Case for change
Why is change needed?
For a full explanation, please read the Case for Change.
This potential change is about the future.
In a nutshell, the Legal Services Act 2007 and the work of CILEx Regulation (CRL) have raised the status of CILEX professionals, allowing them to become partners, hold independent practice rights and set up their own regulated firms.
Last year saw the launch of a new route to qualification that, for the first time, integrates practice rights to create CILEX Lawyers who can carry out reserved activities independently as specialist practitioners from day one. Until now, Chartered Legal Executives have been required to undergo a further application and assessment process to obtain those rights.
However, the Legal Services Act also created a complex legal sector regulatory landscape. The number and variety of models involved in the regulation of legal services can be confusing for consumers and professionals alike, and has led to some potential difficulties that may not serve the consumer interest.
For many CILEX members, this stems from a lack of recognition of their role and regulated status and has introduced unnecessary barriers. For example, some institutions will only recognise solicitors as authorised persons to undertake certain tasks, when Chartered Legal Executives are also authorised.
CRL has limited resources – indeed, CILEX has had to subsidise its activities at various points. As such, it is constrained in its ability to invest the necessary time and activity in the significant amount of market engagement that is needed to establish confidence and assurance in the minds of consumers of legal services – both individuals and corporate.
There is limited growth in the number of CILEX practitioners and the entity regulation model has attracted fewer than 100 firms since CRL was first allowed to regulate entities in 2015. CILEX must therefore consider the continuing viability of CRL as an independent regulator. The cost of regulation through CRL is already higher for individuals than that paid by solicitors for example (currently £367 vs £306) and the cost of increasing CRL resources significantly would have to be passed onto CILEX practitioners and, in turn, consumers.
Why do you think SRA regulation could serve CILEX better?
The SRA is an obvious choice in order to meet the demands of the modern legal services market as it has the scale and the reach to provide effective independent and financially sustainable regulation for our members.
It sets clear standards for those that it regulates and all who work in SRA-regulated firms. Around 70% of CILEX members work in SRA-regulated firms and are therefore already regulated by the SRA as well as by CRL. CILEX standards are already closely aligned to those of the SRA.
Importantly, bringing the regulation of CILEX members into the SRA would create the opportunity to give clients and others real clarity and confidence that, regardless of who does the work, the outcomes will be of the same high quality. It is also in line with recommendations from the Competition and Markets Authority to make it easier for consumers to buy legal services.
How would this move benefit consumers?
A revised model of independent regulation that retains the distinct identity of CILEX Lawyers, Chartered Legal Executives, CILEX Paralegals and CILEX Advanced Paralegals but sees them regulated by the SRA alongside solicitors, would give clients and others real clarity and confidence that regardless of who does the work, the outcomes will be the of the same high quality.
Preservation of the distinct CILEX route to qualification would be key to continuing to ensure that the legal profession continues to benefit from a high-quality education pathway that allows those, particularly from socially and economically disadvantaged backgrounds, or for whom traditional legal education has not been an option, to qualify as specialist lawyers and practice with equality alongside solicitors who qualify as generalists and specialise after qualification.
How would such a transfer benefit CILEX members?
The SRA has the scale and the reach to provide a financially sustainable model of effective independent regulation for CILEX members. Around 70% of CILEX practitioners work in SRA regulated firms and are therefore already effectively regulated by the SRA as well as by CRL, and CILEX standards are closely aligned to those of the SRA.
Importantly, a model in which the SRA would regulate CILEX members alongside solicitors has the ability to bring greater clarity and confidence to the market and therefore consumers that, regardless of who does the work, the outcomes will be the of the same high quality.
The opportunity to create a clear presence on the SRA website and through its registers would improve CILEX member visibility and raise awareness and understanding of their work, supporting access to justice, the delivery of the regulatory objectives set out in the Legal Services Act and meeting recommendations from the CMA to make it easier for consumers to buy legal services.
Further, SRA regulation of CILEX members in addition to solicitors has the potential to help address an unintended consequence of the Legal Services Act, namely that the number and variety of models involved in the regulation of legal services can be confusing for consumers and professionals alike, and has led to some potential difficulties that may not serve the consumer interest. For example:
a) The exclusion of CRL-regulated firms from mortgage lender panels on the basis of being authorised by an alternative route
b) The exclusion of CILEX Lawyers and Chartered Legal Executives from acting as authorised persons by some institutions insisting on a ‘solicitor’ as the only acceptable lawyer
c) The exclusion of CILEX Lawyers and Chartered Legal Executives on the lists of authorised persons able to sign statutory instruments
d) Consumer hesitancy in taking services from a CILEX member as they ‘aren’t a solicitor’.
SRA regulation, if approved, would need to preserve the distinct route into legal practice that CILEX practitioners take. This is particularly valuable for people from a range of socially and economically disadvantaged backgrounds – complementing the commitment to removing barriers that is at the heart of the new Solicitors Qualifying Examination while ensuring CILEX members make their own specialist contribution to the provision of legal services.
Importantly, proposals would need to be on the basis of no cross-subsidy between CILEX practitioners and solicitors on the core cost of regulation, and CILEX practitioners would retain their titles.
Both solicitors and CILEX members would continue to have their own representative bodies – the Law Society of England and Wales and CILEX respectively, which will also continue to be Approved Regulators under the Legal Services Act.
What did Chris Kenny’s report say?
Chris Kenny’s report concluded that a review of CILEX’s delegated regulatory arrangement was justified. His report can be viewed here.
What was the brief given by CILEX to Chris Kenny?
The terms of reference for Chris Kenny’s review were:
– Provide independent assurance that there is a reasonable evidence base underpinning the decision by CILEX to review its delegation.
– Provide a mechanism for CRL to respond to CILEX’s consultation on the Case for Change via an independent third party, giving increased confidence to CRL that its evidence will be considered.
– To receive and review the evidence provided by CILEX in support of the conclusions captured in the Case for Change document.
– To receive and review evidence provided by CILEX Regulation Limited and advise the CILEX Board whether it is material to the conclusions captured in the Case for Change document.
– To produce a written statement advising the CILEX Board whether, having reviewed the evidence available as of June 2022, the Case for Change provides reasonable grounds for CILEX to seek to review its delegation.
His independent report including his statement summarising his conclusion can be found here.
How does CILEx Regulation perform against the SRA as a regulator?
The LSB’s most annual regulatory performance assessment was published in January 2023 and can be viewed here.
How does the review impact on current regulatory arrangements?
Both CILEX and CRL are committed to maintaining effective regulation and to ensuring any change is carefully managed. Regulation through CRL continues as usual through this period of review and CILEX members should continue to comply with the standards and requirements of the regulator including logging CPD and applying for practice rights authorisation.
Will a change in regulator affect my ability to qualify or change the status of my qualification?
No, a change is regulator will not adversely impact on anyone studying the CILEX route to qualification (legacy or the new CPQ) or anyone who holds an existing CILEX qualification.
CILEX is clear that any future model of delegated regulation must preserve the CILEX route to qualification and the distinct identity of CILEX Lawyers, CILEX Advanced Paralegals and CILEX Paralegals. CILEX membership will also be unaffected.span>
Would CILEX members be required to take the SQE instead of the CPQ?
No. In seeking a proposal from the SRA, the CILEX education route would need to be retained with CILEX members qualifying through CPQ.
A change of regulation would not affect the choice between CILEX CPQ and Solicitor Qualifying Examination as equally valid pathways to qualify as a lawyer.
How would you maintain the specialist nature of CILEX members?
The specialist nature of CILEX members is at the core of what we do.
This has been advanced further by changes last year to create the CILEX Professional Qualification, an integrated route to authorised person status with specialist practice rights.
Would members be required to relinquish their CILEX membership?
No. Any proposals would need to meet the requirement to be a CILEX member in order to be authorised and granted a practising certificate.
If a transfer is ultimately agreed, both solicitors and CILEX members would continue to have their own representative bodies – the Law Society of England and Wales and CILEX respectively, which would also continue to be Approved Regulators under the Legal Services Act.
Would the CILEX brand name eventually be dropped?
Absolutely not. We wish to build our brand, not drop it. CILEX has a long and proud heritage in the legal profession dating back over 100 years. In 2012, we received a Royal Charter.
In any future model of regulation, CILEX members would continue to be identified as CILEX Lawyers CILEX Advanced Paralegals and CILEX Paralegals by virtue of their ongoing CILEX membership status. The protected title of Chartered Legal Executive would be retained on the practising certificate issued by the regulator.
We believe that Solicitors and CILEX Lawyers being regulated by the same regulator offers a potential opportunity for greater transparency and clarity for consumers.
Having CILEX Lawyers and Chartered Legal Executives registered alongside Solicitors as authorised persons, with practice specialism, would make it clearer to both the public and employers that equality of status exists and would help identify the specialist nature of CILEX members’ authorisation.
What guarantees can you give members on PCF rates in future years?
CILEX has never made any guarantees regarding the practising fee. That is, and will remain, a matter for the independent regulator.
Would this potential move end up costing members more?
CILEX is committed to ensuring that CILEX members are not exposed to unreasonable cost.
The Legal Services Act, in requiring independent regulation, established a model whereby the practising certificate fee is set by the regulator. Currently, this is CRL but this responsibility would transfer to the SRA if it was to regulate CILEX members in future.
There is a requirement for all legal regulators to consult members each year when setting the fee, ahead of submission for approval by the LSB, and this would not change if CILEX decides to move regulation from CRL to the SRA.
Would SRA regulation be more stringent and more cumbersome for CILEX practitioners?
CILEX standards are already closely aligned to those of the SRA.
The regulatory framework reflects the status established within the Legal Services Act that CILEX Lawyers with practice rights can operate equally alongside solicitors as authorised persons, the only difference being the general or specialist scope of their practising certificate and their qualification route. We expect this to be preserved.
Would CILEX members eventually be expected to qualify as solicitors?
No. The specialist nature of CILEX members is at the core of what we do. This would not change if regulation were to transfer to the SRA.
This has been advanced further by changes last year to create the CILEX Professional Qualification (CPQ), an integrated route to authorised person status with specialist practice rights.
In a model where CILEX Lawyers are registered alongside solicitors as authorised persons, listed with practice specialism, it would be clearer to both the public and employers the equality of status that exists and the specialist nature of CILEX members’ authorisation.
Why did the LSB conduct an investigation and what did they find?
The circumstances surrounding the LSB’s decision to investigate and its findings can be found here.
Do you still intend to explore changing your delegated regulatory arrangements to the SRA?
Yes. The LSB has provided its determination confirming that CILEX has the power, in principle, to explore and give effect to alternative delegation arrangements to those currently in place through CRL. The LSB also confirmed it was satisfied that CILEX’s ‘case for change’ is compatible with regulatory objectives and public interest. CILEX intends to continue with its review and will continue to engage and seek to collaborate with CRL as the review progresses.
What is the process you are now taking in order to determine whether there will be a transfer of regulation?
On 2 February 2022, we informed the Legal Services Board (LSB) of our intention to undertake a review of our delegation.
Having considered the Case for Change and the assurance provided by the independent review of the evidence and analysis underpinning it by Chris Kenny, the CILEX Board have made the decision to engage in formal discussions with the SRA. The SRA will then need to develop proposals as to how it could regulate CILEX members.
CILEX will work with the SRA to determine the viability of a proposed model and if we then consider it to be feasible and in both the public interest and that of our members, we will run a member consultation on the impact and implications of the proposed change. We will also consider any proposals received from CRL regarding their regulatory model.
What is the earliest this change could come into effect?
If the CILEX Board ultimately approves a change, it would then require amendments to our Royal Charter as well as LSB approval.
So even if a change is sought and approved, nothing would happen immediately; and there will be no change this year.
Following publication of the LSB’s report, what happens next?
CILEX has agreed to pause its consideration of proposals received from the SRA for a period of eight weeks in order to allow CRL the opportunity to explore with the regulated community and stakeholders how it might seek to revise its own model of regulation.
The CILEX Board, at its meeting in July 2023, plans to consider proposals received and to determine whether to move to consultation with members and stakeholders on proposed changes to its model of delegated regulation.
As a result of the LSB’s investigation and its report findings, will you be making any changes to your approach?
CILEX intends to comply with all of the LSB’s recommendations and has already made changes to address the learning identified.
Why did CILEX use a Confidentiality Agreement when informing CRL of its plans to review its delegation?
When CILEX informed CRL of its proposed review in January 2022, CILEX asked the CRL Chair and CEO to sign a Confidentiality Agreement in order to allow discussions to progress in confidence without the risk of CRL staff and members being exposed to any unnecessary worry, uncertainty or inaccurate detail before a decision had been made on whether to explore an alternative regulator.
The intention was to facilitate input from the CRL Board and CEO in developing the public announcement, conducting an assessment of the risk of disruption to the regulatory regime and to enable joint management of staff communications. CRL were, under the terms of the agreement, permitted to seek to expand disclosure to named parties where CRL sought to do so, CILEX agreed.
What will happen if you can’t find an agreed way forward with CRL?
Both CILEX and CRL have committed to work collaboratively to progress the LSB’s recommendations through agreed undertakings and that is our focus. Work is already underway to develop an action plan that will deliver on the LSB’s recommendations.
In an email on 12 July 2022, CILEX Regulation questioned the lawfulness of CILEX’s ability to transfer regulation, and the legitimacy of the case for change. Should members be concerned?
The LSB’s investigation, published on 18 April 2023, found that: “CILEX has the power, in principle, to explore and give effect to alternative delegation arrangements to those currently in place through CRL. In particular, its proposals to redelegate its regulatory functions to the SRA are in principle compatible with both the Act and the IGR (subject to the proposals being implemented in a manner that is consistent with CILEX’s procedural obligations and in a manner that is otherwise consistent with principles of good decision-making in discharging public functions and ordinary principles of public law).” The full report can be found here.
In its statement of 19 July CRL referred to “CILEX’s rapidly deteriorating financial position”. Should members be concerned?
CILEX remains in a stable financial position with reserves of over £6m and property assets of £2.3m. Like most organisations our investments have been affected by market volatility related to the Ukraine/Russia War and our revenues impacted by COVID and economic uncertainty, however CILEX continues to operate on a fully viable basis.
Our assets have been built and are held to support the work of CILEX as a Professional Body and education provider. They are not available to subsidise the cost of regulation.
CILEX has ring-fenced additional reserves of £700k for the purpose of regulation. Since September 2021, CILEX has provided a further £250k by way of temporary underwriting to the Compensation Fund for CILEX Entities as CRL was unable to meet this commitment. In doing so CILEX has fulfilled its obligations under Section 30(3) of the Legal Services Act and in accordance with our Charter.
CILEX maintains that for independent regulation to be effective it must be sustainable without third-party subsidy and financial reliance. This is one of the considerations in our Case for Change.
How much will CILEX’s review of regulation cost?
CILEX will publish its audited accounts and financial statements for the year 1 January – 31 December 2022 for consideration by members as part of its 2023 AGM. This will allow members to see the budget provided for the review and any costs incurred.