SRA focus too narrowly on regulating in the public interest

Est. read time: 6 min

The Solicitors Journal published the following article on 13/03/2014

The Solicitors Regulation Authority’s narrow focus on regulating in the public interest has had a disproportionately adverse effect on BME firms, the author of a major review into allegations of regulatory discrimination has said.

The Independent Comparative Case Review, by diversity expert Professor Gus John, built on previous research by Lord Ouseley in 2008 and Pearn Kandola in 2010, both of which highlighted concerns that regulatory approach before the introduction of outcomes-focused regulation discriminated against black, ethnic and minority solicitors.

It cleared the SRA of discrimination against BME firms, but Professor John said these practices were nevertheless disproportionately affected by the regulator’s then approach to compliance and enforcement.

Talking to Solicitors Journal, Professor John said he was not surprised at the findings but that he did not expect “the wide disparities” the research had uncovered or “the extent to which SRAfocuses on regulation in the public interest, at the exclusion of other regulatory objectives of the Legal Services Act, especially promoting access to justice, promoting a diverse and competent legal profession”.

BLUNT INSTRUMENT

This degree of disproportionality was “a major issue in the context of the overall impact on the profession”, he said.

While the regulatory regime pre-OFR was not per se discriminatory, Professor John said it was applied like “a blunt instrument” which failed to take into account, in terms of actions and outcomes, the severity of the breaches or the context in which they arose.

This approach would be particularly harsh on sole practitioners and smaller firms, he said, with the SRA making demands for information to be produced and documents collated within “artificially tight timescales” with no evidence that this was justified in terms of client interest.

Yet, the professor said, failure to deliver these documents on time would be seen as a breach.

BME firms were also disproportionately affected because of their “structural location”, that is, the fact that most are clustered in the small practices or sole practitioner segment, where firms are notoriously more likely to be spending time on client files and chasing fees than on efficient management and compliance.

“BME firms will be more affected because they populate this area,” he said.

Even more “alarming”, he said, were findings in relation to capitalisation, with “a major gap” in relation to the number of years BME solicitors would start practice on their own compared with their white counterparts.

White solicitors set up on average 12 to 17 years after qualifying, much later than their BME counterparts, who tend to find it significantly more difficult to secure employment with a firm after qualifying and end up instead setting up their own business much sooner.

“They start up in practice prematurely, without the opportunity to be in a firm learning the dynamics of running a firm or the intricacies of practice,” Professor John said.

“For these lawyers, there is no external system for advice or hand-holding, which would come naturally if you’re part of a bigger firm.”

This lack of exposure to good practice and risk management in the early on was more likely to generate professional rule breaches later.

Q&A | PROFESSOR GUS JOHN
How do you address these issues in practice?

The Law Society as the representative body has a major role to play: if a section of your constituents is disproportionately affected by whatever practices, you have a responsibility to interrogate that and to consider what action may be appropriate. There is a need for advice to people who want to start a firm, capitalisation, financial probity. The Law Society offers a range of services but at present it has a very passive role; it needs to be more proactive and, for instance, look into the reasons for disproportionality, how we acknowledge that a large section is affected, what systems could be developed to eliminate risks and give people the tools to identify risk and take corrective measures.

Should the SRA change its approach to the assessment of BME firms?

Yes, but this also applies to its approach to all small firms generally. Breaches in that operational context can’t be looked at in the same way as in the top 100. The SRA has acknowledged that but it needs to review its approach to the regulation of small firms and sole practitioners, and take account of all nuances that make the situation of BME firms more challenging and make them an at-risk group.

How do you suggest SRA staff develop a new approach?

Supervisors need to be trained to be aware of the nuances. The more senior ones have wide discretion as to what measure an adjudicator should take in a given matter. It should also deal with stereotypes and unconscious bias – those are key issues, because these decisions affect people, their careers, their financial situation.

What do you do in relation to risk of bias?

Everybody from [SRA chief executive] Paul Philip down should be able to demonstrate equality and diversity competence but also have objectives around them, and meet both regulatory objectives in the Legal Services Act and in the Equality Act. At the moment, it’s not joined up. I recommend the Legal Services Board, the Law Society and the SRA get around a table and start a dialogue about what this means.

What should they talk about?

It’s not enough to say in any piece of communications by the SRA that they regulate in the public interest, it’s important they demonstrate how they do it, in particularly in the case of more minor breaches. Mortgage fraud is clear, but there are lots of grey areas where there is no obvious public interest. Often there is no justification for the SRA to put in the amount of resource to investigate minor breaches, for the level of sanctions, and the effect on the individual concerned.

Any chance the professional bodies will actually do anything?

Given the clear evidence in the report on how BME solicitors are affected and the wide disparity in terms of how the outcomes affect them – what this means for a diverse profession, the availability of training contracts etc – I would hope the connection will be made between that and the need to promote diversity in the profession. But it’s not just about the access stage, it’s also about how firms can retain BME solicitors who train with them.

The LSB and the Law Society could have some much more robust conversations with firms that show little evidence of diversity across their staff.

BME FIRMS IN NUMBERS

The review team looked at 160 case files opened between 2009 and 2011, half of which involved BME solicitors and half white solicitors.

The review found evidence of disproportionality at three stages: when the case is raised, during the investigation, and in the type of sanction.

While BME solicitors represent 13% of the total solicitor population, they account for 25% of new investigations, 29% of interventions, 33% of SDT referrals, and 32% of conditions attached to practising certificates.

The Solicitors Journal published the article above on 13/03/2014

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