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Prevention V Enforcement

9 January, 2023

How much can legal regulation be about prevention rather than enforcement? Is the current model favoured by most of the regulators too focused on disciplining wrongdoing, rather than more active engagement to stop it in the first instance and promoting ongoing competence? Which approach do lawyers best engage with?

The Council for Licensed Conveyancers recently held a panel discussion that looked at whether legal regulators have the balance right between before- and after-the-event activity, and what the profession itself believes is best. You can watch the full discussion here.

Stephen Ward, the CLC’s director of strategy and external relations, explained its approach of ‘assisted compliance’, in which the regulator seeking to collaborate with those it oversees to achieve compliance. “It’s not about us simplifying the rules or expectations. It’s about us helping the firms and individuals that we regulate to meet our expectations and the requirements of the law. We can also describe it as helping practices deal with issues before they cause harm to the client or public interest.”

He suggested this was sometimes misunderstood as the CLC being a light-touch, or even a soft-touch, regulator. “If there is persistent non-compliance or if actual harm has occurred, then we do use our disciplinary tools – assisted compliance isn’t a free pass to go on as you wish. In fact, our approach to regulation is quite intensive.”

Where there are compliance failings, the first step – unless there is an immediate risk to clients or the public – is to agree a plan to bring the practice back into compliance. “We always expect that plan to be completed within an agreed and generally quite a short, albeit realistic, timeframe. Where that isn’t achieved, disciplinary action could well follow.”

At the same time, this approach is aided by the size of the CLC’s regulated community – some 230 firms who each have a named relationship manager, albeit that between them they represent about 15% of all conveyancing activity in England and Wales. Mr Ward said: “We calculate that we cover double that level of activity and still operate the same intensive and collaborative model. It is scalable.”

The Solicitors Regulation Authority (SRA), on the other hand, already has plenty of scale. “There are added complexities when you regulate over 150,000 practicing solicitors in 10,000 plus law firms,” said Chris Handford, its director of regulatory policy. “It’s not just about the number, but also the differences between them, the different business models, size, provider types, the different areas and categories, activities, client types.”

“It’s worth remembering that most firms do want to get things right when we look at them,” he pointed out. “They are trying to do things correctly, or at least want to, but they don’t always succeed in that.” Though the SRA tries to maintain a balance between preventative and enforcement activity, it receives more than 10,000 reports about potential problems a year and has to deal with them, sometimes urgently. Around 2,000 are referred for investigation, of which about 100 a year lead to the ultimate stage of a referral to the Solicitors Disciplinary Tribunal.

Mr Handford said: “You can also often see cycles in regulation and the balances change over time. If you look into our history, there have been times where we were very heavily focused on supervision. And there have been times when we were very reactive and focused on just what came across the desk. We now have a much more sophisticated mix where we use horizon scanning – issuing risk outlooks, for example – risk targeting, and proactive visits or desk-based reviews, alongside enforcement work.”

Like the CLC, he said, “we will try and work with firms to bring them into compliance. Where we really go down the enforcement route is where there’s a will for non-compliance, or there’s a really big mess.” Though the largest firms have relationship managers, Mr Handford said there were no plans to extend the programme.

Sarah Debney has more experience of legal regulators than most, having worked in conveyancing for nearly 40 years. She has been a fellow of CILEX since 1995 before more recently qualifying with the CLC too so as to gain independent practice rights. She has worked at both CLC and SRA-regulated firms, and is now a member of the CLC council, a consultant conveyancer at Taylor Rose MW and a director of Hive Partnership.

“I found it really interesting moving back into an SRA-regulated firm from a CLC one because I’ve been used to having a working relationship with the regulator, whereas it felt very much more arm’s length in an SRA practice,” she recounted. This was, she recognised, in part “a size and scope issue” but she suggested too that the constant media reports of SRA disciplinary activity “perhaps doesn’t encourage firms to want to engage”.

She continued: “Having a regulator who understands your specialist area, knows your business model, your profile, your size, and takes a proportionate and pragmatic approach is very helpful, and that’s certainly been my experience of the CLC.

“They understand that some things can be difficult to prevent altogether, but equally, they’re easily rectified. They’re not deliberate or serious enough to need anything more than a conversation really to resolve. What they do expect, and I’ve certainly seen this, is that if you do come to their attention, you need to be honest and open about the circumstances that led to it. You need to apologise, do your best to resolve it quickly and keep them updated so that they can close off the complaint or, if necessary, become more actively involved. That seems a fair approach to me.”

Ms Debney’s ask for a regulator was one with “clear rules consistently and fairly applied” and a two-way relationship. “You need to feel confident that you can ask if you’re not sure without a fear of opening a can of worms. That’s particularly helpful in an outcome-focused regulation environment because the rules are less prescriptive, and so ultimately, they are more open to interpretation, which potentially leads to uncertainty or inadvertent mistakes.

“As to how you establish trust enough to have a relationship with your regulator, ultimately they’re not your friend, but I think it does require an assumption on the regulator’s part that very few people set out to deliberately flout or ignore the rules and, on the regulated community’s part, that the regulator isn’t there to catch them out or to set traps for the unwary. An effective regulator should need to take disciplinary action relatively rarely. The majority of things can be brought into compliance.”

Paul Bennett, a solicitor and partner at Bennett Briegel, where he specialises in legal regulation, talked about his recent experience with one of the smallest legal regulators, IPReg – the Intellectual Property Regulation Board, which oversees both patent and trade mark attorneys. Though a small community, IP lawyers’ work can have “multi-million-pound, often multi-billion-pound, consequences for clients if they go wrong”.

IPReg only has a handful of staff but nonetheless they have a similar assisted compliance and close relationship model with their firms. In return, the firms have “trust and confidence in their regulator and I actually think for the bigger regulators, that’s the bigger challenge”, Mr Bennett said. “How do you get the regulated community to want to approach you, to want to engage with you, to do that assisted compliance?”

He urged all the regulators to move to an assisted compliance model – “we have focused too much over the last decade on enforcement”. Rather than focusing on the tiny minority of lawyers who will have to be dealt with by disciplinary processes, Mr Bennett said “we should be focused on high standards of consumer protection through information, prevention, and building confidence in the regulators”.

Like the CLC, Mr Bennett sees real benefits in assisted compliance: “It really empowers businesses to thrive and their clients to get what they want from them. That ultimately is the purpose of legal regulation.”

This would be achieved by engagement and the regulators reaching out to their communities, Mr Bennett said. All regulators would say they already do a lot of this – t he issue is how to connect with those who do not engage with the guidance notes, blogs, webinars and events. One technique the SRA was trying, Mr Handford said, was more precise targeting of particular groups, such as a recent thematic review of immigration work.

Mr Ward agreed: “There’s only so much you can do with the proactive outreach, the newsletters, the events, and so on because it’s self-selecting who engages with that.” But what should regulators do when they contact firms and they still do not engage? And does the process take too long?

“We are very keen to treat lawyers and firms fairly,” said Mr Ward. “We want to give them the opportunity to come into compliance. Generally, the timetables we set for that are quite short, however. So we do take action pretty quickly, but the process has to be fair and so can take some time.”

Mr Handford said he hoped the SRA’s new regime for fixed penalties would help speed up the process and also identify potentially more serious non-engagement. It is to pilot a £750 fine for: failing to comply with the transparency rules; failing to provide information or documentation requested or required by the SRA, such as firm diversity data or a declaration of compliance with anti-money laundering requirements; and failing to ensure approval of role holders like compliance officers. A second offence within three years will lead to a £1,500 fine.

Mr Ward welcomed the role of technology in supporting compliance – both in ensuring the right steps are being taken in the progress of cases and also in ensuring a comprehensive record of each matter. Longer term, “it potentially offers a way for regulators to have even more intensive oversight of the delivery of legal services through being able to interrogate the systems to see to what degree the tools are being used properly, and policies and procedures are built-in and being observed, without taking up the time of the practice involved”.

He said: “It might seem a bit Big Brother-ish, and we would need to think about it to ensure consent, confidentiality, and so on, but it is an opportunity we need to explore with the software providers and lawyers.”

The panel debate was held via Zoom on Tuesday 22 November and you can view a recording of the event.

Watch now

Stephen Ward, Deputy CEO, Council for Licensed Conveyancers
Chris Handford, Director of Regulatory Policy, Solicitors Regulation Authority
Paul Bennett, Bennett Briegal LLP
Sarah Debney, Professional Council Member of CLC, Consultant Conveyancer at Taylor Rose MW and Director Hive Partnership
Chair: Neil Rose, Editor, Legal Futures