The Future of Legal Services - Putting Consumers First
Comments from ACCA
January 2006
I write to convey the comments of the Association of Chartered Certified Accountants (ACCA) on the White Paper of the above title. ACCA is the leading international accountancy body, with over 320,000 members and students in 160 countries. We are recognised by law in the UK for the purposes of authorising members to act in the regulated areas of audit, investment business and insolvency.
While the White Paper focuses on the future regulation of the legal profession, we as accountants have a direct interest in at least one outcome of this process, namely the proposals with regard to Alternative Business Structures (ABSs), and in particular the scope they offer for multi-disciplinary partnerships (MDPs). Our comments in the following paragraphs focus on this aspect of the proposals.
Appeal of ABSs to accountants
The accountancy profession has by tradition been supportive of the concept of a one-stop shop for consumer financial services. In principle we remain of this view but consider that there are now a number of barriers in the way of widespread involvement of accountants in MDPs.
Firstly, there is the issue of the ‘control’ of firms engaged in statutory audit work. EU law now rules that, in order to be licensed to do this, a firm must be controlled by qualified auditors. The white paper envisages that the question of whether lawyers should or should not be in the majority should be addressed on a case by case basis by front line regulators when considering whether to licence an applicant ABS. Any firm which envisages carrying out audit work as an ABS will therefore require assurance from the new regulator to the effect that control of the firm by non-lawyers will be acceptable for registration purposes. The regulator should consider adopting a policy on this matter. If audit firms are to be accepted for ABS purposes, then the different regulators will also need to seek a basis of co-operation so as to prevent firms being effectively monitored by two different regulators.
Secondly, the white paper says that the Government does not intend to extend legal professional privilege (LPP) to include communications between a client and a non-lawyer member of an ABS firm. This will cause confusion in practice. If ABSs are to work effectively as units, there must be a level playing field between members of the firm. For example, in the case of a tax investigation, where advice is given to a client by a lawyer, it will benefit from LPP but it will not where it is given by an accountant. We suggest that, if a firm is registered as an ASB, the firm as a whole should benefit from LPP. We base this not only on practical considerations, but also on our view that LLP should be extended to all professionals where the subject matter of the work carried out by them is the same.
Interaction of regulatory authorities
The proposed new regulatory system anticipates that the new complaints handling body (the Office for Legal Complaints) will field consumer complaints about the activities of ABSs. The Office will then refer any specific complaints about misconduct to the front line regulator (most obviously the Law Society or Bar Council) which has licensed the ABS concerned to operate. Bodies like these will not be in a position to deal with specific complaints about the conduct of accountants or other non-legal professionals, so will have to refer them on to the individuals’ concerned professional body. For this reason, part of the ABS licensing procedure will have to provide for applicant directors, members or partners of an ABS firm to disclose the professional body to whose regulatory and disciplinary rules they are subject (this in itself will mean that all directors, members or partners will have to be natural persons).
Because, though, the front line regulator will be ultimately responsible for granting or withdrawing licences to practice as an ABS, there must also be provision in the system to require the non-legal professional’s professional body to report back on the findings of any investigation to the ABS licensing body, to be made available thereafter to the new oversight body. ACCA itself would have no difficulty in principle with sharing information in this way, provided information was shared between regulators on an equal basis. There will have to be memoranda of understanding put in place to govern this aspect.
Freedom of choice for consumers
The object of the white paper is presented as being to promote greater freedom of choice among consumers of legal services. The recent case of Agassi v Inland Revenue, however, highlighted the fact that solicitors and non-solicitors are still treated very differently by the law in crucial respects. The court in the aforementioned case reaffirmed that no costs in respect of anything done by a non-solicitor when acting as a solicitor are recoverable, either by him or by any other person (e.g. his client). This restriction even applies to a firm which is entitled to submit instructions direct to barristers under the Bar Council’s direct access scheme.
The direct access scheme was meant to provide access to advice at a reasonable cost to the consumer – insisting on the involvement of a solicitor just for the sake of it simply adds to costs. If the Government is truly minded to remove artificial barriers in the provision of legal services, it needs to address the privileged position of solicitors and their clients vis-a-vis other professionals when doing the same or similar work.