Law Society of Scotland consultation on Entity Regulation and Charging

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The SLCC welcomes the Law Society of Scotland’s consultation on entity regulation and charging. 

 Our experience, as the gateway for all legal complaints in Scotland, confirms that very often risk sits at the entity level rather than with individual practitioners.  Consumers may not always make a distinction between the conduct of an individual practitioner and that of a firm - the way we deal with complaints about inadequate professional service reflects this.  Additionally, the 2010 Legal Services (Scotland) Act laid the grounds for a more diverse legal services environment; the introduction of entity regulation and charging would appear to rest more comfortably with anticipated of alternative business models.

 As section 4.4 of the Nova Scotia Barrister’s Association report acknowledges, legal entities have cultures that impact on the behaviour of individual practitioners.  In order to have successful, client-focussed businesses getting the culture right is essential. 

 As the consultation explained, several areas of the Society’s work are already carried out at an entity level so the principle of regulation at this level is already established.  Support will be needed however, to assist firms in making the transition.

 In order make an entity based system work, there needs to be an individual tasked with responsibility for assessing and addressing risk and setting the right culture.  We have already said in our response to the Society’s consultation on the partnership training course that we think there is a role for a more professionalised client relations manager.  This individual should also be able to contribute to identifying and managing risks associated with client service and corporate culture.

 The overall regulatory burden on solicitors must be considered.  As we have said in our response to the consultation on outcomes focussed regulation, the existing regulatory commitments solicitors have should be reviewed. By lessening some of these, there is a great opportunity to unlock time and resource to underpin an organisational culture focussed on clients and good service which is a powerful driver of profitability.

 In particular, it is important to consider how the charging system might impact different sizes of practice.  Our research work has told us that smaller firms are far more likely to be involved in higher risk business areas, such as conveyancing and family law. One approach might be to change charging so that the parts of the market with higher risk, which demand more of the regulator’s resources, meet a greater share of paying for the resources. However, there is the contrary risk that this would put an increased burden on the resources of smaller firms, increasing the risk by lessening their ability to invest time and resources in mitigating risk and realising opportunity.  This is a complex question which we are also considering in how we approach the levy on the profession.

 We are in favour of a shift towards entity based regulation. It will encourage a regulatory approach which more closely maps client experience. It will recognise the critical role which entities can have in supporting or subverting a professional culture which prizes high standards of service and conduct.