Self-regulation likely to be welcomed by City solicitors
City solicitors are likely to be pleased by Lord Hunt’s review into law firm regulation, which advocates self-regulation for the most robust firms, better communications, and an end to box-ticking.
Lord Hunt’s review, which was commissioned by the Law Society last October, proposes that “authorised internal regulation” (AIR), or self-regulation, be made available to any law firm whose risk, compliance and governance processes are deemed sufficiently robust by the Solicitors Regulation Authority (SRA).
Proposals for a specialist division of the SRA to be set up to exclusively handle corporate firms were advanced in March this year in a report by former civil servant Nicholas Smedley, and received strong support in the City.
While Lord Hunt’s review, published this week, falls short of this—AIR status would potentially be available to all law firms—it goes some way to granting the City’s wishes.
The large corporate firms, which have sophisticated internal compliance and risk awareness set-ups, will be the first to adopt the new status.
The review calls for a move towards more principles-based regulation and away from box-ticking on specific requirements.
Will-writing and probate work should be regulated, and claims management companies should be brought within the aegis of the Legal Services Board. Lord Hunt also recommends that the SRA should make greater use of consumer feedback and “mystery shoppers” and that solicitors should make a declaration similar to the hippocratic oath when they receive their practising certificate.
Graham Reid, employed barrister at Reynolds Porter Chamberlain, and a specialist in solicitor regulation, says the 115-page, 88-recommendation report was a “virtuoso performance”.
However, he questioned the incentive for firms to seek AIR status. “It’s a voluntary process, and I am unclear about why one would want to do this,” he said. “If AIR-approved, you won’t pay as much in fees, but I’m not sure that’s going to be the biggest incentive. It may be that this is Lord Hunt’s way of heading off suggestions for separate regulation for City firms.”
Reid welcomed Lord Hunt’s proposals for a more principles-based approach, which would encourage solicitors to “step back from box-ticking, and get into the mindset of what the regulator wants them to do”.
Many of Lord Hunt’s proposals would “foster a grown-up dialogue” between firm and regulator, he says, for example, the proposal that firms risk-assess themselves and share that information with the SRA.
