Tuesday, October 02, 2007

Lawyers may regulate accountants in opened legal services markets

Accountants might or might not be too upset there is a prospect they will be regulated by the Law Society of Scotland in the opened legal services market post Clementi.

After all, the Law Society see to do as bad a job at regulating complaints against solicitors as ICAS does against it's member accountants, so surely there can't be much change ?

The Herald reports :

Solicitors should regulate accountants under ‘Tesco Law’


Scotland's chartered accountants should submit to regulation by solicitors if they want to join fully-fledged multi-disciplinary partnerships (MDPs), one of the nation's most respected lawyers has proposed.

Douglas Connell, co-founder of private client advisers Turcan Connell, wants the Law Society of Scotland to assume regulatory oversight of MDPs if practice restrictions are eased.

Connell was speaking at Friday's landmark conference in Edinburgh, "The Public Interest - Delivering Scottish Legal Services", staged by the society to consider the introduction of so-called "Tesco Law" north of the border.

The society has pledged to produce draft policy proposals by the end of February, under pressure from both Justice Secretary Kenny MacAskill and competition watchdog the Office of Fair Trading. It remains unclear how far the society will be prepared to go to embrace Tesco Law - it has not appeared enthusiastic so far. Connell has been almost a lone voice in urging the removal of restrictive practices and the warm applause which followed his contribution suggests his blueprint for alternative business structures may turn out to be a favoured option.

Connell wants to see MDPs in which only up to one-third of partners could be non-lawyers. The latter would be subject to an "approved person" regime limiting access to professionals such as accountants, chartered surveyors and investment managers. The Law Society would be responsible for licensing and regulating these individuals as members of the MDP.

The non-lawyer partners would also have to sign up to society obligations on accepting joint and several liability in respect of the Scottish Solicitors' Guarantee Fund. The fund, to which Scottish solicitors contribute, compensates clients who have lost money through the dishonesty of a solicitor.

Connell's prescription is certain to raise eyebrows at the Institute of Chartered Accountants of Scotland, the world's oldest accounting body. Icas is unlikely to welcome a model which effectively renders it a second-division regulator subservient to another professional body in respect of policing the professional services business vehicles of the future.

Former society president Ruthven Gemmell, who now sits as a public interest member on the Icas council, suggested that bodies such as Icas would demand the right of co-regulation. Connell agreed, but without spelling out how this would work. "There will be individual issues to be sorted out. Co-regulation is entirely possible," said Connell.

He added: "Whether you want to call these vehicles MDPs or not, they could revitalise the provision of advi- sory services in many parts of Scotland. If we are supposed to be fleet-footed, let's get in and do it."

Connell's well-publicised enthusiasm for alternative business structures does not stretch to enabling law firms to seek external capital or sell out "to Tesco, Capita or a private equity house".

He added: "External capital comes at a price. Investors want shareholder value, dividend yield and most importantly an exit. I find that incompatible with the profession's core values."

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