of the future structure of legal services regulation, particularly the separation of frontline regulators from professional bodies.
The consideration of these issues will, in our view, continue to be highly relevant during the period of this plan, and we will need to participate in the debate.
Summary
These factors, along with the consideration of our purpose and our values as an organisation, have informed the choices we have made about the strategy we will follow over the next three years.