Clause
98
Referral
of employees etc to appropriate
regulator
Question
proposed, That the clause stand part of the
Bill.
Simon
Hughes:
This clause is the first of a set of linked
clauses to which my comments are relevant, so I shall make my comments
substantively on this clause, but they apply to clauses 99 to 102 and
to schedule 14. That way, I need not trouble the Committee to debate
each of those measures.
I want to
make a straightforward, general point on behalf of the people whose
professional careers might be affected as a result of an investigation
and disciplinary sanction, such as the employees referred to in clause
98, the people who might be disqualified under clauses 99 and 100, and
the people who might be affected by a suspension or revocation of their
licence under clause 101 or by an intervention under clause
102 or schedule 14.
My experience
of dealing with the regime for people in the legal profession,
particularly solicitors, is that the most common type of complaint is
from members of the public who feel that a grievance has not been dealt
with adequately by the regulatory or complaints authorities. We shall
discuss the complaints mechanisms in part 6. However, complaints from
members of the profession have, periodically, been justified, such as
that the process is very slow, which means that they have had a cloud
hanging over them for a long time, and that the procedures are opaque,
which has denied them natural justice in putting their side of the
argument.
Whatever my
view or the views of other hon. Members about alternative business
structures, if we are to have some or all the systems, perhaps starting
with a pilot or delayed scheme before they are all introduced, we need
to ensure not only that the people who work within them can be dealt
with toughly and without any nonsense if they behave improperly, but
that the systems are reasonable.
The
structures set out in the clauses are fine. It is perfectly proper to
have a referral process about an individual employee and to have
disqualification, and it is important to publish lists of people who
have been disqualified, so that people do not find that they are
dealing with someone who is no longer eligible. It is also perfectly
proper for licences to be suspended or revoked and for there to be
interventions. None the less, there must be fairness on both sides.
Will the Minister assure us that the Government intend that the rules,
as they are set up by the Legal Services Board and as they apply down
the pyramid, will ensure that the new systems are better, fairer, more
transparent and more user-friendly both for the people who work in the
relevant businesses and for the consumers who buy the
services?
It has not
been a happy story. I can cite chapter and verse when it comes to
perfectly reasonable complaints from aggrieved practitioners who feel
that the system has not been fair to them. The greatest complaint on
both sides is delay. Customers say, “This is a ridiculously long
investigation,” and solicitors say, “It has
taken
ridiculously long for you to tell me whether I did anything
wrong.” It will be helpful if the Minister can assure me that
she understands the need for a system that is just on both sides and
better than the previous
one. 1.45
pm
The
Chairman:
Order. Before I invite the Minister to reply,
may I suggest that the hon. Member for Stafford take the place of the
Parliamentary Private Secretary so that if the Minister needs
information from her civil servants, they can legitimately pass it to
her via the Parliamentary Private Secretary, rather than
directly?
Bridget
Prentice:
Thank you, Sir Nicholas, for that clear
explanation of the quaint but important rules of Committee. It means
promotion for my hon. Friend the Member for Stafford, and rightly
so—[ Hon. Members: “Hear
hear.”]— a week early, in this case.
I need not
delay the Committee. The hon. Member for North Southwark and Bermondsey
is right. Fairness on both sides is crucial. The board and the approved
regulators must act fairly and proportionately, and that applies to
employees within the system as well as to consumers. Those working
within the system are consumers, too, but in a slightly different
sense. I can give him the assurance that the regulatory objectives and
the duties under clauses 3 and 28 should ensure that the board and the
authorities behave fairly towards everybody with whom they
interact.
Question
put and agreed
to.
Clause 98
ordered to stand part of the Bill.
Clauses 99 to 102 ordered to
stand part of the Bill.
Schedule
14
Licensing
authority’s powers of
intervention
Bridget
Prentice:
I beg to move amendment No. 184, in
schedule 14, page 214, line 35,
leave out paragraph
(b).
I shall be brief.
This is a technical amendment to delete wording that is superfluous
because its effect is achieved elsewhere in the schedule. In order to
make the provision outlined in paragraph 1 consistent with the same
provisions in schedules 16 and 17—in relation to the
intervention powers of both the Law Society and the Council for
Licensed Conveyancers—I have deleted paragraph 1(2)(b), because
that is covered by paragraph 1(2)(c), which relates to insolvency. It
is unnecessary to have both of them.
Mr.
David Burrowes (Enfield, Southgate) (Con): I appreciate
that this is a technical matter. However, whether it is technical or
substantive, it has to be right. I am concerned as to whether
sub-paragraph (2)(b) is indeed superfluous. The reason for my concern
stems from the definition of an insolvency event. For the purposes of
sub-paragraph (2), paragraph 1(3)(c)
states:
“an
administrative receiver within the meaning of section 251 of that Act
is appointed.”
I am concerned about the mention
of an administrative receiver. Such a receiver is used for a different
type of insolvency event from what the normal receiver would deal with,
as mentioned in sub-paragraph (2)(b). Is the Minister confident that
sub-paragraph (2)(b) is superfluous given that there is a distinction
as set out in paragraph
(3)?
Bridget
Prentice:
I hope that I can reassure the hon. Gentleman.
The phrase “a relevant insolvency event” covers the wider
aspect to which he is referring. The important thing about this
technical amendment is that it brings things into line with the Law
Society’s powers that are set out in relation to recognised
bodies as they are amended in paragraph 113 of schedule 16; I do not
want to be absolutely quoted on that. The measures under that schedule
make schedule 14 consistent with Law Society powers. I hope that that
gives the hon. Gentleman some
reassurance.
Schedule
14, as amended, agreed
to.
Clause 103
ordered to stand part of the
Bill.
Clause
104
Prevention
of regulatory conflict: accounts
rules
Robert
Neill (Bromley and Chislehurst) (Con): I beg to move
amendment No. 296, in clause 104, page 56, line 30, after
‘body’, insert
‘which is not licensed by the Law
Society’.
The
Chairman:
With this it will be convenient to discuss
amendment No. 297, in clause 104, page 56, line 33, after
‘body’, insert
‘which is not licensed by the
Council for Licensed
Conveyancers’.
Robert
Neill:
Thank you, Sir Nicholas. It is a pleasure to serve
under your chairmanship again.
The amendments are intended to
avoid ambiguity. They will give better and proper effect to the
intention behind the section, which is to prevent the regulatory
conflicts that can occur in relation to accounts. We think that the
regulatory system can be simplified without compromising public
protection, which is the principle behind the Bill.
The intention of the provisions
relating to alternative business structures is that the rules of the
licensing authority are for the business rather than for any
individuals who work in the ABS, and they should apply to all the
activities. That seems sensible. We do not have any quibble with that.
Clause 104 is intended to reinforce that by ensuring that the accounts
rules of the licensing authority apply rather than those of any
professional body to which particular members of the ABS may belong.
For example, a solicitor working in an ABS authorised by the Council
for Licensed Conveyancers would be subject to the accounts rules of the
CLC rather than the Law Society. We do not have any problem with
that.
The problem is
with the current wording. It seems to go too far, preventing either the
Solicitors Regulation Authority under its status as the Law
Society’s approved regulator or the CLC from adopting the most
sensible and pragmatic approach to regulation of alternative business
structures. The SRA, as a licensing authority, would wish to ensure so
far as possible that the same rules apply to all the legal services
businesses that it regulated, whether they were traditional solicitors
firms, legal disciplinary practices or ABSs. We accept that additional
regulation will be required for ABSs, but the core regulations should
be the same. That is the thrust of their concern, which is why they and
the Council for Licensed Conveyancers suggested the amendment. We
believe that it is
sensible.
Under the
Bill, a firm of solicitors would become an ABS by, for example, making
a finance director who was an accountant a partner of the firm.
However, the finance director might quite properly decide to move on,
perhaps having got a better offer elsewhere. The firm might replace him
with a lawyer rather than an another non-lawyer—but still
someone with the relevant expertise. At that point, it seems to us that
the firm would cease to be an ABS; it would resort to being a
“traditional” solicitors firm, although it could recruit
a third person, a finance director who was an accountant, and become an
ABS again. To have different sets of accounts rules applying to such a
firm does not seem sensible. It is a needless bureaucratic burden, and
it could cause extra cost and confusion—for the consumer as well
as for the firm.
The SRA is
concerned that clause 104 will notpermit the Law Society to
make identical rules under paragraph 20 of schedule 11 and sections 32
and 34 of the Solicitors Act 1974; yet that is what they would wish to
do, as it would overcome some of those difficulties. That is exactly
what concerns the Council for Licensed Conveyancers. If they were able
to do that, the problem would be resolved. We therefore hope that the
amendment commends itself to the Government, as it is intended to make
the Bill work better.
I hope, Sir Nicholas, that I
may make one more point on an important matter of principle. It is
convenient to make it now, and I hope that the Minister can reply to
all my questions in one go. The Bill provides for a distinct regulatory
regime for ABSs. That is sensible, as it allows for the creation of new
licensing authorities; and the Legal Services Board can become a
licensing authority if necessary and appropriate. Should an existing
approved regulator such as the SRA apply to become a licensing
authority, we anticipate that the application would be made on the
basis of the SRA using largely the same set of statutory powers that it
uses to regulate traditional solicitors firms and legal disciplinary
partnerships. That is sensible, as it would maintain a proportional
approach and avoid confusion. It would also avoid having gaps in the
regulatory framework—a risk that we all want to avoid.
It
would be for the Legal Services Board to decide whether to accept that
approach, but we understand that the discussions between the SRA and
the Ministry of Justice were on the basis that the Bill would allow the
SRA to make application in that way. It seems that the transitional
provisions set out in schedule 22 anticipate, at least in part, that
existing regulators might need to amend their statutory powers as part
of their application to become an ABS. I should be grateful if the
Minister
confirmed that our understanding, and that of the various professional
bodies, is correct. Such clarity would help everyone. For the reasons
that I have advanced, I hope also that the amendments commend
themselves to the Minister. 2
pm
Bridget
Prentice:
I hope that I can reassure the hon. Gentleman
that the SRA’s position is as he outlined his understanding of
it, thereby giving both him and the SRA some reassurance. The
amendments are intended to clarify whether the trumping effect of the
rules made under part 5, over existing rules applicable to solicitors
and licensed conveyancers, will operate only where those professionals
are working in bodies regulated by authorities other than the Law
Society and the Council for Licensed Conveyancers, and to determine
whether those rules do not attempt to alter the position of solicitors
and licensed conveyancers working in firms regulated by other
authorities.
I
understand the underlying objective, which is, as the hon. Gentleman
said, to avoid duplication through applying two different sets of
accounts rules to ABS and existing practices. I appreciate the
rationale behind that. Like the hon. Gentleman, I want to facilitate
efficiency where possible, and clause 104 is consistent with that; it
is intended to operate only to resolve situations where rules conflict,
putting a solicitor or licensed conveyancer in a difficult position. I
presume that, where the Law Society is the licensing authority for a
body, its rules would not create a conflict for a solicitor within that
body, and that the same would be true for the CLC and licensed
conveyancers. I am happy to consider whether we need to make any
further provision, just to reinforce that conflict-resolution
point.
I assure the
Committee that both the Law Society and the CLC will be able to apply
for orders under schedule 22 or to seek board recommendations under
clause 69 for amendments to their existing powers, so long as that does
not conflict with the requirements of part 5. I cannot go any further
than that at the moment and speculate about what the board might take
into account in its recommendations or what the Lord Chancellor might
decide. However, I hope that my remarks go some way towards reassuring
the hon. Gentleman, the Law Society and the CLC that I understand their
position.
Robert
Neill:
I am grateful to the Minister for replying to both
points that I made and for dealing constructively and helpfully with
the issue that we raised. It is clear that she, and those who advise
her, are well seized of those legitimate points, so on the basis of her
undertakings, I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Clause
104 ordered to stand part of the
Bill.
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