Last updated: 14 December 2012
Solicitors and law firms regulated by the SRA are in a period of significant change. Much of this is driven by those individuals and firms themselves, as they seek to improve quality and service standards, develop new markets and new ways of working and greater competitiveness.
Much also is driven by changes in the environment within which firms operate. For example, as a result of the opportunities presented by the Legal Services Act 2007 or new technologies, or by the challenges presented to them, as a result of changes in the economy or by government policy on referral fees, personal injury claims, civil litigation funding or legal aid.
The SRA regulates in the public interest and is determined to ensure that the public are able to access safe, ethical, good quality legal services that meet their needs. We share those core principles with the great majority of those we regulate. They will not change. However, given the rapidly evolving nature of the legal services market, how we regulate and what we focus our resources on at any point in time must, and will, change.
This plan sets out our programme for 2013/15. This will be a key period in the evolution of the legal services market in England and Wales as the impact of the changes enabled by the 2007 Act begin to develop fully. It sets out the work we will be undertaking: to complete the implementation of the Act; to embed fully proactive, risk-based and outcomes-focused regulation; and continuously to identify risks to the achievement of our regulatory objectives as they emerge and take early action to address them.
It is a significant programme of work. We will be open with our stakeholders in the way we progress it, and seek to establish good dialogue and strong collaborative relationships with those we regulate and the organisations which represent them.
The most effective regulatory regimes deliver against the requirements of better regulation. They are transparent, proportionate and targeted only where intervention is necessary. Throughout the period of this plan the SRA will continue to challenge itself to meet these objectives so as to deliver high quality, effective and efficient regulation in the public interest.
Chairman, SRA Board
Section one: The SRA's regulatory role and approach
This Strategic Plan sets out the SRA's key objectives during the period 2013 2015. It is a three year plan which will be reviewed and revised annually.
The SRA's work programme for 2013, which contributes to the achievement of these objectives, is set out in greater detail in the SRA Business Plan 2013. The organisation's performance in delivering against these plans will be published in the SRA Annual Report 2013, in March 2014.
The SRA is the independent regulatory body of the Law Society. It regulates solicitors and entities providing legal services – both solicitors' firms and bodies licensed under the Legal Services Act 2007 (LSA) – and individuals employed within those entities. The SRA regulates in the public interest.
The SRA's key objectives and the programme of work set out in this document, both in developing its regulatory approach and in the delivery of regulation, are framed and influenced by two underlying factors (as well as by the analysis of the SRA's current environment):
- the SRA's regulatory objectives and principles derived from the statutory and regulatory framework within which the SRA carries out its role; and
- the vision and values to which the organisation, and the people who work within it, are committed.
Under the Legal Services Act 2007 (LSA), the various professional bodies responsible for the regulation of legal professionals were required to make arrangements to ensure the separation of their representative and regulatory functions. In 2011, new arrangements were agreed for the governance of the relationship between the SRA and the other parts of the Law Society Group. These parts include the Law Society Council, the representative functions of the Society and Organisation Services (which is responsible for delivering IT, human resources, finance, procurement and facilities functions across the Group). The new arrangements were designed: to ensure the SRA's operational independence in accordance with the requirements of the LSA; to ensure the effective management and delivery of support services to the SRA; and to promote good working relationships. Central to these arrangements was the new Business and Oversight Board (BOB) which began operating in 2012.
The SRA will continue to embed these governance arrangements and seek to make them work effectively. Their successful operation is critical to the SRA's ability to operate independently, secure the resources required for effective regulation, receive key support services of good quality and discharge its regulatory remit in the public interest.
Further information on the SRA's structure, governance and management is set out in Annex 1.
The SRA's regulatory objectives
In discharging its regulatory responsibilities, the SRA operates within a statutory framework for regulation provided by the Solicitors Act 1974, the Administration of Justice Act 1985 and the LSA. It also operates within the framework provided by the internal governance rules (which set out the relationship between the SRA and the rest of the Law Society Group) and also by formal guidance provided by the Legal Services Board. Together, the statutory framework provides that the SRA must have regard to, and act in a way that is compatible with, 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 legal services;
- encourage an independent, strong, diverse and effective legal profession;
- increase public understanding of the citizen's legal rights and duties;
- promote and maintain the professional principles;
- ensure that regulatory interventions are transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed; and
- ensure that best regulatory practice is adopted.
There is a direct link from the regulatory objectives through to the SRA Principles which provide the foundations for the regulatory arrangements in the SRA Handbook. The Principles apply to all those individuals and entities regulated by the SRA and to all aspects of legal practice.
SRA Vision and Values
The SRA's vision is to be the leading regulator of legal services; recognised for the outcomes it achieves in the public interest and the way in which it achieves them.
We act in the public interest and promote and protect the interests of consumers of legal services:
- we enable the provision of good quality, ethical and safe legal services and access to those services, and help consumers make informed choices;
- we are committed to the principles of better regulation and are proportionate and transparent in how we regulate;
- we make fair, impartial and transparent decisions and we focus on achieving the right outcomes;
- the identification, analysis and management of risk is integral to our regulatory approach and decision-making.
We work collaboratively and engage constructively with all of our stakeholders:
- our regulatory approach, our policies and procedures are informed through a close engagement with our stakeholders and our decisions are evidence-based;
- we value diversity, and ensure our engagement, with those we regulate and with consumers, is wide-ranging and inclusive;
- we work hard to help those we regulate to achieve a high level of compliance;
- we are clear, timely and targeted in how we communicate with all our stakeholders, and our communication approach is designed to meet the needs of those with whom we are communicating.
We value our people – we work together to achieve our objectives:
- we work as a team, are inclusive, treat everyone with respect and understanding and value difference;
- we invest in the development of people's skills and knowledge, empower them to make decisions and equip them to embrace change;
- our people seek responsibility and accountability, and their performance is assessed and rewarded fairly;
- our people are proud to work for the organisation, committed and actively seek to make a positive difference.
We constantly seek to improve the effectiveness of our regulation and the efficiency with which we achieve our objectives:
- we deliver against our plans and budgets;
- we are open, honest and transparent about our performance;
- we keep our activities and use of resources under review to ensure the optimum utilisation of resource to deliver our objectives;
- our people are proactive in seeking opportunities to improve both the effectiveness and efficiency of the organisation and the delivery of our objectives.
SRA Risk Framework
The SRA is a risk-based regulator. Its regulatory activities, and the allocation of resources required to deliver them, are driven by its assessment of the risks to the achievement of its regulatory objectives. This work is undertaken through the application of the SRA Risk Framework which provides a single, comprehensive, approach – integrated throughout the organisation and everything it does – to the identification and assessment of risk. That assessment directly informs the SRA's regulatory activities. The risk framework is described in greater detail in Annex 2.
Section two: current situation and future challenges
SRA progress to date and current position
The SRA's strategy for 2013/15 is set in the context of:
- rapid changes in the legal services market and in the regulation of that market;
- the significant programme of change that the SRA itself has delivered in the 2010/12 period;
- the operating environment for the SRA within the Law Society Group; and
- the need for further changes to the regulation of legal services arising from elements of the LSA that remain to be implemented and directly from the oversight regulator – the LSB.
When the SRA set its strategic plan for 2010/13 it committed to delivering a programme which would fundamentally change its approach to regulation from a rules-based approach to principles-based, outcomes-focused and risk- based regulation (OFR); to enable it to license alternative business structures (ABSs); and radically reform the SRA as an organisation. Concurrent with the transformation in the organisation's regulatory approach, the SRA commenced a major transformation in its IT systems and associated processes. This work was essential due to the fragility of the outdated information systems being used which predated the establishment of the SRA and their inability to support effective public interest regulation.
Within that plan period, 2011, in particular, was a year of significant change in order to deliver this core transformation programme. The SRA:
- introduced OFR with the implementation of the SRA's new Handbook of regulatory arrangements;
- was designated as a licensing authority for ABS;
- implemented new core IT systems (to replace old, inflexible and fragile systems) and associated new work processes;
- implemented online registration services for entities and individuals regulated by the SRA, including annual renewals processes;
- with other key regulators, commenced the Legal Education and Training Review (LETR) as a fundamental re-examination of the approach to the education and training of regulated individuals and its place in the new regulatory environment;
- restructured to create three core regulatory functions – Authorisation, Supervision and Enforcement – all supported by the Risk Centre; and
- commenced the reorganisation and re-skilling of staff to operate under OFR, including redundancy, recruitment and training programmes to ensure the appropriate behavioural and technical competences.
These programmes were implemented alongside other significant changes, for example the implementation in October 2011 of the first phase of changes to indemnity insurance arrangements, and the delivery of regulatory "business as usual”.
2012 saw a continuation of the core transformation programme. The SRA:
- commenced implementation of the new compliance officer arrangements, with the nomination of compliance officers by each regulated entity, approval by the SRA and the implementation of the compliance officer responsibilities in the Handbook;
- continued development of the Risk Centre and commenced the implementation of the new, organisation and activity-wide, Risk Framework to inform and target the organisation's development and regulatory activity;
- received and considered the first applications from entities for licences, and licensed the first of those entities;
- implemented significant enhancements to the online annual individual and entity renewal process; and
- continued to train and develop staff in the new core regulatory functions and continued recruitment of new staff, particularly into the Supervision function;
- consolidated the SRA's Midlands operations from Redditch and Leamington into a single modern office in central Birmingham.
Much has been delivered but only the successful delivery of the programme set out in this Plan will complete the transformation of the SRA into an efficient, risk-based, public interest regulator. There are further elements of all aspects of the core strategic transformation to be implemented. Alongside this, there will be a very strong management focus on ensuring that those changes already implemented are fully embedded in the core regulatory approaches and delivery by the organisation. Embedding OFR throughout the organisation and making the approach integral to all the organisation remains a key priority and is recognised as the organisation's principal challenge. In addition, it will be a priority for the organisation to ensure that the investment that has been made in organisational change, and particularly in IT systems, is delivering the operational effectiveness and efficiencies which provided the justification for that investment.
The SRA recognises the impact of the scope and pace of change on the firms and individuals it regulates. It also recognises the specific issues raised as a result of the online renewals process in 2011, and the implementation of other process changes. The implementation of a number of these process changes caused operational difficulties for those the SRA regulates. Addressing the underlying causes of these issues will form a key element of the SRA's programme for the first part of this plan period.
Transformation presents internal organisational challenges for the SRA and the capacity and capability of the organisation to deliver will be continually monitored and the associated risks managed. Recognising these challenges, the SRA will stay focused at all times on achieving a balance between concentrating upon the highest priorities judged against the risk framework, delivering operational excellence, and working towards its longer-term objectives.
The SRA within the Law Society Group
As set out in Section One of this Plan, the SRA is part of the wider Law Society Group – albeit intended to be able to discharge its regulatory functions independently. The SRA is subject to oversight by the Law Society's Business and Oversight Board (on which the SRA is represented) and receives its support services from the Law Society's Group Organisation Services. The structure places requirements upon the SRA to operate in a way that is consistent with a number of wider Group policies – particularly as they relate to finance, human resources and IT which are controlled for the whole Group by Organisation Services (which has management accountability not to the SRA Board but, independent from the SRA and the representative functions of the Society, to the BOB). Together these issues result in more complex governance arrangements than would be the case were the SRA a wholly independent organisation.
The Law Society Group, as a whole, has received critical external audit reports for the past three years on operation of the whole control framework operating across the whole Group. This is a significant issue for the SRA as the effective operation of a strong control framework (within the SRA and across its relationship with the rest of the Group) is critical to good governance and to the effective and efficient delivery of good regulation. The SRA is committed to improving the current position. During the second half of 2012 there has been a strong Group imperative to address these issues and this will extend into 2013. This will affect the whole Law Society Group, as all its component parts take the necessary steps to ensure the effectiveness of the control environment. The seriousness of this issue for the Law Society Group as a whole is such that, in 2013 in particular, the SRA to prioritise its contribution to this activity.
The external environment
Evolution of legal services market
Throughout the period of this plan the SRA expects to see the legal services market continue to evolve rapidly. Existing firms will continue to seek a competitive advantage by expanding into new markets, both here and overseas, and by investing and restructuring to improve services and reduce the costs of providing them. These changes will continue to require a focus on our approaches to the regulation of:
- firms with overseas practices;
- firms outsourcing activities, both within England and Wales and overseas; and
- firms offshoring activities.
It is probable that the SRA will need to continue to manage the regulatory issues flowing from the merger of firms, both within England and Wales and with firms in other jurisdictions. It expects to see this activity driven by firms seeking to improve their competitive position in the market; as a response to economic pressure arising from the continuation of the economic downturn; and from new entrants to the market – particularly new entrant ABS.
Economic pressure is also likely to see further failures in existing firms.
Economic pressure, particularly on firms operating in the personal injury market, is also likely to increase as a result of the implementation of the changes to the civil costs regime flowing from Lord Justice Jackson's review and from the introduction of the ban on referral fees in personal injury cases. In addition, planned changes to the procedures for road traffic and other categories of case through the widening and deepening of the RTA Portal and the proposed reduction in recoverable costs will present significant challenges to firms operating in these markets.
The changes to legal aid being implemented as a result of the Legal Aid Sentencing and Punishment of Offenders Act, together with the consequent reduction in legal aid expenditure, will also present challenges to some firms heavily dependent on legal aid.
Alternative Business Structures (ABSs)
During 2013/15 the SRA expects to begin to see the impact on the market of new ABS entrants and, throughout this period, it will monitor this impact through the Risk Framework. In the first applications for licences there were a range of business models and business activities being taken forward. The regulatory challenges faced by the SRA in supervising many of these new licensees will differ little from those it faces in regulating existing law firms; they are licensed rather than recognised bodies, but their underpinning structures and business models are very familiar. Others will present new challenges, mainly due to the following:
- new business models, such as multi-disciplinary practices where legal services are combined with the delivery of other services;
- complex ownership and financing structures which sit above the licensed entity; and
- the scale of consumer-focused services being delivered (traditionally the largest firms regulated by the SRA have focused on commercial clients).
Ensuring that the risks to the SRA's regulatory objectives that arise from these new factors are well understood and managed effectively will be a key priority in the period of this plan.
Reform of the regulatory framework
A further key environmental factor for the SRA is the further significant reform to the regulatory framework within which it operates remains to be implemented. In particular, this includes:
- key elements of the LSA yet to be implemented, including:
- the licensing of special bodies; and
- the ending of the grace period for existing Legal Disciplinary Practices with non-lawyer managers.
- the LSB is considering, in accordance with the remit provided by the LSA, the scope of legal services regulation. This consideration may lead to the incremental extension of reserved legal activities or, as the SRA has advocated, fundamental reform of the statutory basis for legal services regulation in England and Wales; and
- the LSB has made clear that it will continue its work in reviewing key areas of the approaches taken by Approved Regulators under the LSA and, flowing from this, continuing constructive challenge to current regulatory approaches.
Section three: key objectives for 2013/15
In Section one of this Plan the SRA set out its governance arrangements, the vision for the organisation and the core values which underpin the decisions it will make in achieving that vision. It also set out the SRA's regulatory objectives and its risk-based approach to delivering them. Section two summarised the current position of the organisation, the position of the SRA within the Law Society Group and how this impacts on SRA priorities, and how the SRA's current environment will evolve during the Plan period. The SRA's high level objectives for 2013/15 have been set in this context.
Ensure the SRA has the capability and capacity to deliver risk-based outcomes-focused regulation effectively and efficiently and to meet future challenges in a rapidly changing legal services market.
In 2011 and 2012 the organisation delivered significant change in its regulatory remit and approach with: the implementation of risk-based OFR as its core regulatory approach; the licensing of ABSs; and functional restructuring to create the core regulatory functions of authorisation, supervision and enforcement.
Throughout the period of the plan, a priority will be to ensure that the organisation's capabilities and capacity are developed so as to achieve the positive outcomes that these fundamental changes were designed to achieve. Importantly the SRA will ensure it delivers OFR so as to achieve the required outcomes in terms of more effective, proportionate and transparent regulation.
In addition it will be a priority to complete the development, and implement, the elements of the SRA's working procedures and supporting information systems that will deliver the key regulatory tool functionality for staff so as to enable the full benefits of OFR to be operated efficiently and effectively.
Priorities to achieve this objective
The programme to transform the SRA from a reactive, rules-based and complaints driven regulator to one which is using a proactive risk-based approach to delivering positive outcomes in the public interest is not yet complete. Annex 3 illustrates the progression of the SRA from initial development through to fully embedded and optimised delivery of risk-based OFR in the public interest.
In 2011 and 2012 the organisation delivered significant change in its regulatory approach with: the implementation of OFR, the publication of the new Handbook of regulatory arrangements, functional restructuring to create the core regulatory functions of authorisation, supervision and enforcement, the creation of the new Risk Centre and the development of the Risk Framework.
During this Plan period the SRA will complete this process through the delivery of its core R-view programme and other closely related development work so that, by the end of 2015, the organisation will be able to deliver, to its fullest extent, proactive risk-based outcomes-focused regulation in the public interest: regulation that is effective, efficient, proportionate and transparent.
The SRA's approach to the delivery of the R-view Programme will be modular – with benefits being delivered progressively throughout the life of the programme and the learning from early development and implementation used in the development of later stages. The significant investment in the information system elements of the programme will be phased towards the end of the programme.
Purely in terms of regulatory and operational priorities for the SRA, the full implementation of R-view, ie including the necessary information systems, should take place earlier in this Plan period; during 2014. However, significant work is required to be undertaken by Group Organisation Services to the fundamental infrastructure and functionality of the Law Society Group information systems to address significant legacy issues. Given this, the SRA's judgment is that the R-view information systems should not be implemented into this environment until this work has been progressed. However, working with Organisation Services, the SRA will monitor progress and, if the implementation of the R-view information systems can be accelerated it will do so.
Because the Programme has been formulated to fit with the overall development of the Law Society Group IT infrastructure, the additional time available for the early phase work will be fully utilised to ensure that the development of the Risk Framework, process reviews and associated work-streams are complete before significant investment in the critical R-view information systems is committed. This will ensure the user requirements (built on the early phase work) are certain, and the underlying information systems, with which R-view must interact, are robust.
R-View programme activities
By the end of 2013 the SRA will have completed the development and implementation of the Risk Framework throughout the organisation to ensure that all decision-making is driven by a clear assessment of the risks to the SRA's regulatory objectives. This will include the development of governance, people and process capabilities to underpin the consistent identification, assessment and treatment of operational and regulatory risks. In turn this approach will both challenge and optimise the balance of resources against risk exposures.
During 2013 the SRA will continue the programme to ensure that it has embedded, in all its regulatory functions, risk-based, outcomes-focused decision-making that is timely, fair, consistent, proportionate and transparent. All aspects of decision-making necessary to achieve this will be reviewed against the risks they mitigate and to ensure that they are operating effectively. These aspects include:
- robust decision-making processes, which align to the risk framework;
- clear, published decision-making criteria;
- staff with the required regulatory and behavioural skills;
- effective management and supervision systems;
- robust quality assurance mechanisms;
- feedback and learning is shared across the organisation; and
- a strong evidence base providing intelligence on the legal services market and regulatory risk.
Ensuring appropriate regulatory and behavioural skills will be a key part of the R-view programme. During 2011/12 there have been significant changes in staff (through recruitment into new roles) and the implementation of OFR and the progressive implementation of the R-view programme will change the nature of the regulatory decisions facing staff and the frameworks within which they are made. Therefore, the R-view programme will ensure that the necessary technical and behavioural training and development are delivered, consistent with the other elements of the programme.
The essential development of the Risk and Decision-Making Frameworks, the investment in people and the alignment of controls with the Risk Framework will deliver significant improvements in the organisation's capability and capacity to deliver the positive outcomes required. These steps will not, however, complete the realisation of our objective to become a mature, proactive risk-based regulator.
Therefore, building on these early phases, in 2014 we will commence the major development of the information systems necessary to provide the core regulatory IT functionality to enable the SRA to deliver proactive risk-based regulation in a proportionate, effective and efficient manner. This will be undertaken in collaboration with Organisation Services to ensure that the functionality required for R-view can be delivered in way consistent with Group Services' development of the Group's IT infrastructure. These R-view systems will support the operation of the Risk Framework by utilising the information drawn from our new regulatory IT systems. It will provide:
- a single, consistent, approach to the capture and recording of information about the entities and individuals we regulate;
- the information systems necessary to efficiently and effectively analyse the information we hold on those we regulate and external factors;
- a consistent and accurate view of each firm and individual we regulate, helping us to construct our approach to engagement and dialogue and assisting those making risk-based regulatory decisions; and
- the ability to aggregate and cross-reference individual event, regulated individual and firm level information at a 'thematic' risk level, thereby significantly improving our quantitative analysis and enabling better decision making;
- The implementation of R-view is critical to the SRA's ability to deliver more proportionate, risk-based outcomes-focused regulation in the public interest; and to do so efficiently and cost-effectively. It is also essential to enable the SRA to meet the formal requirements placed upon it by the LSB.
Other key priorities to achieve this objective
In addition to the training and development delivered through the R-view Programme, the SRA will deliver a comprehensive development programme for staff throughout this period. It is critical to success that the organisation continues to develop and train for the future. This programme will include:
- leadership and management development - including 360° feedback, coaching, performance management, change management, relationship management, communications and emotional intelligence;
- SRA Accredited Training Scheme - an accredited programme providing staff with an opportunity to develop their skills and knowledge as first-rate regulators;
- SRA Talent Management programme - to underpin transformation plans, to maximise potential and develop the next generation of managers, leaders and specialists;
- technical development - technical training programme will be reviewed and developed to support the development of core regulatory skills;
- Role Profile Framework - as the role profile framework develops, it will be utilised to manage resource effectively and flexibly through generic role profiles in peak times of activity across SRA functions;
- risk awareness and understanding training to ensure a consistent view of risk management; and
- embedding the SRA vision and values across the organisation.
The SRA is committed to creating a work environment which is inclusive and one where all staff feel valued and treated with respect and dignity. We will value difference and promote equality of opportunity for all staff to nurture and retain a diverse workforce. We will be proactive in addressing under-representation by using creative approaches to improve the diversity profile of our workforce at all levels and grades. We will continue to embed equality and diversity in all our work.
Deliver risk-based outcomes-focused regulation so as to achieve positive outcomes for consumers in the public interest and do so in a way that is justifiable to all our stakeholders.
The implementation of the SRA Handbook of regulatory arrangements in October 2011 was the major, external manifestation of the implementation of OFR. In 2012 the SRA continued the implementation of OFR with, for example, the approval of compliance officers in the firms it regulates.
The delivery of this objective in the plan period has two main aspects:
- first, the operational delivery by the SRA through our new regulatory systems; and,
- second, embedding the operation of our new regulatory approach within the entities we regulate.
Delivered effectively, the two aspects will be mutually supporting: the delivery of the SRA's regulatory activities will be more effective and achieve better outcomes if those it regulates have fully embraced the new regime and are actively identifying and managing their own regulatory risks. However, the extent to which firms do fully embrace the new system will be hampered if the SRA does not demonstrate a real difference in its approach to regulation as a result of the implementation of OFR.
In addition, the SRA recognises that the ability of any organisation to drive significant change and improvement within its sector (as the SRA is seeking to do) is founded on excellent delivery in core existing operational functions. By demonstrating high levels of professionalism and excellence in this area, the SRA's ability to deliver better regulation and better outcomes for consumers in the public interest will be significantly enhanced.
Priorities to achieve this objective
Throughout the period the SRA's Supervision function will continue to engage with regulated firms to ensure that the new regulatory approaches are becoming firmly embedded within firms and, as a priority, that the new compliance officer roles are operating effectively. This work will include ensuring that all regulatory issues arising from the nomination and approval process for compliance officers (undertaken in 2012) are addressed. This may include enforcement action arising from firms failing to co-operate with the SRA in the nomination process and from failures to disclose material issues in that process.
The SRA remains committed to the implementation of a proactive scheme to assure the quality of advocacy services in criminal cases. This is a key step towards assuring quality in an area of high importance to the consumer and to the courts. In the public interest a single scheme, supported and operated by the three key frontline regulators (the SRA, BSB and ILEX Professional Services) has the potential to deliver the most significant public benefit. Such a scheme has been developed by the regulators, working closely with the LSB and the judiciary and was the subject of a final consultation in the second half of 2012. It is the SRA's preference to implement such a joint scheme. However, should a joint scheme not be capable of delivery because of decisions taken by other parties to the scheme, the SRA will reassess the options open to it in order to achieve the desired outcomes. This would be undertaken within the broader context provided by the LETR work programme.
Understanding the experience of legal service consumers and what matters to them is central to the successful achievement of the SRA's regulatory objectives. The SRA is committed to listening to consumers and ensuring that they influence its policy and decision-making. During 2013 the SRA will revise its Consumer Empowerment Strategy to formalise its approach to consumer engagement and will also develop a legal services public network. The SRA will also continue to better support consumers to be more aware of their rights when they use a legal service so that they can play a more active role in identifying and reporting the risks that they face within the legal services market.
The SRA will undertake research, through stakeholder focus groups and by engaging with groups that represent consumers, to inform its work. To further strengthen its understanding of consumers, the SRA will also engage with public interest groups working within the legal services sector, such as the Legal Ombudsman (LeO).
The delivery of risk-based OFR and fair, transparent, consistent and proportionate decision-making will be accompanied by continuing assessment to identify any disproportionality in outcomes. The SRA is committed to ensuring fair and equal treatment for all those it regulates and, therefore, should disproportionality be identified the SRA will analyse the causes, engage with stakeholders and work to address the underlying issues. A programme of audits and reviews will continue.
In January 2013 the SRA will begin a review of learning from the first year of licensing ABS. This will encompass both the framework within which licensing and subsequent regulatory decisions take place and the operational management of ABS authorisation processes. The outcomes of this review will inform the development of the SRA's overall regulatory approach to the authorisation and supervision of entities.
In 2013 the SRA will complete reviews of the regulation of overseas practice and in-house practice. These reviews were commenced both to ensure that regulatory approaches were effective in addressing current risks in a rapidly changing external environment, and to ensure that these important areas of regulation are consistent with OFR. The implementation timetables for any changes to regulatory arrangements or regulatory delivery flowing from these reviews will be set during 2013.
In October 2013 the SRA will close the Assigned Risk Pool (ARP) with the aim of improving competition in the open insurance market by removing the ARP as a market distortion. It will be replaced with a mechanism to enable firms unable to obtain open-market cover to close in an orderly fashion and to ensure clients are protected. The implementation of these arrangements will create conditions that increase the likelihood of existing insurers remaining in the market, encourage new insurers to enter the market and increase the level of competition for business between insurers.
The SRA's approach to regulation encourages the entities that it regulates to identify, manage and mitigate their own risks in meeting the requirements of the SRA Handbook. This allows the organisation to concentrate on those who cannot or choose not to manage these risks.
The SRA will continue to embed this approach across the regulated community through effective communications, relationship management and supervision.
It is the role of all SRA regulatory functions to ensure that the regulatory approach acts as a credible deterrent, with a view to preventing the need for enforcement action. The SRA will continue to ensure that this approach is embedded across its regulatory functions, working with firms at the authorisation and supervision stage to identify and manage the escalation of potential risks.
When enforcement activity is needed, the SRA will ensure its actions are effective, proportionate, and consistent with the associated risks and in line with OFR. In doing so, it will apply its published Enforcement Strategy which explains that enforcement activities are aimed at deterring those who breach the SRA Principles and to control or remove those who represent serious risk to the SRA regulatory objectives. The Strategy sets out examples of the factors which may be taken into account when deciding if enforcement action is needed and these will be continually reviewed to ensure that they are appropriate. In addition, ensuring that the SRA has the appropriate tools in place to deliver effective enforcement action, such as fines that will act as a credible deterrent, continues to be a priority.
The implementation of the outcomes of the end to end review of Post Enforcement activities (which commenced in 2012), including the operational, financial and legal aspects, will transform the operation to provide an efficient and effective process which provides value for money and adopts an outcome focused approach. It will develop a strong control environment; a structure to manage the risk associated with Post Enforcement activities and provide visibility of the outcome of a particular intervention. In order to deliver these outcomes, the Post Enforcement function will drive the following behaviours; decision-making mentality, accountability and responsibility, and a risk based approach.
Develop the SRA regulatory arrangements and tools to better meet the regulatory objectives and the principles of better regulation and to mitigate emerging risks and anticipate changes in the external environment.
There are significant drivers for the evolution and development of the SRA's regulatory arrangements and tools. These include:
- the SRA believes that, even with the significant changes that have been implemented, the current regulatory arrangements are still not sufficiently aligned with the legal services market or consumer interests;
- the Legal, Education and Training Review (LETR) - a fundamental, evidence-based review of education and training requirements across regulated and non-regulated legal services in England and Wales – will form the basis of significant changes to the SRA's education and training requirements;
- elements of the LSA that are yet to be implemented, such as the process for bringing special bodies into regulation as authorised bodies;
- changes arising from amendments to statute, such as the ban on the payment of referral fees in personal injury cases;
- changes arising from decisions by the LSB, such as the inclusion of will writing in the list of reserved legal activities;
- changes arising from the SRA's own planned examination of areas of regulation;
- changes that will arise from the SRA's analysis and appreciation of developing risks where the appropriate response is a change in the regulatory arrangements.
Given the scope of these activities and, therefore, the potential magnitude of the changes to be implemented, the SRA recognises that whilst it can map out the likely core priorities for development it will need to maintain flexibility in its approach to ensure that, at all times, it is focused on the highest priority areas judged against the risks being addressed and their potential impact. In addition, it will be necessary to manage the development and implementation of changes in the context of the demanding programmes of work that will meet the other objectives in this Plan.
Priorities to achieve this objective
The SRA will continue to work with consumers and key stakeholders, including those regulated by the SRA, to develop regulatory arrangements that are optimally aligned with the regulatory objectives, market demands and that are in the public interest, including in the interests of consumers. Projects such as QASA are an example of how the SRA is already working (through the Joint Advocacy Group) to achieve this objective. Continuing to build collaborative and influential relationships with stakeholders, including other regulators, both internationally and nationally, the regulated community and government will be central to achieving this objective.
As a part of this work, the SRA will maintain and strengthen its relationship with the Legal Services Board, providing challenge where appropriate, compliance with their requirements and contribution to the development of their approach.
Consideration and implementation of the outcomes of SRA research projects, including research into understanding the impact, benefits and costs of OFR, the impact on the market of legislation banning referral fees for personal injury work, the review of the new approach to authorisation and understanding further the impact of the new approach to supervision. The SRA's research will be closely aligned to support the SRA's developing risk framework.
At the beginning of 2013 the report of the research team conducting the first phase of the LETR will be published. This will set out the outcomes of the work they undertook during 2012. During the first part of 2013 the SRA will analyse and consider the research team's report alongside its co-sponsors of this work: the Bar Standards Board and ILEX Professional Standards. Thereafter the SRA expects to publish, for consultation, its planned strategic approach to the reform of legal education and training. The subsequent programme to develop and implement these reforms will extend throughout the remaining period of this plan and, almost certainly, into later plan periods.
In April 2013 the SRA will implement changes to its regulatory arrangements to give effect to the statutory ban on the payment and receipt of referral fees in personal injury cases. This will be accompanied by a programme of supervisory, and if required enforcement, activity to ensure that the changes have been fully implemented within regulated firms.
During 2014 the SRA will implement the next stage in the implementation of entity-based regulation by regulating the businesses of sole principals rather than regulating sole principals as individuals.
The SRA's current expectation is that the grace periods allowed by the LSA for Legal Disciplinary Practices (LDPs) with non-solicitor managers and for special bodies will end in 2015. Therefore, by this date, the SRA will have completed the licensing of all such bodies (transitioning LDPs from recognised body to licensed body status and bringing special bodies into entity regulation through licensing). The licensing of special bodies will be preceded by a significant programme of work in 2013/14 to develop the framework within which they will be licensed.
In October 2014 the SRA will implement changes to its compensation arrangements flowing from the fundamental review of those arrangements which commenced in 2012.
In October 2014 (ie for the fees collected for the regulatory year 2015) the SRA expects to set regulatory fees based on the outcome of a fundamental review of fee-setting which will take place in 2013/14. The review will consider the appropriate balance between fees charged to individuals and entities for activities (eg for making an application) and annual fees payable by all those regulated. It will also examine the weighting of annual fees between individuals and entities and between different types and sizes of entities. The review will provide information to enable a justifiable and transparent fee structure so that those regulated can be clear about the cost of regulation and the basis on which regulatory fees are calculated. It will also ensure transparency on the difference between those fees that are necessary to meet the cost of regulation and those fees The Law Society levies for representation purposes.
The SRA regards transparency and justifiability in fee setting to be critical to confidence in the regulatory systems and, therefore, to the extent that it is possible to do so, early outputs from the review will be incorporated into the 2013 fee-setting approach.
During the period of this plan the SRA expects to license the first entities undertaking the new reserved legal activity of will writing and estate administration. The timing of this will be dependent on decisions yet to be taken by the LSB and Ministry of Justice regarding the scope of the reserved activities.
Ensure effective operational delivery, the effective operation of the new systems and processes already implemented so as to realise the business benefits and financial efficiencies they were designed to deliver, and address the control weaknesses pertinent to the SRA identified by the Law Society Group external auditors.
In 2011 and 2012 the organisation managed a period of intense change in its operating environment designed to improve its operational effectiveness and efficiency. This has included significant investment in new business processes and IT systems (which also support the new regulatory responsibilities and approach) and the consolidation of the separate Midlands offices into a single site in Birmingham.
During such a change programme it is essential to continuously, and critically, review progress and focus on ensuring that the new processes, systems and structures are operating as intended; that there is excellence in operational delivery; and that the organisation is operating as efficiently as possible. Throughout the period of this Plan the SRA will ensure that these requirements are met: but this will have a particular emphasis in 2013. In doing so, the SRA will engage with all relevant stakeholders to ensure that any impacts on them are identified and that, where changes in approach by the SRA are required, these are addressed.
Priorities to achieve this objective
During 2013 the SRA will review those elements of its core operational interactions with those it regulates which had been scheduled to move online in 2012 but were delayed from that year. This was done in order to focus on making a number of improvements to the functionality of the changes implemented in 2011, and to the stability of the IT environment on which they operate. These latter changes were made successfully during 2012. It is important that a number of these remaining elements are moved online so as to provide a more modern system for those the SRA regulates and for the organisation to realise the improvements in efficiency and effectiveness they will deliver. The scope and timing of this further work will be developed between the SRA and Group Organisation Services to ensure that the best balance is struck between operational benefits and the need to manage the volume of IT changes in 2013. This work will be co-ordinated with the development and implementation of the R-view programme.
Given the extent of the reform programme during this plan period, achieving the SRA's objectives will be heavily dependent on an ability to deliver change successfully to the required quality, time and cost and in a way which delivers the required outcomes. To this end, the SRA will:
- invest in new knowledge, systems and practices to ensure the cost effective delivery of its objectives; and
- enhance programme and project management capabilities to successfully deliver the infrastructure required to perform its regulatory role.
Working with Group Organisation Services, the SRA will help the Law Society Group deliver those improvements to the control environment which relate to the SRA's responsibilities. These are necessary to address the significant weaknesses in the Group control environment identified by the Group's external auditors. A continuing focus will be applied to ensure that the SRA's objectives are achieved in an environment with a strong framework of internal controls, with a particular effort on improving the following areas:
- processes and systems that safeguard the organisation's assets;
- the quality and timeliness of management information for SRA management decision-making;
- portfolio, programme and project governance capability;
- cultural change to reinforce accountability for performance; and
- supplier performance management.
During 2013 there will be a significant management emphasis on ensuring that the operational benefits (in terms of operating effectiveness and efficiency) on which the investment decisions for the new process and IT systems were based, are realised. This will be undertaken within the context of a wider programme of management activity designed to ensure overall operational effectiveness and to identify and implement further opportunities for cost reductions and increased efficiency whilst, at the same time, improving our regulatory effectiveness and operational delivery.
The importance of these elements of the programme is such that, during 2013, they will take priority if necessary over some strategic work on the development and implementation of further changes to the organisation's role in the overall reform of legal services regulation.
The SRA: structure, governance and management
The SRA is the independent regulatory body of the Law Society. It regulates solicitors, bodies providing legal services to the public - both traditionally structured law firms and ABSs - and those employed within these bodies. It regulates more than 120,000 solicitors and over 10,000 legal services businesses.
The SRA operates within a statutory regulatory framework, including the Legal Services Act 2007 and the Solicitors Act 1974. Its strategy is determined by its Board and its committees. The SRA management team implements that strategy and is accountable to the Board. The SRA's work is guided by documented decision-making principles and we quality assure and monitor our performance.
In 2011 new arrangements were agreed for the governance of the relationship between the SRA as the regulator and The Law Society as the Approved Regulator under the LSA and the representative body of solicitors.
Central to the new arrangements agreed with The Law Society is a new Business and Oversight Board (BOB) which began operating in 2012 to advise the Law Society Council on oversight of the SRA, to have responsibility of the shared services functions for both organisations and to appoint a Director of Organisational Services responsible for Group Organisation Services who reports into BOB. BOB is made up of four representatives of the SRA, four representatives of The Law Society and three independent members. This includes joint Chairs, one from each organisation.
From January 2013 the SRA Board will consist of 15 members with a lay majority — seven solicitors (one of whom chairs the board) and eight lay members. Solicitor members are drawn from a cross section of the profession. All SRA Board meetings include sessions that are open to the public.
The SRA Board is helped in its work by committees. All are accountable to the Board and at least one Board member sits on each committee. There are currently seven committees reporting into the Board.
SRA Management Structure
The SRA's current management structure is set out below.
SRA Senior Management – Structure
SRA Chief Executive
Executive Adviser to the CEO
Performance and Delivery*
Director of Organisation Services
Acting on behalf of the Chief Executive to help the SMT ensure operational delivery in accordance with the SRA’s strategy and business planning
Education and Training
Investigations and Inspections
Strategy and Planning
International – policy
International – engagement
CFO function for SRA
Shared Services – Finance, HR, IT
Group Programme Management
*Posts to be advertised
OFR Delivery Group
- Director of Risk
- Director of Authorisation*
- Director of Supervision*
- Director of Enforcement*
- Director of Post Enforcement
- Director of Education and Training
- Director of Policy
*Posts to be advertised
SRA regulatory risk framework summary
The SRA's Regulatory Risk Framework sets out the context for our regulatory activity and how we deliver outcomes-focused regulation through taking a risk-based approach. It outlines how we operate and oversee risk-based regulation through our risk management process, risk governance and the organisational culture required to embed a risk-based approach. Our Regulatory Risk Index sets out the risks that we manage under this framework.
Our regulatory approach
The ultimate goal of our regulatory activity is to work towards the regulatory objectives set out in the Legal Services Act 2007, and to do so in a manner that is transparent, accountable, proportionate, consistent and targeted at cases in which action is needed.
In order to do this, the SRA has adopted an outcomes-focused philosophy to regulation, which we execute through a risk-based approach to regulatory activity. The diagram below shows at a high level how these concepts relate.
The regulatory risk management process
Risk is considered to be the combination of impact (the potential harm that could be caused) and probability (the likelihood of a particular event occurring). In the SRA context, impact and probability are combined to give a measure of the overall risk posed to statutory objectives. This assessment is then used to prioritise and select our response.
This approach enables us to become much more proactive, identifying and tackling risks before adverse events occur, rather than acting retrospectively once harm has arisen.
The following diagram gives an overview of the SRA's process for managing regulatory risk:
Identification of risk is the starting point for any regulatory activity and involves drawing upon a wide range of sources.
Risks to the regulatory objectives are set out in our Regulatory Risk Index. This enables us to prioritise and organise incoming information in a consistent manner, whilst building a comprehensive picture of our risk exposures across all areas of activity. Publishing the Index also makes transparent the areas of regulatory concern and provides a common language to promote clear dialogue with those we regulate around risks.
Risks may arise from the activities of individuals and firms we regulate as well as external factors such as macro-economic changes or consumer awareness. The Risk Index is not designed to be exhaustive and will evolve as new risks emerge.
Consistent assessment throughout the organisation, and across the broad spectrum of risks that we handle, is essential to ensure that action is targeted proportionately at controlling the risks that pose most threat.
We assess risk at several different levels:
- incoming reports or notifications from the regulated community, consumers and other agencies;
- individuals or firms;
- market-wide or sector-specific risks
Risk indicators are drawn from a range of information and are identified and weighted using statistical analysis. The SRA's risk analysis also makes use of qualitative information which provides us with a fuller picture across the spectrum of regulatory risk and provides important context for the interpretation and application of statistical results.
Risk monitoring takes place across the SRA to ensure that risks are constantly reassessed in line with tolerance and escalated as appropriate. Monitoring is done through regular reviews at individual, firm and thematic risk levels.
Risk tolerances express the SRA's view as to the level of risk that is acceptable and these provide thresholds against which action can be taken consistently across the SRA.
Risk control is the process by which regulatory tools and interventions are applied to manage issues, reduce risks or exploit opportunities.
Our regulatory response in any given situation is tailored to deliver particular outcomes by targeting unacceptable risks. The SRA has a broad range of regulatory tools and powers at its disposal and our choice and application of regulatory tool is dependent upon the risks posed. We have formal decision-making governance arrangements in place to ensure appropriate oversight and objectivity in evaluating and managing risks.
The effectiveness of the risk framework itself and how well it is operating in practice is continually evaluated to ensure desired outcomes are achieved and to identify potential improvements.
Responsibilities for risk need to be clear, with effective risk governance forums providing assurance to internal and external stakeholders. The SRA has a non-executive Board Committee who has oversight of the delivery of risk-based, outcomes-focused regulation, our Regulatory Risk Committee. We also have executive risk governance groups who provide strategic and tactical governance.
Risk reporting is provided to help our governance forums to ensure that there is a proportionate response to any new or emerging risks, to understand any risk exposures outside tolerance and adjust tolerance levels in line with changing priorities and outcomes observed.
We also publish risk information externally to provide those we regulate and other stakeholders with information on risk exposures and the effectiveness of risk management activities. This includes our Risk Outlook, which is an annual publication that sets out the SRA's assessment of the most significant risks to regulatory objectives in the legal services market.
Embedding Risk Management
The SRA OFR maturity model sets out the key steps and capabilities that it is developing on the path to full risk-based OFR implementation (please see Annex 3).
The SRA has also identified a number of key behaviours that will serve to embed the effective operation of the risk framework within its internal operations, such as the escalation of the right risks, at the right time, to the right people. When enacted, these behaviours will ensure good risk awareness and a positive risk culture.
Risk-based outcomes-focused maturity model
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