News focus: CILEX's proposed divorce from its regulator

A report published on Tuesday this week by the profession’s oversight regulator, the Legal Services Board, revealedjaw-dropping details of a festering row between the representative body for legal executives and their regulator.

For instance, the chair and interim chief executive of CILEx Regulation were made to sign a non-disclosure agreement before CILEX revealed it might want to divorce its regulatory spouse and get hitched to the Solicitors Regulation Authority.

‘It is hard to avoid the conclusion that the confidentiality agreement was a serious misstep that reverberated long and loud over subsequent events,’ the LSB said.

A few months after their relationship problems became public, CILEx Regulation emailed CILEX on a Friday, outside business hours, with a consultation that it was planning to publish the following Monday. Proposals included CILEx Regulation thwarting the plan by replacing CILEX as the approved regulator for legal executives.

‘Failure to keep CILEX informed of the ongoing development and then planned publication of the consultation would be poor practice under normal circumstances,’ the LSB said.

As the standoff continues, the LSB’s report does two important  things.

First, it provides more clarity on the relationship between an approved regulator, the body to whom it has delegated its regulatory functions, and what the rules allow when one side wants a divorce. The LSB says an approved regulator retains the power, in principle, to revoke its delegation to a regulatory body and re-delegate its regulatory functions. So CILEX’s proposed defection to the SRA remains live. But the LSB adds: ‘The exercise of the power to revoke a delegation from a regulatory body by an approved regulator will be subject to approval by the LSB or ultimately subject to challenge in the courts.’

'Failure to keep CILEX informed of the ongoing development and then planned publication of the consultation would be poor practice under normal circumstances'

Legal Services Board

An approved regulator cannot initiate a divorce merely because its members complain that professional standards imposed by a regulator are too onerous, or that the practising certificate fee is too high. Acting on such complaints would be in breach of its overarching duty under governance rules.

Second, the report is a helpful guide on what to do in the event of a split.

For starters, NDAs are unwise. ‘On a matter of such sensitivity, it would have been important to create an atmosphere of trust from the outset, even if there were matters on which the parties disagreed,’ the LSB said.

In recommendations that could apply to any representative body, the LSB says that, should CILEX wish to explore alternative delegation models, it should do so ‘collaboratively and in cooperation’ with CILEx Regulation, including prompt notification as far as is practicable. Play nice, in other words.

In recommendations that could apply to any delegated regulator, the LSB says CILEx Regulation should engage ‘constructively and collaboratively’ with CILEX’s review of its delegation, carefully scrutinise whether its public communications will promote and protect the public interest, and provide CILEX with access to information relevant to the representative body’s proposals.

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