Legal services regulation reform: consultation

Part 2: Regulatory models and landscape

A. The Potential Regulatory models

In seeking to build consensus, this paper contains additional alternative viable regulatory models to that proposed by the independent review and the resulting Roberton report.

The alternative models within this paper are aimed at delivering the outcomes aligned to the principles set out by the Roberton report, and as set out in Part 1 above, whilst also intending to meet the initial remit of the review.

The Scottish Government is of the view that the final regulatory model to be taken forward in primary legislation should deliver a regulatory framework which meets the following criteria:

• agile
• risk based
• efficient
• outcomes based

whilst also incorporating:

• a proactive focus continuous improvement and prevention of failures (which lead to complaints)
• proportionality
• and an increased focus on independence, accountability and transparency.

The Models

The first regulatory model and main focus of this consultation is that proposed by the independent review:

Option 1: Roberton Model

This landscape model is the primary recommendation of the independent Roberton review and is seen by the report as the optimum model for delivering accountability, transparency and proportionality. It encompasses all legal professions.

The Roberton report sets out that despite the Scottish jurisdiction being small, our regulatory structure is complex, inefficient and comparatively expensive with five main regulatory bodies for around 12,000 legal professionals. The Roberton report proposes that this new model would be cost effective and efficient.

In the proposed new model, a single independent regulator would be responsible for entry, standards, monitoring, complaints and redress in respect of the legal profession. In addition lead on work to prevent failure which lead to complaints, though continuous improvement and quality assurance. This would not be a one size fits all model; the arrangements for each of the professional areas would be designed to be appropriate and proportionate to the business carried out by those professional groups, and the level of risk to the consumer. It would also have an approval function on education, which would be developed in collaboration with the professional bodies who would have a key role in the development and delivering continuous professional development of their members.

Role of regulator and complaints body

A new single regulator would be established, independent of Government and those regulated.

The regulator would regulate all providers of legal services and licence all entities providing legal services to the public and corporate entities. Lawyers who do not provide legal services directly to consumers, or who have additional governance structures, such as advocates and in-house lawyers, may not be subject to entity regulation.

The regulator would act not only as regulator but also as the complaints handler and disciplinary body for solicitors, advocates, commercial attorneys etc., including any new entrants to the market.

The regulator would be able to seek approval to act as a regulator in other jurisdictions. It would assess and make recommendations to the Scottish Government and Financial Conduct Authority around the potential of future regulation of Claims Management Companies in Scotland. It would seek to assume the role of regulator of Anti-Money Laundering as well as the role of incidental financial business regime.

It would act as single gateway for complaints and redress as well as establish an independent arm's length disciplinary tribunal, with sufficient safeguards to protect the independence of the tribunal.

Proposed regulator functions

• Hold the register of all legal professionals
• Set requirements for entry, education and training – working with professional bodies
• Quality assure CPD, evaluation and monitoring – working with professional bodies
• Develop codes of conduct and service standards – working with professional bodies
• Regulate entities
• Review the scope of 'reserved activities' in Scotland
• Consider data sharing with other organisations in the Justice sector on the health of the system and meeting of professional standards for the purposes of quality assurance
• Handle all legal complaints and appeals
• Establish a disciplinary tribunal
• Develop a formal procedure on whistleblowing
• Manage the Professional Indemnity Insurance scheme
• Manage a Client Protection Fund to protect consumers against loss of value through dishonesty

Governance and Accountability

The independent regulator would be accountable to the Scottish Parliament and the legal character of the body set out in legislation. This would ensure that it would be able to fulfil its governance objectives in a clear, consistent and comparable way, leading to a simplified and more transparent landscape and promoting greater accountability. In addition it would be subject to scrutiny by Audit Scotland.

The Scottish Parliament Corporate Body would appoint the non-legal Chair of the Board to the new independent regulator through a public appointments process. That Chair could only be removed by a two-thirds majority of the Scottish Parliament.

The Board would be made up of an equal number of legal and non-legal members. Members would be appointed through the public appointments process; legal members potentially by the Lord President and non-legal members potentially by Scottish Ministers or other means. The Chief Executive would be appointed by and accountable to the new regulator's Board.

The independent regulator would lay an annual report before the Scottish Parliament each year.

Consumer Voice

The regulator would be required to ensure that it embedded a consumer voice in the organisation to provide advice, represent the views of consumers and organise research. This may be through a consumer panel or by asking Consumer Scotland to consider the sector. Views on this are sought at question 10.

Courts and the Lord President of the Court of Session

The role of the Courts and the Lord President would require to be set out in legislation in respect of the regulation of legal services. This would define their regulatory role in a consolidated and transparent way. The Courts and Lord President would retain a role in respect of the admission of individuals to the legal profession. Part 2 B of this consultation seeks further views on their role in the framework.

The professional bodies

The regulator would be required to work with professional bodies such as the Law Society Scotland, the Faculty of Advocates and the Association of Commercial Attorneys as well as any new organisation representing other professional groups. The regulator would be required to consult those bodies on proposed regulatory changes.

The professional bodies would be membership organisations representing the interests of their members. They would have a statutory footing in line with sections 1 and 2 of the Legal Services (Scotland) Act 2010, however these would be described as professional objectives rather than regulatory objectives.

Professional bodies would have a role in providing CPD (approved by the regulator), provide professional services and guidance, issue publications, and be able to seek to influence law reform.

Key points

All legal professionals would be regulated by a new independent body which would be accountable to the Scottish Parliament. All complaints relating to legal professionals would be handled by that body, replacing the SLCC.

That new body would be funded through a levy on those it regulated, with the intention that the cost to the legal profession be no more than the current regulatory framework.

The global regulatory fund may increase though the potential to regulate providers in other jurisdictions, along with the introduction of entity regulation and alternative business structures. In addition the intention would be that by reducing the complexity of the complaints system, as well as reduced duplicative administrative and support functions in relation to complaints (office accommodation, HR, finance, case management systems, IT, etc.) there may be potential for savings to the overall framework.

Current regulators, The Law Society of Scotland, The Faculty of Advocates, and The Association of Commercial Attorneys, would no longer have regulatory roles. Instead they would be invited to work with the new independent regulator as professional membership organisations.

Option 2: Market Regulator Model

Role of a market regulator and authorised regulators

In this regulatory model, an independent market regulator would oversee the work of the 'authorised regulators', each having distinct roles and purpose.

a. Market regulator role

A market regulator under this regulatory model would have three main roles:

Monitor the supply of legal services – Authorise the regulators of legal professionals, and to have the ability to act and make recommendations to counter geographic or subject specific areas where services are reduced or in decline.

Monitor risks within the sector – Have a broad regulatory tool-kit to counter and mitigate potential risks.

Act as economic regulator – Act impartially, aiming to align and balance the interests of the sector with the interests of consumers and corporate entities.

Proposed market regulator functions

• Licence / authorise regulators of legal services

• Set minimum entry, education and training standards
• Lead and have oversight of quality assure CPD, evaluation and monitoring
• Review reserved activities / definition of legal services, and make recommendations based on changes in the market.
• Assess and make recommendations around any future ability to regulate Claims Management Companies in Scotland.
• Consider data sharing with other organisations in the Justice sector on the health of the system and meeting of professional standards for the purposes of quality assurance
• Undertake or commission research on the legal services market
• Develop a formal procedure on whistleblowing

b. Authorised regulators (current regulators) role

Current regulators would continue to regulate their respective professions as they largely do now, as well as licence entities providing legal services to the public and corporate entities. Lawyers who do not provide legal services directly to consumers, or who have additional governance structures, such as advocates and in-house lawyers, may not be subject to entity regulation. Authorised regulators would be able to seek approval to regulate in other jurisdictions.

In addition where authorised regulators have responsibility in respect of Anti-Money Laundering matters and the incidental financial business regime in conjunction with the Financial Conduct Authority, this would continue.

Potential functions of authorised regulators

• Hold a register of their members (Data shared with market regulator and complaints body in line with GDPR)

• Set entry, education and training standards for their respective professions
• Provide and comply with quality assure, CPD, evaluation and monitoring, set by the market regulator
• Develop codes of conduct and service standards against criteria set out by market regulator
• Regulate entities
• Manage Professional Indemnity Insurance
• Manage a Client Protection Fund to protect consumers against loss of value through dishonesty

Governance and Accountability

a. Market Regulator role

An Independent Market Regulator would be accountable to the Scottish Parliament and the legal character set out in legislation. This would ensure that it would be able to fulfil its governance objectives within a clear, consistent and comparable way, leading to a simplified and more transparent landscape and promoting greater accountability.

Scottish Ministers would appoint the non-legal Chair of the Board for the Independent Market Regulator through a public appointments process. That Chair could only be removed by a two-thirds majority of the Scottish Parliament.

The Board would be made up of an equal number of legal and non-legal members. Members would be appointed through the public appointments process; legal members by the Lord President and non-legal members by Scottish Ministers or other means, shaped by this consultation. The Chief Executive would be appointed by and accountable to the Board.

b. Authorised regulators (current regulators) role

Each regulator would "host" an independent regulatory committee with functions set out in statute.

The Regulatory Committees would be strengthened in terms of their independence, and their ability to oversee regulatory functions. More detail is set out in Part 2 C of this consultation where views are sought on the role of Regulatory Committees in the framework.

Regulatory Committees would require to provide an annual report on the matters within their remit, to the market regulator, who would specify that remit.

Consumer Voice

The market regulator would be required to ensure that it embedded a consumer voice in the regulatory framework to provide advice, represent the views of consumers and organise research. This may be through a consumer panel or by asking Consumer Scotland to consider the sector. Views on this are sought at question 10.

Courts and the Lord President of the Court of Session

The role of the Courts and the Lord President would require to be set out in legislation in respect of the regulation of legal services. This would define their regulatory role in a consolidated and transparent way. The Courts and Lord President would retain a role in respect of the admission of individuals to the legal profession. Part 2 B of this consultation seeks further views on their role in the framework.

Complaints

The SLCC would remain in place. The complaints process would be informed by the responses to this consultation. The SLCC would have a complaints tool-kit available to it, allowing it to respond more proportionality and flexibility to the handling of complaints.

Key points

A new independent market regulator would be created which would sit over the current authorised regulators. It will be accountable to the Scottish Parliament.

The authorised regulators would retain many of their current functions. Each of the regulators would host an independent statutory regulatory committee which would be accountable to the independent market regulator, who in turn would be responsible for authorising each committee's regulatory functions.

A similar model currently operates in England and Wales by way of the Legal Services Board. The Legal Services Board is an oversight regulator and sits at the top of the regulatory system. It provides regulatory oversight of the ''approved regulators'' named in the Legal Services Act of 2007 as well as additional regulators added since that Act received Royal Assent. The work of the LSB is supported by a small team of 30 staff and nine Board members. It is thought that support proportionate to Scotland's legal profession under this model would require a very small staffing complement.

That new body would be funded through a levy on those it regulated with the costs intended to be no more than the current regulatory system in place in Scotland. The global regulatory fund may increase with the addition of entity regulation of alternative business structures, and associated levy income that would bring, plus the potential to regulate providers in other jurisdictions. There may be potential savings to the costs of the regulator in this model by reducing the complexity of the complaints system.

Difference to the primary recommendation of Option 1: Roberton model

A new independent market regulator would be created. It would oversee the existing regulatory/complaints framework rather than replace it.

Independent statutory regulatory committees within each authorised regulator would regulate each profession, rather than a single new body under Option 1.

A reorganised SLCC would continue to handle and oversee legal complaints.

Option 3: Enhanced accountability and transparency model

In this model, the current regulators would continue to regulate their respective professions. There would be a focus on enhanced accountability and transparency, and a simplification of the current framework.

Regulator(s)

This model would retain the current regulators: the Law Society of Scotland, Faculty of Advocates and Association of Commercial Attorneys. Legal complaints would continue to be handled by the SLCC.

Role of regulator

Those bodies would regulate their respective professionals as they do now. In addition licence entities providing legal services to the public and corporate entities. Lawyers who do not provide legal services directly to consumers, or who have additional governance structures, such as advocates and in-house lawyers, may not be subject to entity regulation. Regulators would be able to seek approval to regulate in other jurisdictions.

Where authorised regulators have responsibility in respect of Anti-Money Laundering and the incidental financial business regime in conjunction with the Financial Conduct Authority this would continue.

Proposed regulator functions

• Hold the register of their members
• Set entry, education and training standards
• Quality assure CPD, evaluation and monitoring
• Develop codes of conduct and service standards
• Regulate entities
• Manage Professional Indemnity Insurance
• Manage a Client Protection Fund to protect consumers against loss of value through dishonesty

Regulators would create a working group to:

• Assess and make recommendations to the Scottish Government and FCA, as to any future ability to regulate Claims Management Companies in Scotland
• Review reserved activities / definition of legal services, and make recommendations based on changes in the market.
• Consider data sharing with other organisations in the Justice sector on the health of the system and meeting of professional standards for the purposes of quality assurance
• Develop policy on whistleblowing

Governance and Accountability

Each regulator would "host" an independent regulatory committee with functions set out in statute.

The regulatory committees would be strengthened in terms of their independence, and their ability to oversee regulatory functions.

Regulators would have a statutory requirement to ensure that these regulatory committees are suitably resourced. Internal governance arrangements similar to those set out in section 27 of the 2010 Act are envisaged as being put in place.

Regulatory committees would provide an annual report to the Scottish Parliament on regulatory matters and have their remit approved by the Parliament. More detail is set out in Part 2 C of this consultation where views are sought on the role of regulatory committees in the framework.

Consumer Voice

The regulators would be required to ensure that they embed a consumer voice in their organisation to provide advice, represent the views of consumers and organise research. This may be through a joint consumer panel encompassing the sector, a requirement for consumer expertise within the regulatory committees, or by asking Consumer Scotland to consider the sector. Views on this are sought at question 10.

There is potential for Consumer Scotland to be a designated consumer body with power to raise a super-complaint in the legal sector in Scotland^[22],^[23].

Courts and the Lord President of the Court of Session

The role of the Courts and the Lord President would require to be set out in legislation in respect of the regulation of legal services. This would define their regulatory role in a consolidated and transparent way. The Courts and Lord President would retain a role in respect of the admission of individuals to the legal profession. Part 2 B of this consultation seeks further views on their role in the framework.

Complaints

The SLCC would remain in place. The complaints process would be informed by the responses to this consultation. The SLCC would have a complaints tool-kit available to it, allowing it to respond more proportionality and flexibility to the handling of complaints.

Key Points

No new organisation would be created – each of the current regulators would host an independent statutory regulatory committee which would be accountable to the Scottish Parliament. The SLCC would continue to handle legal services complaints.

The regulators and SLCC would be funded through a levy on those regulated with the costs intended to be no more than the current system. The global regulatory fund may increase with the addition of entity regulation of alternative business structures, and associated levy income that would bring, plus the potential to regulate providers in other jurisdictions. There may be potential savings to the costs of the regulator in this model by reducing the complexity of the complaints system.

Difference to the primary recommendation of Option 1: Roberton model

No new body would be created and the existing regulatory framework would remain with adjustments. Enhanced independent statutory regulatory committees within each professional body would regulate each profession, rather than a single new body.

Question 4

The primary recommendation of the Roberton report was that "There should be a single regulator for all providers of legal services in Scotland. It should be independent of both government and those it regulates. It should be responsible for the whole system of regulation including entry, standards and monitoring, complaints and redress. Regulation should cover individuals, entities and activities and the single regulator should be a body accountable to the Scottish Parliament and subject to scrutiny by Audit Scotland."

To what extent do you agree or disagree with this recommendation?

Strongly agree

Mostly agree

Mostly disagree

Strongly disagree

Please give reasons for your answer.

Question 5

Of the three regulatory models described above, which one would you prefer to see implemented?

• Option 1: Roberton Model
• Option 2: Market Regulator Model
• Option 3: Enhanced accountability and transparency model

Please give reasons for your answer.

Question 6

Of the three regulatory models described above, please rank them in the order you would most like to see implemented?

1 most liked to see implemented, and 3 least liked to see implemented

• Option 1: Roberton Model
• Option 2: Market Regulator Model
• Option 3: Enhanced accountability and transparency model

Please give reasons for your answer.

Question 7

Please rank in importance the aspects of regulation you would most like to see handled by professional regulatory bodies, through independent regulatory committees?

1 most liked to see handled and 3 least liked to see handled

• Education and entry
• Oversight of standards and conduct
• Complaints and redress

Please give reasons for your answer.

Question 8

Of the three models described above, please rank in importance the aspects of regulation you would most like to see handled by a body independent of, and external to the professional regulatory bodies, and of government?

1 most liked to see handled and 3 least liked to see handled

• Education and entry
• Oversight of standards and conduct
• Complaints and redress

Please give reasons for your answer.

Question 9

Under the Roberton Model, to what extent do you agree or disagree that the professional bodies should have a statutory footing?

Please give reasons for your answer.

Question 10

Which of the following methods do you think the final regulatory model should utilise to embed a consumer voice?

• Seeking input from Consumer Scotland
• Through a consumer panel
• A requirement for consumer expertise within regulatory committees
• A combination (please specify)

Please give reasons for your answer.

Question 11

To what extent do you agree or disagree that Consumer Scotland should be give the power to make a Super-Complaint in respect of the regulation of legal services in Scotland?

• Mostly agree
• Strongly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

Question 12

To what extent do you agree or disagree that a baseline survey of legal services consumers in Scotland should be undertaken?

• Mostly agree
• Strongly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

B. The Role of the Lord President and the Court of Session

The Lord President of the Court of Session is the head of the Judiciary in Scotland. The Lord President has responsibilities in relation to the regulation of the legal professions and has a regulatory function in relation to the Scottish Legal Complaints Commission.

Section 34 of the Solicitors (Scotland) Act 1980 provides an overarching role for the Lord President in the regulation of solicitors and in relation to professional practice rules, conduct and discipline. The Lord President is responsible for the approval of regulatory changes, predominantly changes in practice rules. Rule changes cannot take effect unless approved by the Lord President after considering any objections the Lord President thinks relevant.

The Lord President must also approve all regulations relating to admission into the profession and can give direction to the keeping of the roll of solicitors; and has a role in arbitrating any disagreements between the Law Society of Scotland's Council and its independent Regulatory Committee.

In addition the Legal Services (Scotland) Act 2010 sets out aspects of regulation in relation to advocates^[24].

Advocates hold a public office to which they are admitted by the Court of Session. As is set out in the 2010 Act, only the Court of Session has the power to admit an individual to, or remove that individual from, the office of Advocate.

The 2010 Act provides that the Court of Session is responsible for prescribing the criteria and procedure for admission to (and removal from) office, and for regulating the professional practice, conduct and discipline of advocates. Those responsibilities are exercisable on the Court's behalf by the Lord President or the Faculty of Advocates in accordance with such provisions as the Court may make. Professional rules are, if made by the Faculty, of no effect unless and until they are approved by the Lord President. They cannot be revoked unless the Lord President has approved this action is to be taken.

Under the current regime, responsibility for the regulation of advocates is delegated by the Court to the Faculty of Advocates by the Act of Sederunt (Regulation of Advocates) 2011^[25]. It is open to the Court to make different provision for the regulation of advocates. The Lord President retains a role in connection with the Faculty's disciplinary procedures. In addition to his responsibility of approving the Faculty's disciplinary rules, it is also incumbent upon him to appoint the Chair to the Disciplinary Tribunal as set out by Section 96 of the Faculty of Advocates Disciplinary Rules 2019^[26].

The Lord President has a regulatory function in relation to the SLCC. The SLCC must consult with the Lord President on appointing members and on rule changes to practice and procedure. The Legal Profession and Legal Aid (Scotland) Act 2007 also sets out that the Lord President may, by written notice, remove the chairing member of the SLCC from office in certain circumstances^[27].

The Roberton report does not make specific recommendations in respect of the role of the Lord President but instead states that the legislative approach should make clear what role the Lord President and the Court have in the regulatory framework.

The responses to this consultation will shape Ministers' view as to the extent of both of these roles. If certain regulatory functions carried out by the Lord President were to cease they would require to transfer to another body. It is therefore possible that in the future the regulatory role of the Lord President may be different to the present role depending on the eventual model that is put in place following this consultation and any resulting reforms. It could vary from a solely consultative role, become something else or remain largely as it currently is.

The position in other jurisdictions

To illustrate the position in other jurisdictions the following examples set out regulatory models that provide for increased independence from the legal profession, whilst retaining the safeguards that the Court currently provides in Scotland. Firstly, independence is maintained through a degree of separation from the Judiciary in England and Wales, while secondly, in California, there is direct oversight by the Supreme Court.

England and Wales

In England and Wales, the Legal Services Board is an independent body responsible for overseeing the regulation of legal professionals. It is a non-departmental public body sponsored by the Ministry of Justice, created through the Legal Services Act 2007. The Legal Services Board is politically and financially independent of the Government. Costs are covered entirely by a levy on the approved regulators of the legal professions. Its overriding mandate is to ensure that regulation in the legal services sector is carried out in the public interest and that the interests of consumers are placed at the heart of the system. The Ministry of Justice is a ministerial department of the British Government headed by the Secretary of State for Justice and Lord Chancellor (a combined position).

The Lord Chancellor is a member of the UK Cabinet and, by law, is responsible for the efficient functioning and independence of the Courts. In 2005, there were a number of changes to the legal system in England and Wales and to the office of the Lord Chancellor. Formerly, the Lord Chancellor was also the presiding officer of the House of Lords, the head of the Judiciary in England and Wales and the presiding Judge of the Chancery Division of the High Court of Justice. However, the Constitutional Reform Act 2005 transferred these roles from the Lord Chancellor to the Lord Speaker, the Lord Chief Justice and the Chancellor of the High Court respectively.

The Lord Chief Justice of England and Wales is the Head of the Judiciary of England and Wales and the President of the Courts of England and Wales. The Legal Services Act 2007 sets out the role of the Lord Chief Justice in the regulatory framework. The Lord Chief Justice must give consent to the fees to be charged by relevant authorised persons in respect of the administration of an oath or the taking of an affidavit, as prescribed by the Lord Chancellor. Before appointing or removing an ordinary board member to the Legal Services Board, the Lord Chancellor must consult the Lord Chief Justice about the process for appointment of the member and about the person selected for appointment. The Legal Services Board must consult the Lord Chief Justice on applications to become an approved regulator, applications around designation of approved regulators as licensing authorities, and around the cancellation of designation as an approved regulator or to remove their licensing authority. The Lord Chief Justice must be consulted on the rules governing decisions by the Legal Services Board, alteration of reserved legal activities, and directions or interventions to approved regulators around procedure.

Schedule 4 of the Legal Services Act 2007 sets the approved regulators overseen by the Legal Services Board. The following extract sets out the position with regard to a few of the authorised regulators:

Profession

Solicitors

Representative body

Law Society of England and Wales

Regulatory body

Solicitors Regulation Authority

Reserved legal activities regulated

The exercise of right of audience

The conduct of litigation

Reserved instrument activities

Probate activities

The administration of oaths

Profession

Barristers

Representative body

General Council of the Bar

Regulatory body

Bar Standards Board

Reserved legal activities regulated

The exercise of right of audience

The conduct of litigation

Reserved instrument activities

Probate activities

The administration of oaths

Profession

Notaries

Representative body

Notaries Society

Regulatory body

Master of the Faculties

Reserved legal activities regulated

Reserved instrument activities

Probate activities

Notarial Activities

The administration of oaths

United States of America - State of California

As mentioned in the background to this consultation, the State Bar of California is California's official attorney licensing agency. It is responsible for managing the admission of lawyers to the practice of law, investigating complaints of professional misconduct, prescribing appropriate discipline, accepting attorney-member fees and financially distributing sums paid through attorney trust accounts to fund non-profit legal entities.

Unlike the position in England and Wales, the State Bar of California it is directly responsible to the Supreme Court of California. Its Trustees are appointed by the Supreme Court, the California Legislature and Governor of California. All attorney admissions and disbarments are issued as recommendations of the State Bar, which are then routinely ratified by the Supreme Court.

Question 13

To what extent do you agree or disagree with the Roberton report, that the legislative approach should make clear the role of the Lord President and the Court of Session in the regulatory framework?

Strongly agree

Mostly agree

Mostly disagree

Strongly disagree

Please give reasons for your answer.

Question 14

To what extent do you agree or disagree that the role of the Lord President and Court of Session in the regulatory framework in Scotland is important in safeguarding the independence of the legal profession?

Strongly agree

Mostly agree

Mostly disagree

Strongly disagree

Please give reasons for your answer.

Question 15

Should the Lord President and Court of Session have a 'consultative' role, or 'consent' role with regard to the following potential changes to the operation of any new regulatory framework?

• Changes to professional rules: practice rules, conduct and discipline?
• Changes in relation to complaints practice and procedure?
• New entrants to the market seeking to conduct of litigation and exercise right of audience?

Please give reasons for your answer

Question 16

To what extent do you agree or disagree that the Lord President should have a role in any new regulatory framework in arbitrating any disagreements between independent Regulatory Committees and the professional regulatory bodies?

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

Question 17

To what extent do you agree or disagree that the Lord President should have a role in the process of appointment of any new 'legal members' to relevant positions, such as regulatory committees, in any new regulatory framework?

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

C. Regulatory Committees

The Legal Services (Scotland) Act 2010^[28] amended the 1980 Act to establish the Regulatory Committee of the Law Society of Scotland. It is both independent of, and accountable to, the Council of the Law Society of Scotland. The Regulatory models set out under Options 2 and 3 in Part 2 A of this consultation, would require the Faulty and ACA to establish similar committees, as would any new regulatory entrants to the market.

The remit of such a Regulatory Committee would be to set, maintain and enforce standards in the interests of the public and the profession.

One of the stated purposes of the current Law Society Regulatory Committee as set out in section 3B(2)(b) of the 1980 Act^[29] is to achieve public confidence.

Section 3D of the 1980 Act also sets out how lack of agreement between the Regulatory Committee and the Law Society Council is to be dealt with. These issues are to go to arbitration and the outcome of that arbitration is binding^[30]. This function may be retained for Regulatory Committees in a future legal services regulatory framework. Views are sought on this at Question 16, in relation to the role of the Lord President.

At least 50% of the Law Society's Regulatory Committee membership^[31] must be non-legal members and the Chair of the Committee is appointed by that committee and must be drawn from the non-legal members.

Proposed new model for Regulatory Committees

Under model Option 1, the Roberton model, the existing Regulatory Committee functions would be absorbed into the new independent regulator.

Under model Options 2 and 3, the existing remit of Regulatory Committees would remain. However the Regulatory Committees would be fully independent of their host regulator with each regulator requiring to establish committees similar to that currently required of the Law Society of Scotland. Regulatory Committees would be required to lay an annual work plan and an annual report before the Market Regulator or Scottish Parliament (depending on the model option in operation). That plan and report would set out the regulatory business carried out in the previous year, the regulatory health of the legal profession and the strategic priorities for the year ahead. The Regulatory Committees would consult the host regulator and the Lord President on their work.

The terms of the working relationship between host regulator and the Regulatory Committee would be agreed through a Memorandum of Understanding (MOU) for periods of up to 5 years at a time and these MOUs would be published by the host regulator for the information of members and the public.

Appointments

Appointments to each Regulatory Committee would follow the current public appointments process in seeking increased independence.

Members of the Regulatory Committee would not be permitted to also be members of the host regulator's governance structure, for example Law Society Council members or Faculty office-bearers could not sit on their corresponding Regulatory Committees.

Interaction with Committees

A formal process for allocating issues to Regulatory Committees and the reporting process would form part of the MOUs which the Regulatory Committee, as the overarching committee, would have oversight of. This would ensure that the Regulatory Committee is fully engaged with and aware of the range of work undertaken by the regulators and their various committees and can consider whether there is a regulatory aspect to that work.

Administrative support

The Regulatory Committee would be supported by a staff who are involved in delivering the regulatory role and functions. These staff should not be involved in work to support, for example, the Law Society Council, this would provide for the independence of staff working for the Regulatory Committee, and ensure there is clear separation in the work of the Committee with a view to achieving public confidence.

Transparency and Accountability

The 'Freedom of Information International Review: Scope of Bodies Included^[32]' suggests that bodies who exercise administrative authority, including professional licensing and standard setting organisations, could be an area where the law could be extended to be subject to Freedom of Information. There may be potential for regulatory functions to be subject to requests under the Freedom of Information (Scotland) Act 2002.

The separation of regulatory and representative functions in England and Wales

The Legal Services Board (LSB) confirmed in July 2020 that the requirement for all nine approved regulators which it oversees to separate their regulatory and representative functions had been achieved^[33].

The requirement for the separation between regulatory and representative bodies was outlined in the LSB's revised internal governance rules (IGRs) in July 2019^[34] and accompanying statutory guidance^[35]. Approved regulators and regulatory bodies were given a maximum of 12 months to comply.

As a result of the new IGRs, the Institute of Chartered Accountants in England and Wales (ICAEW) has separated its legal services regulatory and representative functions formally for the first time. This was not required before the new IGRs came into effect.

In addition, the Law Society of England and Wales will establish the Solicitors Regulation Authority (SRA) as a separate company within the Law Society Group. This means that the SRA will join other regulatory bodies in being distinct legal entities.

Question 18

To what extent do you agree or disagree that regulatory committees, as described above, should be incorporated into any future regulatory framework?

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

Question 19

To what extent do you agree or disagree that Regulators should be required by statute to ensure that Regulatory Committees are suitably resourced, with a certain quota of persons being exclusively ring-fenced for dealing with regulation?

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

Question 20

To what extent do you agree or disagree that regulatory functions of Regulatory Committees should be subject to Freedom of Information legislation or requests?

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

D. Fitness to Practice

The Roberton report highlighted that currently Part 2 of the Admission as Solicitor (Scotland) Regulations 2011 sets out that someone may only be admitted to the Law Society of Scotland if "he is a fit and proper person to be a solicitor" and holds appropriate qualifications. There are a number of stages in a solicitor's career where they will be required to satisfy the fit and proper criteria:

• application for an Entrance Certificate
• admission to the Roll of Solicitors for the first time
• application for Restoration to the Roll of Solicitors at any time
• application for a Practising Certificate having not held one for 12 months or more

The Law Society of Scotland guidance^[36] sets out the indicators of whether a person is considered 'fit and proper' to be a solicitor and this includes such factors as personal integrity, lawful behaviour and financial probity.

The Faculty of Advocates Admission Regulations^[37] set out that a Solicitor who produces a certificate from the Law Society of Scotland to the effect that he has been actively engaged in practice as a Solicitor in Scotland for at least three years prior to the presentation of his Petition, and that he is a fit and proper person to be admitted to the Faculty, shall be exempt from certain other entry requirements as an advocate.

Before any person can become an intrant to the Faculty they must produce a certificate disclosing:

• any prior criminal convictions or outstanding criminal proceedings
• any complaints of professional misconduct or negligence which have been upheld against him or which are outstanding, and
• whether he has ever been declared bankrupt, or sequestrated or signed a Trust Deed for creditors, and the circumstances thereof

The applicant must also provide a reference regarding their fitness to hold the public office of advocate.

Any applicant found to be unfit to hold the office of advocate may be removed from the Roll of intrants by the Dean of the Faculty, subject to consultation with the Lord President and the Lord Justice-Clerk.

Separately, when considering the matter of ABS in England and Wales, the LSB's 'Alternative business structures: approaches to licensing' consultation paper in 2009 sets out that the Legal Services Act 2007 outlines that non-lawyer owners and managers of an Alternative Business Structure must be fit and proper according to the relevant fitness to practice requirements^[38].

Question 21

To what extent do you agree or disagree that the following aspects of 'fitness to practice' requirements or regulations are appropriate and working well in Scotland?

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

• content of the criteria

Answer

• frequency of career points where the criteria must be satisfied

Answer

• transparency and fairness in decision making

Answer

Question 22

Are there are any changes you would make to each aspect as set out in the previous question?

Please give reasons for your answer.

Question 23

To what extent do you agree or disagree that there should be a test to ensure that non-lawyer owners and managers of legal entities are fit and proper persons?

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

E. Legal Tech

The Roberton report highlighted that there are opportunities in the greater use of legal technology in the application of legal services in Scotland; the report's example referring to increasing access to justice^[39]. The review and report warned against the creation of barriers to new legal services founded on legal tech through over specification of regulation in legislation.

The regulatory sandbox concept originated in the United Kingdom as one element of Project Innovate, a program of the Financial Conduct Authority (FCA). Project Innovate was developed by the FCA to foster competition and growth in financial services by supporting both small and large businesses that are developing products and services that could genuinely improve consumers' experience and outcomes^[40].

Regulatory sandboxes typically involve temporary relaxations or adjustments of regulatory requirements to provide a "safe space" for start-ups or established companies to test new technology-based services in a live environment for a limited time, without having to undergo a full authorisation and licensing process.

A recent example of technology supporting legal services came about as a result of the Covid-19 global pandemic. In the Coronavirus (Scotland) (No.2) Act 2020^[41], the usual requirement for the physical presence of Scottish notaries public, solicitors and advocates was removed in specific circumstances for example where a document is to be signed in the presence of a notary public. This allowed for other methods such as live video connection to be utilised during the course of the pandemic when physical distancing was required but also to facilitate the continuing provision of some notary public services when they otherwise would have had to cease during this emergency period.

Question 24

To what extent do you agree or disagree that Legal Tech should be included within the definition of 'legal services'.

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

Question 25

To what extent do you agree or disagree that those who facilitate and provide Legal Tech legal services should be included within the regulatory framework if they are not so already. If so how might this operate if the source is outside our jurisdiction?

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

Question 26

To what extent do you agree or disagree that, not including legal tech may narrow the scope of regulation, and reduce protection of consumers?

Please give reasons for your answer.

Question 27

To what extent do you agree or disagree that the inclusion of legal tech in a regulatory framework assists in the strength, sustainability and flexibility of regulation of legal services?

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

Question 28

To what extent do you agree or disagree that the Scottish regulatory framework should allow for the use of Regulatory Sandboxes to promote innovation?

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

F. Client Protection Fund (Guarantee Fund)

The Client Protection Fund is the operating name of the Scottish Solicitors' Guarantee Fund and is a statutory Fund^[42] to "make grants in order to compensate persons who suffer a pecuniary loss by reason of dishonesty" on the part of a solicitor, an employee of a solicitor, a registered foreign lawyer or a conveyancing/executory partner or employee.

The Fund is paid for entirely by solicitor firms without the use of taxpayer money from government.

The Client Protection Fund only provides protection to clients who use solicitors within legal firms or are sole practitioners regulated by the Law Society. It also includes circumstances where the solicitor or lawyer has since died or, after the dishonesty has taken place, has been struck off or suspended from practice.

The Client Protection Fund is a fund of last resort and in most cases will only compensate those who have exhausted all other options to recover their losses, including through civil proceedings. Unrecovered losses not notified within a year of coming to a client's attention will not normally be considered other than in exceptional cases.

Awards from the Fund are discretionary and are taken by the Law Society of Scotland's Regulatory Committee which is overseen by the SLCC. Consideration of applications and any awards are underpinned by rules and certain criteria and are limited to £1.25million.

The Roberton report suggested that the future operation of the Client Protection Fund should be transferred from the Law Society to the recommended new independent regulator.

Question 29

To what extent do you agree or disagree that the Client Protection Fund works well?

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.

Question 30

What, if any, changes should be made to the Fund?

• Strongly agree
• Mostly agree
• Mostly disagree
• Strongly disagree

Please give reasons for your answer.