SRA: research is missed opportunity
The Solicitors Regulation Authority (SRA) has hit back over a report questioning why it introduced both entity and outcomes-focused regulation, saying it was acting in the interests of both consumers and lawyers.
Researchers commissioned by the Legal Services Board and Law Society said it had been a voluntary choice that had led to the creation of “a heavy-handed regulatory structure”.
They also said that the level of checks imposed by the SRA on new entrants to the profession could be stifling innovation for no benefit.
An SRA spokeswoman responded that the research – which was primarily on economic barriers to entry, exit and merger in the solicitors’ market – was “a missed opportunity”.
The regulator said its value was “significantly lessened by some factual inaccuracies and omissions” which could have been avoided if the researchers had “engaged properly” with the SRA during their work.
“For example, it confuses the statutory time limits for ABS applications with the time actually taken by the SRA to authorise new solicitor bodies. It also omits any reference to the LSB’s requirements on all approved regulators to adopt risk-based and outcomes-focused approaches to regulation. This is particularly surprising in a report which was commissioned by the LSB.
“In fact, the decision by the SRA to introduce risk-based outcomes-focused regulation was consistent both with regulatory best practice and the LSB’s requirements. Far more importantly it was in the interests of consumers and the diverse range of excellent firms operating in this market.”
By contrast, the spokeswoman argued, a rules-based, ‘one size fits all’ approach, is not in the interests of firms or consumers and is simply unsustainable.
“There is more for the SRA to do to unpick the highly prescriptive and costly rules-based systems it inherited from the Law Society, and the SRA will continue to complete that work. Unfortunately this research is of limited value to that important work.”
I’ve read the report. Some of the points it makes are valuable and interesting. I didn’t read it it as being quite as controversial as your stories suggest. For instance the central point about OFR seemed to me to be that sometimes outcomes may be appropriate and sometimes rules. This is not a new point but it is one which needs to be held in mind.
The real weight of the report was around criticising the SRA for thinking it is well placed to regulate small firms as businesses. An interesting and valuable point is made: does the SRA supervision of financial problems make them less likely. Aren’t small businesses under rather strong incentives not to go under anyway? What extra does the SRA effort in this area add?
Beyond that, the report was a modest look at the rule book from an economists perspective. It was done at a pretty general level (and in.fact often ends up saying the rules look broadly appropriate) and with a modest empirical base. Nothing wrong with that at all, but not a game changer.
The interesting thing about the whole thing is the rather thin skinned nature of the SRA response. It reminds me that the regulators actually have very little decent evidence of what works and does not work in regulatory terms. They are not alone in this. Many regulators don’t have the energy or resources to ask the fundamental question how does our activity affect behaviour? Shame that, but it won’t change overnight.