Oversight: memorandum assists cross-regulator co-operation
Twelve regulators and professional bodies from the legal, accountancy, financial and property sectors have finally signed a formal agreement aimed at co-ordinating the oversight of multi-disciplinary practices (MDPs).
The memorandum of understanding (MoU) has been in the works for a couple of years – a draft was submitted to the Legal Services Board in March 2011 – but was only signed on Wednesday.
It deals with five main issues arising from alternative business structures (including individuals within them) that are subject to more than one regulator or professional body: information sharing, co-ordinated oversight, protecting the financial interests of consumers, resolving regulatory conflict and transparency.
The signatories are the five main legal regulators – the Solicitors Regulation Authority (SRA), Bar Standards Board, ILEX Professional Standards, Council for Licensed Conveyancers and Intellectual Property Regulation Board – and seven external regulators/professional bodies.
These are the Financial Services Authority, the Law Society of Scotland, the Royal Institution of Chartered Surveyors, the National Federation of Property Professionals, the Institute of Chartered Accountants of Scotland, the Institute of Chartered Accountants of England and Wales, and the Ministry of Justice acting as the Claims Management Regulator.
The MoU – which is non-binding – has been put together by the MDP working group, made up of all these bodies (except the last one) as well as the Legal Services Board, the Legal Ombudsman, the Financial Ombudsman Service and Ombudsman Services: Property.
Regulatory conflict has long been identified as a particular issue that needs addressing to make MDPs work, and the MoU says various arrangements might be required to prevent these, such as further MoUs dealing with particular subjects in more detail and working groups to reduce inconsistency or uncertainty in regulatory obligations.
If a conflict occurs, the MoU suggests informal resolution mechanisms for procedural issues – such as disagreements over how investigations should be sequenced or co-ordinated – and formal mechanisms “for issues that create risk to consumers such as those that might otherwise cause delay in the processing or payment of compensation”.
Investigations will usually be undertaken or led by the regulator of the entity rather than any particular individual within it. When one of the regulators identifies that an investigation is desirable, it will endeavour to identify whether any other of the regulators has a “proper interest in the issues or persons to be investigated and, if so, discuss the proposed investigation with a view to agreeing whether one of the regulators or both should pursue an investigation”.
The MoU also calls on all those involved to ensure as far as possible that evidence obtained by one of the regulators should be admissible in actions taken by others.
The MoU will be useful where there is a synergy between two codes of conduct as this could lead to the MDP having to deal with only one regulator.
David Hackett, SRA regulatory policy manager, said: “Enhanced co-operation will help to deliver coherence to new organisations and avoid both regulatory conflict and gaps. We want a regulatory framework that avoids duplication and is transparent to the public on how issues are dealt with.
“The memorandum means we will be able to agree standard definitions on rules wherever practical, to help reduce inconsistent or duplicate regulation and thus reduce the cost of compliance. While different rules must necessarily apply across different professions, a common understanding of the cross over and the gaps between these is in everyone’s interests.”
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