All together now: regulators want evidence to be admissable in each other's actions
A memorandum of understanding (MoU) between legal regulators and regulators and professional bodies in the financial, accountancy and property worlds whose members may be part of multi-disciplinary practices (MDPs) is close to agreement, it has emerged.
The draft MoU, which has been sent to the Legal Services Board as part of the Solicitors Regulation Authority’s alternative business structures (ABSs) licensing application, deals with five main issues: information sharing, co-ordinated oversight, protecting the financial interests of consumers, resolving regulatory conflict and transparency.
MDPs – a concept much debated in the profession during the 1990s before Enron brought it to a shuddering halt – are in essence a sub-category of ABSs.
The signatories to the MoU will be the five main legal regulators – the Solicitors Regulation Authority, Bar Standards Board, ILEX Professional Standards, Council for Licensed Conveyancers and Intellectual Property Regulation Board – and seven external regulators/professional bodies:
- 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 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 draft 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 of an entity or a person within it 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 application also includes a letter from the Lord Chief Justice, Lord Judge, on an earlier draft, in which he chided the SRA for seemingly eliding the protection and promotion of the consumer interest with improving access to justice, and for making little reference to protecting and promoting the public interest. These comments appear to have been taken on board in the final version.
Lord Judge also called on the SRA to ensure its new consumer affairs function consults more widely with stakeholders other than consumer representative groups – such as the judiciary and other regulatory bodies – and, on equality and diversity issues, with bodies not just representing solicitors, such as the Equality and Human Rights Commission. He also expresses surprise that the Association of Women Solicitors is not listed as a stakeholder with which the SRA has sought to build a strong relationship.
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