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The end of the beginning

6 October 2010 brought us the Legal Ombudsman (LeO); 6 October 2011 brought us outcomes-focused regulation (OFR) and alternative business structures (ABS) – not yet regulated by the SRA but still a reality. While it is undeniable that times – and the provision of legal services – are changing, the real test of OFR and ABS is in how much and how well our regulators can adapt. The profession, as always, will react in one of four general ways: enthusiastic endorsement, resigned acceptance, panicked resistance and dogged ignorance.

The SRA is already implementing a restructure designed to move away from reactive regulation to proactive risk management. There will inevitably be teething problems, particularly as no one seems to know exactly how the new regime will work in practice. Firms will inevitably take different approaches and will have more interaction with the SRA than ever before. Reporting requirements alone throw up a myriad of possibilities. Some firms will report every tiny infraction, others will report nothing; most will fall somewhere in between given the inherently subjective nature of OFR.

It is the subjective nature of OFR which seems to be causing conceptual difficulties among some in the profession. There are increasingly demanding calls for guidance and support – or at least a credible explanation of how the SRA will deal with unintentional transgressions while the new regime beds in.

I am increasingly struck, in my dealings with the SRA, by the apparent lack of connection – or empathy – with high street firms. Having made a concerted effort to engage more with the City, it seems as though the tide has turned and there are now few among the senior members of the SRA who fully understand high street practice. I know that my concerns are felt deeply by some – perhaps many – in small high street practices. There are signs that some small firms believe that they have been left  to flounder in matters they feel ill equipped to deal with.

Playing catch up

This time last year, we were all wondering how LeO would cope with the demands of an unprecedented regime change. A year in and the chief ombudsman celebrated his anniversary by informing the Law Society’s compliance conference that his team had faced many challenges and were doing well but were still not as efficient as he would wish. Commendably honest but the thing that struck me during the question and answer session was that there were still those present who did not know that LeO cannot entertain complaints from businesses (other than micro-enterprises) and that it can deal with negligence matters. One would have thought, after a year of ‘signposting’, the profession would be well familiar with the limits of the LeO’s jurisdiction. It seems that the profession has not – yet – fully come to grips with last year’s regime change.

Sadly, the SRA did not use the opportunity presented by the new code of conduct to correct the requirement that all clients must be informed of their right to complain to LeO. Thus it remains that firms must tell clients of the right to complain irrespective of whether the client does have the right or not.

Interestingly, this is not the only problem with the code of conduct, already errors, omissions and unintended consequences have reared their heads and these are being looked at as they come to light. One can only hope that the SRA’s new approach is sufficiently flexible to allow it to admit and correct its own mistakes.

Facing the unknown is undoubtedly a challenge for regulators and regulated alike. There are no tried models for how the new regime will work – the profession is embarking on a huge experiment. Larger firms seem unconcerned by the prospect of increased regulatory interest – a view I am not sure I necessarily support; smaller firms are concerned about the future, more as a result of the perceived threat of ABS rather than OFR.

At present, there are no plans to introduce further acronyms next October. For now, we have reached the end of the beginning – the introduction of OFR and a new dawn for the SRA’s relationship with the profession. Although it is too soon to predict the outcome of the next chapter, I suspect we’re in for a bumpy ride.

Susanna Heley

This article was first published by Solicitors Journal and is reproduced by kind permission.


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