Confidence in regulation

This is a conference* about ‘trust in the market’ and building confidence within the sphere of legal services regulation.  I shall therefore open with the observation (or reminder) that regulation is a public intervention in otherwise private transactions and free markets.  It must therefore stem from a political judgement that we should not have complete trust and confidence, and must instead rely on the intervention in the market. issue of how confidence in regulation develops and is then sustained is a fascinating one.  It begs preliminary questions of what we mean by ‘confidence’, and from whose standpoint we are assessing it.

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CMA market study and the pressure for regulatory change

The Competition & Markets Authority (CMA) published the final report of its market study into legal services in December 2016.  At 285 pages (and a further 233 pages of appendices), it is not a light read!  Nevertheless, it is worthwhile – though for those with less time or stamina, the executive summary on pages 4-19 will give a flavour of the review’s scope, conclusions and recommendations.  It should also be emphasised that the scope of the study was intentionally limited to the experiences of individual consumers and small businesses, and that criminal legal services were excluded.  The study is not therefore a review of the whole legal services sector.

The headline conclusion from the review is that the legal services sector is not working well for individual consumers and small businesses, largely because those consumers lack the experience and information they need to understand their needs, to make informed choices, and to engage confidently with providers of legal services.  The CMA also concluded that these challenges are likely to increase over time and make the current regulatory framework unsustainable in the long run (especially since, in the CMA’s judgement, that framework also does not meet the principle of targeted regulation).

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Clementi 10 years on (and now for the next 10)

This month marks the tenth anniversary of the publication of Sir David Clementi’s final report on the regulatory framework for legal services in England & Wales.  How time flies!  The report is still a good read, and a helpful reminder of what needed to change – and why.

The report laid the foundations for the Legal Services Act 2007 (even though the Act went further on alternative business structures than Sir David was willing to recommend).  Its principal aims can be summarised as:

  • creating the Legal Services Board and establishing the principle of regulation that is independent from professional representation
  • improving the way in which – and the speed with which – complaints against legal services providers are handled, including setting up the Office for Legal Complaints and the Legal Ombudsman
  • liberalising the business structures through which lawyers can operate by permitting ownership and investment by individuals who have not qualified as lawyers, and allowing legal businesses access to external capital.

All of these primary objectives have been achieved – more or less.  So what now?

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