The Legal Services Board (LSB) has today published its report on its investigation into the Law Society of England and Wales’ (TLS’s) arrangements for monitoring and oversight of the Solicitors Regulation Authority (SRA).
After an extensive investigation we have found evidence that TLS has breached the Internal Governance Rules (IGR) set by the LSB under section 30 of the Legal Services Act (the Act) in the following ways:
Firstly, TLS’s arrangements for oversight and monitoring of the SRA were not proportionate or transparent. This was due to:
- an overlap and ambiguity in the terms of reference for the oversight bodies set up by TLS resulting in duplication and lack of clarity on accountability;
- the TLS General Regulations, in which TLS (amongst other things) sets out its arrangements for monitoring and oversight of SRA being incomplete and out of date; and
- a lack of a shared understanding between TLS and SRA as to what each body in the oversight arrangements should do, see and discuss and how they linked with each other.
Secondly, the SRA, as the regulatory body, was not responsible – as it should have been – for designing and managing the appointments and reappointments process for its own Board members. However the LSB has not found that the SRA’s independent performance of its regulatory functions was impaired.
Despite the more recent action by the TLS to endeavour to remedy the failings prior to the completion of our investigation, this was a serious breach of the IGRs. The LSB has therefore decided to issue a public censure, the first time it has ever had to take such action, to reflect the gravity of the findings.
TLS is a statutory approved regulator and as such should have appropriate compliance and governance arrangements in place to ensure that such breaches do not occur. The fact that such breaches happened reflects very poorly on the way the organisation was governed at the time the breaches occurred.
We have also agreed with TLS that it will report to us in November 2018 on the progress it has made on remedying all the failures identified in this report.
Interim Chair of the Legal Services Board, Dr Helen Phillips said:
“Our investigation has revealed serious breaches by the Law Society of the Section 30 Internal Governance Rules.
The complexity, ambiguity and burdensome nature of TLS’s monitoring and oversight arrangements for the SRA were unacceptable. Its actions have impaired the effectiveness of the SRA, thereby undermining the public interest in effective regulation of legal services. For a body which emphasises the importance of the rule of law this is a serious failing.
TLS has, since the investigation started, updated its General Regulations in October 2017 to ensure that the SRA is now responsible for designing and managing the process for appointing its own Board members. However I am deeply concerned that TLS failed to do this in 2014 when the LSB amended the IGR to require it.
Therefore the LSB decided to take enforcement action against TLS in light of these breaches. Regulatory independence is fundamental to public confidence in the legal sector. The serious failings our report has identified have led the LSB to take formal enforcement action against an approved regulator for the first time. We are therefore publicly censuring TLS for its failings. This is the first occasion the LSB has used this sanction and it reflects the extent and significance of the breaches by TLS. We expect lessons to have been learnt from our findings so that such failings will never be repeated.”