Loading...

SRA corporate strategy 2014/15 to 2016/17

 

Published 20 November 2014

Introduction and summary

  • 1.1

    This plan sets out the SRA's strategic direction for three years, from November 2014 to October 2017. Our aims over this period are to:

    • reform our regulation to enable growth and innovation in the market and to strike the right balance between reducing regulatory burdens and ensuring consumer protection;
    • work with solicitors and firms to raise standards and uphold core professional principles;
    • improve our operational performance and make fair and justifiable decisions promptly, effectively and efficiently;
    • work with our stakeholders to improve the quality of our services and their experience when using them.
  • 1.2

    We will deliver this programme during a period of rapid change within the market. That change brings new opportunities for solicitors, firms and consumers—to deliver and receive new, more competitively priced services through a wider range of approaches. It brings opportunities for solicitors and firms to work in a wider range of structures, with choices made on the basis of what best serves their businesses and customers rather than by outdated regulatory requirements.

  • 1.3

    Change will also bring challenges, and new risks, to be addressed by firms and by us. The creation of a more dynamic market for legal services will not only attract new entrants but firms will also exit the market. Therefore, throughout this period of change we will ensure that risks are identified and addressed and that appropriate levels of protection for consumers remain firmly in place.

  • 1.4

    Details of our programmes to deliver our strategic objectives, and the resources we will use to deliver them, will be published in our annual Business Plans. We will report on our performance and the delivery of our strategic objectives in our Annual Reports.

About the SRA

  • 2.1

    We regulate the conduct of solicitors and law firms to protect consumers and to support the rule of law and the administration of justice.

  • 2.2

    We are a part of the Law Society, the professional body for solicitors, but have full operational independence and all our regulatory decisions are made independently in the public interest.

  • 2.3

    We work within a statutory framework for regulation provided by the Solicitors Act 1974, the Administration of Justice Act 1985 and, primarily, by the Legal Services Act 2007. We also work within a framework provided by internal governance rules which guarantee our independence from the Law Society and also by formal guidance provided by the Legal Services Board, the oversight body for all legal service regulators.

  • 2.4

    This is a complex framework but we aim to manage the complexities it causes in a way which allows us to make our role and the work we do as clear and simple as possible for those we regulate and for consumers.

Why we regulate

  • 2.5

    In regulating solicitors and law firms, our purpose is to protect consumers and to support the rule of law and the administration of justice. To do this we focus on a set of core professional principles that we require all those we regulate to achieve. These are that solicitors and firms we regulate must:

    • Act with independence and integrity
    • Maintain proper standards of work
    • Act in the best interests of clients
    • Comply with their duty to the court to act with independence and integrity
    • Keep client affairs confidential

    These principles, and regulating to make sure they are delivered, form the core of our activities.

  • 2.6

    Our decisions about how we regulate and what we focus on are informed both by the statutory framework we work within and by our own values as an organisation.

Legal services regulation requirements

  • 2.7

    The Legal Services Act 2007 provides a common framework, and set of objectives, for all of the legal services regulators and for our oversight regulator, the Legal Services Board. In deciding how we regulate we need to have regard to these objectives. They are the need to:

    • protect and promote the public interest;
    • support the constitutional principle of the rule of law;
    • improve access to justice;
    • protect and promote the interests of consumers;
    • promote competition in the provision of services;
    • encourage an independent, strong, diverse and effective legal profession; and
    • increase public understanding of the citizens' legal rights and duties.
  • 2.8

    We particularly consider these objectives when we set the rules we use to govern the conduct of the people and firms we regulate. For example, we have a series of rules to protect the money and other assets of consumers who entrust them to solicitors. When setting these rules we have to consider not only whether they provide sufficient protection to consumers but also the impact of those rules on competition in the market and on access to legal services.

  • 2.9

    We have to make an overall judgment, considering all of these factors, and reach a decision which we can justify.

Better regulation requirements

  • 2.10

    The 2007 Act also requires us to have regard to best regulatory practice and the better regulation principles. These are that we must be:

    • transparent,
    • accountable,
    • proportionate,
    • consistent, and
    • targeted.

    We are wholly committed to these aims and to the need to be effective and as efficient as possible in all we do.

Our framework for regulating

  • 2.11

    Our regulatory purpose, the requirements on us as a legal services regulator and the better regulation principles provide an overall framework for our work. This is illustrated below.

    Purpose of our regulation
    We regulate the conduct of solicitors and law firms to protect consumers and support the rule of law and administration of justice
    Those we regulate Those we regulate We deliver good practice regulation
    • Act with independence and integrity
    • Maintain proper standards of work
    • Act in the best interests of clients
    • Comply with their duty to the court to act with independence and integrity
    • Keep client affairs confidential
    • Protect and promote the public interest
    • Support the constitutional principle of the rule of law
    • Improve access to justice
    • Protect and promote the interests of consumers
    • Promote competition in the provision of services
    • Encourage an independent, strong, diverse and effective legal profession
    • Increase public understanding of the citizens’ legal rights and duties
    • Transparent
    • Accountable
    • Proportionate
    • Consistent
    • Targeted
    • Effective
    • Efficient
  • 2.12

    More information about our role and our approach to regulation can be found in our policy statement Approach to Regulation and its reform.

How we work

  • 2.13

    To fulfil our role we focus on a number of main areas of activity. These are:

    Set standards -- we set the standards that individuals and firms:

    • must meet in order to become solicitors or be authorised by us;
    • must achieve in the way they work; and
    • about how we enforce our requirements when conduct falls below the standards we require.
  • Provide guidance and support - we provide guidance and information to those we regulate to help them deliver services in ways that meet our requirements, including to raise their awareness of the compliance risks they face. We provide help and information to consumers.

    Authorise — we authorise individuals to be solicitors and firms to provide legal services to the public.

    Supervise — we supervise work done by solicitors and firms both proactively and in response to reports we receive about failures to meet our requirements. Sometimes this work can involve significant investigations into complex transactions.

    Discipline and enforce — we make sure that, where there has been conduct that falls below the standards we set, individual solicitors and firms are held to account. This can include closing firms in order to protect consumers.

    Provide compensation — we run a compensation fund to protect consumers if a solicitor or firm does not return money due to them.

Equality, diversity and inclusion

  • 2.14

    We are committed to being an organisation where diversity is valued and to working in an inclusive way, harnessing the contribution that every member of the organisation is able to make to our success. Similarly, we aim to regulate in a way that treats all those we regulate fairly and to work with those we regulate to encourage a strong and diverse profession where all have an opportunity to succeed. Our work on diversity and inclusion therefore has three elements:

    • focusing on creating a diverse organisation and the way in which we work together;
    • focusing on the way we operate, our rules and the decisions we make, the impact that has on those we regulate, and helping firms and individuals to understand and comply with our requirements; and
    • focusing on working with those we regulate to support them in achieving a more diverse and inclusive profession.
  • 2.15

    We recognise that we will only achieve our aims in this area if all of these elements are consistent and mutually supporting and if the work is central to all we do--fully considered and integrated into all our programmes of work. We have published our Equality,diversity and inclusion strategy, which sets out how we will take our work forward, including the steps we are taking to address issues identified by Professor Gus John in the Independent Comparative Case Review which we published in 2014.

The environment for our work

  • 3.1

    We regulate the largest proportion of the market for legal services in England and Wales, as measured by the number of individuals and firms regulated, by the value of transactions, and by the number of consumers. Regulated legal services in England and Wales earned £28.5bn last year, around 1.5 per cent of UK GDP; £20.8bn of that income, or 73 per cent, came from SRA-regulated firms. The UK legal services market as a whole is the largest in Europe, taking a 7 per cent share of the entire global legal market. With a large trade surplus and employing over 316,000 people, legal services represent a major and growing contribution to the economy of Britain. The individuals and firms we regulate provide a broader range of services than those subject to other regulators and do so on a global scale.

  • 3.2

    The issues for us to consider in delivering effective regulation, and in deciding how to develop and improve our approach, are numerous and complex. In this section we address some of the key issues that we consider have a particular influence on our forward strategy.

A changing market

  • 3.3

    Before the 2007 Act, we regulated only individual solicitors and solicitor-owned firms. Individual solicitors practised either in SRA regulated firms or as employed solicitors delivering services to their employers.

  • 3.4

    That is not the market we regulate now and the market will increasingly fragment. We now regulate a broader range of businesses, and individual solicitors practise and deliver services to the public through a much wider range of businesses. Some of these businesses are regulated by other regulators, and others are not regulated 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 legal services market operates outside of regulation altogether. Much of this change has been enabled by the 2007 Act but much has also been driven by innovation within the sector including, for example, increased use of technology.

The need for more proportionate and less burdensome regulation

  • 3.5

    We have made important changes to our regulatory requirements in recent years. For example, the introduction of ABS licensing and a principles-based and outcomes-focused Code of Conduct.

  • 3.6

    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 Legal Services Board have emphasised this priority.

  • 3.7

    We began our own red-tape challenge in 2013 to identify and remove unnecessary regulation and, in May 2014, launched a major programme of regulatory reform to broaden and accelerate this work. There is more for us to do.

  • 3.8

    Just as the indirect burdens of regulation must be addressed, the direct burden of the cost of regulation, through the fees levied on those we regulate, must also be addressed. About half of these fees pay for regulation by the SRA. The remainder pay for representation by the Law Society, the costs of the Legal Services Board and the Legal Ombudsman. In 2015 we will reduce our operating budget by some 10 per cent, but we are committed to reduce the amount we require over time, through greater efficiency and more-targeted activity.

Innovation

  • 3.9

    To compete, thrive and improve services for consumers, firms in the legal services market need to develop and innovate. We have seen significant innovation in the sector in recent years and we expect the pace and scale of innovation to increase. We need to ensure that our regulatory requirements and approach do not act as an unnecessary barrier to these positive changes in the market. Our regulatory approach must be agile and keep pace with market developments.

The need for regulation to work for all types of firm

  • 3.10

    The market 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 of £1bn. That diversity is important for consumers, 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 targeted and relevant for the sole practitioner as for the global giant. Although our approach to regulation has become more targeted and flexible in recent years, we have more to do to ensure that our rules and approach to regulation work for all types of firm and are transparent and clear for the consumers of legal services.

Improving diversity and ensuring equality of opportunity in the market

  • 3.11

    Our society has become more diverse, as has the profession we regulate. Many firms have made significant strides in reflecting that diversity at all levels in their organisations. However, there remain significant challenges, particularly for BAME lawyers, women and people with disabilities in working and progressing their careers across all sectors and all types of firm within the legal services market.

  • 3.12

    We have worked with experts and with those we regulate to examine the impact of our own regulation and in a number of important areas we can see that the outcomes of our regulation disproportionately impact on BAME solicitors and their firms.

  • 3.13

    Both of these issues present real challenges to the regulation of the legal services market and, although positive progress has been made, there is much more to do.

Consumers and access to services

  • 3.14

    Although the legal services market has grown and the number and range of providers has increased, research commissioned by the Legal Services Board has shown that many individuals and small businesses do not access the legal services they need. The market is not working for all consumers, and regulators need to consider steps to enable firms to provide more accessible services that meet the needs of all consumers and which are more affordable.

Increasing complexity and risks

  • 3.15

    Just as the firms we regulate have become more diverse in terms of size, structure, business model and range of activities, so the risks that they have to manage have become more complex and diverse. This is particularly the case with risks arising from the use of technology and the risk of law firms being targeted by criminal activity. Our ability to work with those we regulate to help them identify and manage these risks has to continue to improve in order to meet these challenges.

Complexity and reform of the legal services framework

  • 3.16

    We have already referred to the complexity of the statutory and regulatory framework within which we work and the challenge to manage this complexity so as to present a clear and simple regulatory approach to consumers and those we regulate.

  • 3.17

    The framework needs reform and there is a significant strength of feeling across government, the Legal Services Board, and many commentators and firms that the framework created by the Legal Services Act 2007 is beginning to stand in the way of the regulatory reforms necessary to further liberalise the market and reduce regulatory burdens.

  • 3.18

    We face the challenge of both improving our regulation within the current framework and working with others to identify positive reforms to the regulatory framework itself.

The demand for professional regulation with excellent levels of service

  • 3.19

    Consumers 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. The SRA is funded through levies on those we regulate and the cost of our regulation is, ultimately, met by consumers through the fees they pay to firms to receive the legal services they need.

  • 3.20

    One component of increasing consumer and professional expectations is that both those whom we regulate and consumers want open and transparent communication and engagement. We, like others, know we have more to do to be accessible and responsive.

  • 3.21

    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.

Summary

  • 3.22

    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.

Our strategic objectives

  • 4.1

    We have set four strategic objectives for the period of this plan. In our annual business plans we will set out the programmes of work which will enable us to achieve these objectives.

We will reform our regulation to enable growth and innovation in the market and to strike the right balance between reducing regulatory burdens and ensuring consumer protection.

  • 4.2

    To achieve this objective we will focus on measures to:

    • remove unnecessary regulatory barriers and restrictions and enable increased competition, innovation and growth to better serve the consumers of legal services;
    • reduce unnecessary regulatory burdens and cost on regulated firms;
    • maintain robust, proportionate and transparent systems to ensure the protection of those consumers that require regulatory protection;
    • ensure that regulation is properly targeted and proportionate for all solicitors and regulated businesses, particularly small businesses; and
    • ensure that our regulation remains relevant in a legal services market with multiple regulators and where legal services will increasingly be combined with the delivery of other professional services.
  • 4.3

    In addition we will work with government, the Legal Services Board and other regulators to identify and implement improvements under the current statutory framework for regulation and to identify changes that, with primary legislation, would enable significant improvements in the regulation of legal services. We will continue to argue for more fundamental reform of the Legal Services Act and of the regulatory structures established by that Act in order to enable more independent, simpler and less costly regulation of the legal services market.

We will work with solicitors and firms to raise standards and uphold core professional principles.

  • 4.4

    To achieve this objective we will focus on our work to modernise the systems for educating, admitting, training and developing solicitors so that they are fit for the current and future challenges posed by modern society, consumer needs and the needs of a rapidly developing and changing legal services market.

  • 4.5

    We will continue to review and update our guidance on professional standards. This will be supported by research both into current practices and into emerging risks. We will continue to work with solicitors and firms to help them identify and manage emerging risks and regulatory challenges, providing practical examples of addressing these challenges.

We will improve our operational performance and make fair and justifiable decisions promptly, effectively and efficiently.

  • 4.6

    To achieve this objective we will focus on:

    • the culture within the organisation and the capabilities of everyone who works at the SRA; and
    • our operational processes and systems.
  • 4.7

    We aim to establish an organisation where people are supported with the right training, processes, systems and, most importantly, leadership to enable them to deliver better performance, more effectively and more efficiently and to deliver a better quality of customer service.

  • 4.8

    We will also implement a significant programme of process and systems change to better support our operational delivery. These changes will enable us to improve the quality and consistency of our decision-making, monitor and report on our performance and improve efficiency. Improved decision-making and better management information about the outcomes of our decisions will be critical to our ability to understand and address any causes of disproportionate outcomes for BAME lawyers and firms.

  • 4.9

    Changes in our culture, processes and systems will help us deliver better business results more effectively and improve value for money. We will become a more agile, open and responsive organisation, able to react quickly to a changing environment.

We will work with our stakeholders to improve the quality of our services and their experience when using them.

  • 4.10

    To achieve this objective we will work with all our stakeholders. These include those we regulate, the justice system, other regulators, consumers or legal services, and the general public. We will be more transparent about our priorities and our performance in delivering them and seek their views on both.

  • 4.11

    We will involve and engage the solicitors and firms we regulate in the development of our policies, regulatory approach and services, ensuring that we are responsive and accessible.

  • 4.12

    We will work more closely with consumers of legal services and the general public, to listen to their experiences, explain what we do and how we regulate and make available information to help informed decision making about the legal services they need.

  • 4.13

    We will engage with individuals, firms and representative bodies to implement our Equality, Diversity and Inclusion strategy. We will encourage and work with firms to improve their own diversity and we will continue to examine the reasons for disproportionality in our decision making and take steps to address the root causes.

Our resources

  • 5.1

    The majority of the funding we receive to deliver regulation comes from the annual practicing certificate and entity fees which we collect in October each year. The balance to meet our budget requirement, above the sum collected through practising fees, comes from, for example, regulatory fees paid for specific activities (e.g. fees on the authorisation of new entities), cost recoveries and the Compensation Fund, which meets the cost of administering the Fund and of interventions. In Table 1 we have set out details of how our 2014/15 budget (our financial year runs from 1 November to 31 October) for our directly controlled costs will be funded compared to 2013/14.

Table 1

  • SRA income summary 2014/15 budget
    (£000,000s)
    2013/14 budget
    (£000,000s)

    Individual and entity practising fees

    30.9 1 30.9

    Regulatory fees (applications, etc)

    3.3 5.4

    Recoveries (cost orders, etc)

    2.0 2.5

    Compensation Fund

    11.3 14.0

    Total SRA income

    47.5 52.8
  • 5.2

    This income meets our directly controlled budget. As explained in paragraph 2.2, above, we are a part of the Law Society group. Our support services (such as information systems, finance, human resources, etc) are provided to us by the Group's shared services function. In Table 2, below, we have set out our budget for 2014/15, including those elements in respect of the shared services we receive.

Table 2

  • SRA Expenditure summary 2014/15 budget
    (£000,000s)
    2013/14 budget
    (£000,000s)

    SRA directly managed budget (excluding the cost of interventions)

    38.2 40.9

    SRA directly managed budget for interventions costs

    9.3 11.9

    SRA cost of shared services

    27.0 25.8

    Total

    74.5 78.6
  • 5.3

    We will continue to focus on improving efficiency and reducing the cost of our regulation during the period of this strategy, assisted by the implementation of our new information systems in 2015. Our ability to deliver regulation at reduced cost is, however, significantly affected by the volume of regulatory matters referred to us and which we have to investigate. In that context it is important to note that in 2013 we saw an increase of 52 per cent in high risk issues notified to, or identified by, us. A continuation of that trend will limit our ability to bear down on our costs.

1. Of this sum, £28.9m was collected in the October 2014 renewal and £2m was carried forward from reserves in respect of fees collected in the October 2013 renewal but not required in 2013/14 financial year.