HOW MANY REGULATORS DO WE NEED?

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By Trevor Hellawell 

The LSB is currently undertaking a review of the various Regulators in the market – SRA, BSB, CLC, ICAEW, ICAS – in order to determine whether appropriate standards are being observed.

 

For a decade now we have had ‘competition between Regulators’, something which always mystified me.

 

Surely, in the interests of public protection of clients there cannot be a competition? Surely, protection is protection.

 

Competition would appear to be an open invitation to alter standards of entry, regulatory restraints, prescriptive rules and codes of conduct in order to weaken them, make them easier to comply with and ultimately, to reduce prices.

 

I acknowledge that Rules should be proportionate, not too prescriptive and not a barrier to innovation and development (and competition will help drive that), but there must then be some irreducible minimum below which a regulated ‘professional’ entity must not be allowed to drop.

 

That, as I understand it, is the point of the current review. The LSB is looking into the current rush amongst entities to look at alternative regulatory models as they strive to compete in a harsh market for legal services. Given that most things can be undertaken by pretty much anyone (unreserved activities can be carried out by accountants, banks, insurers, estate agents, local property shops and the like) the temptation to avoid the full rigour of SRA regulation (for example) is understandable.

 

To be able to provide property services without the tedium of the SRA’s requirements, PII insurance, accounts rules, legal professional privilege and the rest should allow firms more commercial freedom. The continued pressure from consumer groups, comparison websites and the CMA for clients to ‘shop around’ and for firms to publish their prices online all further press firms to reduce their fees further.

 

But, the enquiry asks, is this rush motivated by the firms’ commercial aims rather than by what is in the interests of the public and the clients?

 

True, the availability of insurance is a prerequisite for most regulators. Consumer protection is available in many guises. The ability to recover compensation for a poor service is also a given. Codes of Conduct are common. But, it is the duty of the regulated entity to make these distinctions clear to the client, so the client knows what their (reduced) fees are (not) paying for and what other stitch-ups may be hidden in the small print – witness the current debate around online estate agents, versus the high street, shop front version.

 

The vast plethora of regulators – all with subtly different requirements and protections – does not help the poor client who has to have all this explained to them. The client may not care too much anyway.

 

Is the time soon arriving where we can reduce the number of regulators to say two – one for the unreserved business sector and another for the reserved business sector? That way we can have a clear set of rules depending on the levels of protection clients want – a cheap and cheerful high street ‘property shop’ model, or a better-protected (if more expensive) high-end version. Competition is not always a good thing. Benevolent dictatorship anyone?

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