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Thursday 9 October 2014


Legal Services Board publishes report into regulatory restrictions on business ownership in the legal sector

Do regulators restrict legal services providers from being connected with other businesses? Are regulatory restrictions to prevent legal services providers being connected to other businesses compatible with the regulatory objectives of the Legal Services Act?

These and similar questions are addressed in a Legal Services Board thematic review of regulation that prevents legal services providers involvement in a range of other business activities.

The key conclusion of this review is that, whilst consumers remain confused about the scope of legal regulation and mistakenly assume that all legal services are regulated. It may be legitimate to impose additional regulatory requirements on lawyers with connected businesses. This could include additional disclosure requirements. The LSB has concluded, however, blanket bans are likely to be disproportionate and cause more harm than good by deterring innovation.

Other findings in the report suggest that:

  • the SRA imposes the most restrictive rules regarding businesses connected to law firms and there is little evidence that their restrictions achieve their goals

  • the amount of waivers granted to ABS firms by the SRA so they need not abide with the rules restricting business ownership (circa 17 percent) may be putting existing law firms at a competitive disadvantage

Legal Services Chief Executive, Chris Kenny, said:

"This report is a timely contribution to the ongoing debate on over burdensome regulation in the legal sector. It is clear that there are some regulations in place that are not needed and should not be there. Saying that we strongly support the work that the SRA is doing to review the separate business rule and hope that this thematic review assists with this exercise.
We also support the exploration of collaborative work between regulators to consider the issue of consumer confusion about what is and what isn’t subject to legal service regulation, the effectiveness of disclosure and whether more consistent approaches can be developed."



For further information, please contact LSB Communications Manager Vincent McGovern or by calling 020 7271 0068.

Notes for editors:

  1. The regulatory restrictions on business ownership report can be found here.

  2. This report is the first of three thematic reviews which the LSB said it would conduct in its 2014/15 business plan.

  3. The Legal Services Act 2007 (the Act) created the LSB as a new regulator with responsibility for overseeing the regulation of legal services in England and Wales. The new regulatory regime became active on 1 January 2010.

  4. The LSB oversees nine approved regulators, which in turn regulate individual legal practitioners. The approved regulators, designated under Part 1 of Schedule 4 of the 2007 Act, are the Law Society, the Bar Council, the Master of the Faculties, the Chartered Institute of Legal Executives, the Council for Licensed Conveyancers, the Chartered Institute of Patent Attorneys, the Institute of Trade Mark Attorneys, the Association of Costs Lawyers and the Institute of Chartered Accountants in England and Wales

    In addition, the Institute of Chartered Accountants of Scotland and the Association of Chartered Certified Accountants are listed as approved regulators in relation only to reserved probate activities.

  5. As at 1 April 2014, the legal profession comprised 138,243 solicitors, 326 alternative business structures, 15,279 barristers, 7,927 chartered legal executives and 5,404 other individuals operating in other areas of the legal profession such as conveyancing. The sector was valued at £29.2 billion in 2013 (total turnover).