Legal Services Bill [HL]

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Legal Services Bill [HL]

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
14

(2)
In this Act references to the “representative functions” of an approved
regulator are to any functions the approved regulator has in connection with
the representation, or promotion, of the interests of persons regulated by it.
General duties of approved regulators
28
Approved regulator’s duty to promote the regulatory objectives etc
5
(1)
In discharging its regulatory functions (whether in connection with a reserved
legal activity or otherwise) an approved regulator must comply with the
requirements of this section.
(2)
The approved regulator must, so far as is reasonably practicable, act in a way—
(a)
which is compatible with the regulatory objectives, and
10
(b)
which the approved regulator considers most appropriate for the
purpose of meeting those objectives.
(3)
The approved regulator must have regard to—
(a)
the principles under which regulatory activities should be transparent,
accountable, proportionate, consistent and targeted only at cases in
15
which action is needed, and
(b)
any other principle appearing to it to represent the best regulatory
practice.
Separation of regulatory and representative functions
29
Prohibition on the Board interfering with representative functions
20
(1)
Nothing in this Act authorises the Board to exercise its functions in relation to
any representative function of an approved regulator.
(2)
But subsection (1) does not prevent the Board exercising its functions for the
purpose of ensuring—
(a)
that the exercise of an approved regulator’s regulatory functions is not
25
prejudiced by its representative functions, and
(b)
that decisions relating to the exercise of an approved regulator’s
regulatory functions are, so far as reasonably practicable, taken
independently from decisions relating to the exercise of its
representative functions.
30
30
Rules relating to the exercise of regulatory functions
(1)
The Board must make rules (“internal governance rules”) setting out
requirements to be met by approved regulators for the purpose of ensuring—
(a)
that the exercise of an approved regulator’s regulatory functions is not
prejudiced by its representative functions, and
35
(b)
that decisions relating to the exercise of an approved regulator’s
regulatory functions are so far as reasonably practicable taken
independently from decisions relating to the exercise of its
representative functions.
(2)
The internal governance rules must require each approved regulator to have in
40
place arrangements which ensure—

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
15

(a)
that the persons involved in the exercise of its regulatory functions are,
in that capacity, able to make representations to, be consulted by and
enter into communications with the Board, the Consumer Panel, the
OLC and other approved regulators, and
(b)
that the exercise by those persons of those powers is not prejudiced by
5
the approved regulator’s representative functions and is, so far as
reasonably practicable, independent from the exercise of those
functions.
(3)
The internal governance rules must also require each approved regulator—
(a)
to take such steps as are reasonably practicable to ensure that it
10
provides such resources as are reasonably required for or in connection
with the exercise of its regulatory functions;
(b)
to make such provision as is necessary to enable persons involved in
the exercise of its regulatory functions to be able to notify the Board
where they consider that their independence or effectiveness is being
15
prejudiced.
(4)
The first set of rules under this section must be made before the day appointed
by the Lord Chancellor by order for the purposes of this section.
Performance targets
31
Performance targets and monitoring
20
(1)
The Board may—
(a)
set one or more performance targets relating to the performance by an
approved regulator of any of its regulatory functions, or
(b)
direct an approved regulator to set one or more performance targets
relating to the performance by the approved regulator of any of its
25
regulatory functions,

if the Board is satisfied that the conditions in subsection (2) are satisfied.
(2)
Those conditions are—
(a)
that an act or omission of the approved regulator (or a series of such
acts or omissions) has had, or is likely to have, an adverse impact on the
30
regulatory objectives taken as a whole, and
(b)
that, in all the circumstances of the case, it is appropriate to take the
action proposed under subsection (1).
(3)
A direction under subsection (1)(b) may impose conditions with which the
performance targets must conform.
35
(4)
If the Board proposes to take action under this section in respect of an
approved regulator it must give notice to the approved regulator—
(a)
describing the action it proposes to take,
(b)
specifying the acts or omissions to which the proposed action relates
and any other facts which, in the opinion of the Board, justify the taking
40
of that action, and
(c)
specifying the time (not being earlier than the end of the period of 28
days beginning with the day on which the notice is given) before which
representations with respect to that action may be made.
(5)
Before taking action under this section, the Board must consider any
45
representations which are duly made.

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
16

(6)
In exercising its regulatory functions, an approved regulator must seek to meet
any performance target set for or by it under this section.
(7)
The Board must publish any target set or direction given by it under this
section.
(8)
An approved regulator must publish any target set by it pursuant to a direction
5
under subsection (1)(b).
(9)
The Board may take such steps as it regards as appropriate to monitor the
extent to which any performance target set under this section is being, or has
been, met.
Directions
10
32
Directions
(1)
This section applies if the Board is satisfied—
(a)
that an act or omission of an approved regulator (or a series of such acts
or omissions) has had, or is likely to have, a significant adverse impact
on the regulatory objectives taken as a whole,
15
(b)
that an approved regulator has failed to comply with any requirement
imposed on it by or under this Act (including this section) or any other
enactment, or
(c)
that an approved regulator—
(i)
has failed to ensure that the exercise of its regulatory functions
20
is not prejudiced by any of its representative functions, or
(ii)
has failed to ensure that decisions relating to the exercise of its
regulatory functions are, so far as reasonably practicable, taken
independently from decisions relating to the exercise of its
representative functions.
25
(2)
If, in all the circumstances of the case, the Board is satisfied that it is
appropriate to do so, it may direct the approved regulator to take—
(a)
in a case within subsection (1)(a), such steps as the Board considers will
counter the adverse impact, mitigate its effect or prevent its occurrence
or recurrence;
30
(b)
in a case within subsection (1)(b) or (c), such steps as the Board
considers will remedy the failure, mitigate its effect or prevent its
recurrence.
(3)
A direction under subsection (2)—
(a)
may only require an approved regulator to take steps which it has
35
power to take;
(b)
may require an approved regulator to take steps with a view to the
modification of any part of its regulatory arrangements.
(4)
The Board may not exercise its powers under this section so as to give a
direction requiring an approved regulator to take steps in respect of a specific
40
disciplinary case or other specific regulatory proceedings (as opposed to all, or
a specified class of, such cases or proceedings).
(5)
For the purposes of this section a direction to take steps includes a direction
which requires an approved regulator to refrain from taking a particular
course of action.
45

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
17

(6)
The power to give a direction under this section is subject to any provision
made by or under any other enactment.
(7)
The Board may take such steps as it regards as appropriate to monitor the
extent to which a direction under this section is being, or has been, complied
with.
5
(8)
Where the Board revokes a direction under this section, it must—
(a)
give the approved regulator to whom the direction was given notice of
the revocation, and
(b)
publish that notice.
33
Directions: procedure
10
Schedule 7 makes provision about the procedure which must be complied with
before a direction is given under section 32.
34
Enforcement of directions
(1)
If at any time it appears to the Board that an approved regulator has failed to
comply with a direction given under section 32, the Board may make an
15
application to the High Court under this section.
(2)
If, on an application under this section, the High Court decides that the
approved regulator has failed to comply with the direction in question, it may
order the approved regulator to take such steps as the High Court directs for
securing that the direction is complied with.
20
(3)
This section is without prejudice to any other powers conferred on the Board
by this Part.
Censure
35
Public censure
(1)
This section applies if the Board is satisfied—
25
(a)
that an act or omission of an approved regulator (or a series of such acts
or omissions) has had, or is likely to have, a significant adverse impact
on the regulatory objectives taken as a whole, and
(b)
that, in all the circumstances of the case, it is appropriate to act under
this section.
30
(2)
The Board may publish a statement censuring the approved regulator for the
act or omission (or series of acts or omissions).
36
Public censure: procedure
(1)
If the Board proposes to publish a statement under section 35 in respect of an
approved regulator, it must give notice to the approved regulator—
35
(a)
stating that the Board proposes to publish such a statement and setting
out the terms of the proposed statement,
(b)
specifying the acts or omissions to which the proposed statement
relates, and

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
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(c)
specifying the time (not being earlier than the end of the period of 28
days beginning with the day on which the notice is given to the
approved regulator) before which representations with respect to the
proposed statement may be made.
(2)
Before publishing the statement, the Board must consider any representations
5
which are duly made.
(3)
Before varying any proposed statement set out in a notice under subsection
(1)(a), the Board must give notice to the approved regulator—
(a)
setting out the proposed variation and the reasons for it, and
(b)
specifying the time (not being earlier than the end of the period of 28
10
days beginning with the day on which the notice is given to the
approved regulator) before which representations with respect to the
proposed variation may be made.
(4)
Before varying the proposal, the Board must consider any representations
which are duly made.
15
Financial penalties
37
Financial penalties
(1)
This section applies if the Board is satisfied—
(a)
that an approved regulator has failed to comply with a requirement to
which this section applies, and
20
(b)
that, in all the circumstances of the case, it is appropriate to impose a
financial penalty on the approved regulator.
(2)
This section applies to any requirement imposed on the approved regulator—
(a)
by rules under section 30 (internal governance rules),
(b)
by a direction given under section 32 (Board directions), or
25
(c)
by section 51 (control of practising fees charged by approved
regulators) or by rules under that section.
(3)
The Board may impose a penalty, in respect of the failure, of such an amount
as it considers appropriate, but not exceeding the maximum amount
prescribed under subsection (4).
30
(4)
The Board must make rules prescribing the maximum amount of a penalty
which may be imposed under this section.
(5)
Rules may only be made under subsection (4) with the consent of the Lord
Chancellor.
(6)
A penalty under this section is payable to the Board.
35
(7)
In sections 38 to 40 references to a “penalty” are to a penalty under this section.
38
Financial penalties: procedure
(1)
If the Board proposes to impose a penalty on an approved regulator, it must
give notice to the approved regulator—
(a)
stating that the Board proposes to impose a penalty and the amount of
40
the penalty proposed to be imposed,
(b)
specifying the failure to which the proposed penalty relates,

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
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(c)
specifying the other facts which, in the Board’s opinion, justify the
imposition of a penalty and the amount of the penalty, and
(d)
specifying the time (not being earlier than the end of the period of 21
days beginning with the day on which the notice is published under
subsection (8)) before which representations with respect to the
5
proposed penalty may be made.
(2)
Before imposing a penalty on an approved regulator, the Board must consider
any representations which are duly made.
(3)
Where the Board proposes to vary the amount of a proposed penalty stated in
a notice under subsection (1)(a), the Board must give notice to the approved
10
regulator—
(a)
setting out the proposed variation and the reasons for it, and
(b)
specifying the time (not being earlier than the end of the period of 21
days beginning with the day on which the notice is published under
subsection (8)) before which representations with respect to the
15
proposed variation may be made.
(4)
Before varying the proposal, the Board must consider any representations
which are duly made.
(5)
As soon as practicable after imposing a penalty, the Board must give notice to
the approved regulator—
20
(a)
stating that it has imposed a penalty on the approved regulator and its
amount,
(b)
specifying the failure to which the penalty relates,
(c)
specifying the other facts which, in the Board’s opinion, justify the
imposition of the penalty and its amount, and
25
(d)
specifying a time (not being earlier than the end of the period of 3
months beginning with the day on which the notice is given to the
approved regulator), before which the penalty is required to be paid.
(6)
The approved regulator may, within the period of 21 days beginning with the
day on which it is given the notice under subsection (5), make an application
30
to the Board for it to specify different times by which different portions of the
penalty are to be paid.
(7)
If an application is made under subsection (6) in relation to a penalty, the
penalty is not required to be paid until the application has been determined.
(8)
The Board must publish any notice given under this section.
35
39
Appeals against financial penalties
(1)
An approved regulator on whom a penalty is imposed may appeal to the court
on one or more of the appeal grounds.
(2)
The appeal grounds are—
(a)
that the imposition of the penalty was not within the power of the
40
Board under section 37;
(b)
that any of the requirements of section 38 have not been complied with
in relation to the imposition of the penalty and the interests of the
approved regulator have been substantially prejudiced by the non-
compliance;
45
(c)
that the amount of the penalty is unreasonable;

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
20

(d)
that it was unreasonable of the Board to require the penalty imposed or
any portion of it to be paid by the time or times by which it was
required to be paid.
(3)
An appeal under subsection (1) must be made—
(a)
within the period of 3 months beginning with the day on which the
5
notice under section 38(5) is given to the approved regulator in respect
of the penalty, or
(b)
where the appeal relates to a decision of the Board on an application by
the approved regulator under section 38(6), within the period of 3
months beginning with the day on which the approved regulator is
10
notified of the decision.
(4)
On any such appeal, where the court considers it appropriate to do so in all the
circumstances of the case and is satisfied of one or more of the appeal grounds,
the court may—
(a)
quash the penalty,
15
(b)
substitute a penalty of such lesser amount as the court considers
appropriate, or
(c)
in the case of the appeal ground in subsection (2)(d), substitute for any
time imposed by the Board a different time or times.
(5)
Where the court substitutes a penalty of a lesser amount it may require the
20
payment of interest on the substituted penalty at such rate, and from such time,
as it considers just and equitable.
(6)
Where the court specifies as a time by which the penalty, or a portion of the
penalty, is to be paid a time before the determination of the appeal under this
section, it may require the payment of interest on the penalty, or portion, from
25
that time at such rate as it considers just and equitable.
(7)
Except as provided by this section, the validity of a penalty is not to be
questioned by any legal proceedings whatever.
(8)
In this section “the court” means the High Court.
40
Recovery of financial penalties
30
(1)
If the whole or any part of a penalty is not paid by the time by which it is
required to be paid, the unpaid balance from time to time carries interest at the
rate for the time being specified in section 17 of the Judgments Act 1838 (c. 110).
(2)
If an appeal is made under section 39 in relation to a penalty, the penalty is not
required to be paid until the appeal has been determined or withdrawn.
35
(3)
If the Board grants an application under subsection (6) of section 38 in relation
to a penalty but any portion of the penalty is not paid by the time specified in
relation to it by the Board under that subsection, the Board may where it
considers it appropriate require so much of the penalty as has not already been
paid to be paid immediately.
40
(4)
Where a penalty, or any portion of it, has not been paid by the time when it is
required to be paid and—
(a)
no appeal relating to the penalty has been made under section 39
during the period within which such an appeal can be made, or
(b)
an appeal has been made under that section and determined or
45
withdrawn,