Public Bill Committee: 14th June 2007

238

Legal Services Bill [Lords], continued

Bridget Prentice

1

Clause  31,  page  15,  line  30,  leave out from ‘on’ to ‘and’ in line 31 and insert ‘one

or more of the regulatory objectives,’.

Members’ explanatory statement

This amendment reverses one made in the House of Lords which changed one of the conditions for

Board action so as to refer to the likelihood of an adverse impact on the regulatory objectives taken

as a whole, rather than on one or more of those objectives.

Bridget Prentice

2

Clause  32,  page  16,  line  14,  leave out from ‘have,’ to end of line 15 and insert ‘an

adverse impact on one or more of the regulatory objectives,’.

Members’ explanatory statement

This amendment reverses one made in the House of Lords which changed a condition for Board

action so as to refer to the likelihood of a significant adverse impact on the regulatory objectives

taken as a whole, rather than an adverse effect on one or more of those objectives.

Bridget Prentice

3

Clause  35,  page  17,  line  27,  leave out from ‘have,’ to ‘and’ in line 28 and insert ‘an

adverse impact on one or more of the regulatory objectives,’.

Members’ explanatory statement

This amendment reverses one made in the House of Lords which changed a condition for Board

action so as to refer to the likelihood of a significant adverse impact on the regulatory objectives

taken as a whole, rather than an adverse effect on one or more of those objectives.

Mr Henry Bellingham

Mr Jonathan Djanogly

Mr Tobias Ellwood

247

Clause  36,  page  18,  line  15,  at end add—

‘(4A)

As soon as practicable after deciding to publish a statement, the Board must give

notice to the approved regulator stating that it has reached that decision and

setting out the terms in which the statement is to be published; and the Board must

not publish the statement until after the expiry of 7 days beginning with the day

on which notice is given under this subsection.’.

Public Bill Committee: 14th June 2007

239

Legal Services Bill [Lords], continued

Simon Hughes

John Hemming

Mr Henry Bellingham

Mr Jonathan Djanogly

Mr Tobias Ellwood

225

Clause  37,  page  18,  line  30,  at end insert—

‘( )	The Board may not determine that it is appropriate to impose a penalty unless it

is satisfied that the matter cannot be adequately addressed by the Board

exercising the powers available to it under sections 31 to 36.’.

Members’ explanatory statement

To ensure that the Legal Services Board does not impose financial penalties where lesser sanctions

would suffice.

Mr Henry Bellingham

Mr Jonathan Djanogly

Mr Tobias Ellwood

248

Clause  39,  page  20,  line  3,  at end insert—

‘(da)

that the imposition of the penalty on any ground that would give rise to a

claim for judicial review.’.

Mr Henry Bellingham

Mr Jonathan Djanogly

Mr Tobias Ellwood

249

Clause  39,  page  20,  line  27,  leave out subsection (7).

Bridget Prentice

4

Clause  41,  page  21,  line  9,  leave out from ‘have,’ to ‘and’ in line 10 and insert ‘an

adverse impact on one or more of the regulatory objectives,’.

Members’ explanatory statement

This amendment reverses one made in the House of Lords which changed a condition for Board

action so as to refer to the likelihood of a significant adverse impact on the regulatory objectives

taken as a whole, rather than an adverse effect on one or more of those objectives.

Public Bill Committee: 14th June 2007

240

Legal Services Bill [Lords], continued

Bridget Prentice

5

Clause  45,  page  23,  line  29,  leave out from ‘have,’ to ‘and’ in line 30 and insert ‘an

adverse impact on one or more of the regulatory objectives,’.

Members’ explanatory statement

This amendment reverses one made in the House of Lords which changed a condition for Board

action so as to refer to the likelihood of a significant adverse impact on the regulatory objectives

taken as a whole, rather than an adverse effect on one or more of those objectives.

Mr Henry Bellingham

Mr Jonathan Djanogly

Mr Tobias Ellwood

250

Clause  47,  page  25,  line  27,  leave out subsection (5) and insert—

‘(5)	If the order which the Board intends to make differs from the draft published

under subsection (2) in a way which in the opinion of the Board is material, the

Board must, before making the order, publish the draft order along with a

statement detailing the changes made and the reasons for those changes.’.

Bridget Prentice

6

Clause  49,  page  27,  line  1,  leave out subsection (3) and insert—

‘( )	In preparing a statement of policy, the Board must have regard to the principle

that its principal role is the oversight of approved regulators.

( )	The statement of policy prepared under subsection (1) must—

(a)	take account of the desirability of resolving informally matters which

arise between the Board and an approved regulator, and

(b)	specify how, in exercising the functions mentioned in that subsection, the

Board will comply with the requirements of section 3(3) (regulatory

activities to be proportionate, consistent and targeted only at cases in

which action is needed, etc).’.

Members’ explanatory statement

This amendment replaces Clause 49(3), inserted by amendment in the House of Lords, with new

subsections setting out the matters that the Board must have regard to when preparing policy state­

ments pursuant to Clause 49(1) and (2) and imposing requirements as to the content of statements

under Clause 49(1).

Public Bill Committee: 14th June 2007

241

Legal Services Bill [Lords], continued

Mr Henry Bellingham

Mr Jonathan Djanogly

Mr Tobias Ellwood

251

Clause  51,  page  28,  line  4,  at end insert—

‘(2A)

Practising fee income shall be kept separate from the other assets of a regulator.’.

Mr Jonathan Djanogly

Mr Henry Bellingham

Mr Tobias Ellwood

258

Clause  54,  page  30,  line  21,  at end insert—

‘(1A)

An approved regulator must consider any request made by an external regulatory

body for the approved regulator to reconsider any provision made by its

regulatory arrangements on the grounds that the provision either—

(a)	conflicts with a requirement of a regulatory provision made by the

external regulatory body, or

(b)	unnecessarily duplicates any regulatory provision made by that external

regulator.’.

Members’ explanatory statement

This amendment would bring parity between the different forms of conflict an approved regulator

might face - either with external regulators or with approved regulators.

Mr Henry Bellingham

Mr Jonathan Djanogly

Mr Tobias Ellwood

252

Clause  54,  page  30,  line  27,  at end insert—

‘(2A)

An external regulatory body may make an application to an approved regulator

under this section if it considers that the arrangements of the approved

regulator—

(a)	frustrate the exercise of the external regulatory body’s requirements, or

(b)	conflict with the external regulatory body’s regulatory requirements, or

(c)	give rise to unnecessary duplication of regulatory requirements for the

subjects of the external regulatory body.

(2B)	For the purposes of subsection (2A)(c) above, “subjects” means any individuals

or entities subject to the regulatory powers and jurisdication of the external

regulator.

(2C)	Where an application is made to an approved regulator under this section, the

approved regulator must—

(a)	determine whether such regulatory conflict exists with the external

regulatory body’s requirements and, where it so determines, take such

steps as are reasonably practicable to address the regulatory conflict

outlined by the external regulatory body, or,

Public Bill Committee: 14th June 2007

242

Legal Services Bill [Lords], continued

(b)	in the absence of satisfactory resolution and where provisions for the

resolution of external regulatory conflict provide, make an application to

the Board under subsection (4).’.

Mr Henry Bellingham

Mr Jonathan Djanogly

Mr Tobias Ellwood

253

Clause  55,  page  31,  line  6,  at end insert—

‘(d)	shall give a reason and explanation for such notice.’.

Simon Hughes

John Hemming

Mr Henry Bellingham

Mr Jonathan Djanogly

Mr Tobias Ellwood

226

Clause  63,  page  35,  line  4,  at end insert ‘and, in either case, no other approved

regulator is suitable and willing to regulate the activity in question.’.

Members’ explanatory statement

To ensure that the Legal Services Board directly regulates the legal services only as a last resort,

where there is no other approved regulator which could regulate the activity in question.

Mr Jonathan Djanogly

Mr Henry Bellingham

Mr Tobias Ellwood

268

Clause  71,  page  41,  line  8,  at end insert ‘, provided that a body is not a “licensable

body” if the only managers who are non-authorised persons are individuals who do not

directly provide any services to consumers.’.

Members’ explanatory statement

To ensure that a law firm or LLP will not become an ABS solely because it wishes to appoint as

managers non-lawyer professionals. This will apply only if these appointees only provide services

to their firms internally and do not directly provide services to clients of the firm.

Bridget Prentice

111

Clause  72,  page  41,  line  10,  leave out subsections (1) and (2) and insert—

‘(1)	A body (“B”) is a licensable body if a non-authorised person—

Public Bill Committee: 14th June 2007

243

Legal Services Bill [Lords], continued

(a)	is a manager of B, or

(b)	has an interest in B.

(2)	A body (“B”) is also a licensable body if—

(a)	another body (“A”) is a manager of B, or has an interest in B, and

(b)	non-authorised persons are entitled to exercise, or control the exercise of,

at least 10% of the voting rights in A.

(2A)	For the purposes of this Act, a person has an interest in a body if—

(a)	the person holds shares in the body, or

(b)	the person is entitled to exercise, or control the exercise of, voting rights

in the body.

(2B)	A body may be licensable by virtue of both subsection (1) and subsection (2).

(2C)	For the purposes of this Act, a non-authorised person has an indirect interest in a

licensable body if the body is licensable by virtue of subsection (2) and the non-

authorised person is entitled to exercise, or control the exercise of, voting rights

in A.’.

Members’ explanatory statement

This amendment refines the definition of “licensable body”, by replacing the “interest in shares”

test with an “interest” test (sub-paragraph (1)(b)) and the test in subsection (2). Subsection (2A)

defines “interest”, and subsection (2C) defines non-authorised persons with an “indirect interest”

in a body licensable because of subsection (2).

Mr Jonathan Djanogly

Mr Henry Bellingham

Mr Tobias Ellwood

257

Clause  72,  page  41,  line  10,  leave out subsection (1) and insert—

‘(1)	For the purposes of this Act, a body is a “licensable body” if—

(a)	at least one manager of the body is an individual who is a non-authorised

person who provides services directly or indirectly to clients; or

(b)	more than 25 per cent. of the managers of the body are individuals who

are not authorised persons regardless of whether they provide services

directly or indirectly to clients; or

(c)	at least one person who has an interest in shares in the body is a non-

authorised person and is not a manager of that body.’.

Mr Jonathan Djanogly

Mr Henry Bellingham

Mr Tobias Ellwood

259

Clause  72,  page  41,  line  13,  at end insert—

‘(1A)

A body is not a licensable body if it is regulated under section 9(A) of the

Administration of Justice Act 1985.’.

Members’ explanatory statement

This purpose of this amendment is to enable Legal Disciplinary Practices to be regulated under

the Law Society’s ordinary regulatory regime providing at least three-quarters of their members

are lawyers, they do not have external ownership and, any non-lawyer partners or members do not

provide services direct to clients.

Public Bill Committee: 14th June 2007

244

Legal Services Bill [Lords], continued

Bridget Prentice

112

Clause  72,  page  41,  line  26,  at end insert ‘, and references to the holding of shares,

or to a shareholding, are to be construed accordingly.’.

Members’ explanatory statement

This amendment provides that references to the holding of shares or to a shareholding are to be

construed in accordance with the definition of “shares” in section 72(3).

Bridget Prentice

7

Clause  83,  page  48,  line  24,  leave out paragraph (e).

Members’ explanatory statement

This amendment reverses one made in the House of Lords requiring licensing rules to contain pro­

vision for specific attention to be paid to the likely effect on access to justice of each application

by a body to be licensed under Part 5 of the Bill.

Mr Jonathan Djanogly

Mr Henry Bellingham

Mr Tobias Ellwood

Simon Hughes

John Hemming

211

Schedule  11,  page  183,  line  8,  at end insert—

‘( )	Licensing rules may provide the fees to cover the whole cost to the licensing

authority of dealing with the application, whether the application is granted or

not.’.

Members’ explanatory statement

The amendment is intended to make it clear that licensing rules can put the whole cost of dealing

with an application on the individual applicant, rather than leaving part to be borne by the licens­

ing authority itself (and hence by other firms regulated by that licensing authority).

Bridget Prentice

134

Schedule  11,  page  189,  line  43,  leave out ‘an interest in shares in the body’ and

insert ‘a shareholding in the licensed body, or a parent undertaking of the licensed body,’.

Members’ explanatory statement

This amendment is related to amendment 162 and reflects the changes made to paragraph 38(1)(a)

of Schedule 13 by that amendment.

Bridget Prentice

135

Schedule  11,  page  189,  line  44,  at end insert—

‘( )	if the relevant licensing rules make the provision mentioned in

paragraph 38(1)(aa) of that Schedule, a non-authorised person has

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Revised 14 June 2007