ICAEW denied reserved legal services application

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The ICAEW has been left considering its next steps after the lord chancellor and secretary of state for justice, David Lidington unexpectedly rejected the Institute's application to offer reserved legal services.

Explaining his reasons in a letter to the ICAEW’s chief executive Michael Izza, Lidington expressed concerns about the Institutes’ proposed governance arrangements and independence. 

The lord chancellor revealed that the lord chief justice “strongly opposed” the application and said the ICAEW’s intention to become an approved regulator was “premature” as it did not intend to offer qualifications immediately.

Lidington added that it is not in the public’s interest for an organisation providing these services to be regulated by a separate regulator “to the entity that they worked within”. Such an approach, he said, not only adds complexity to the regulatory landscape but could lead to “consumer confusion”.

ICAEW ‘disappointed’ by the decision

In a statement Duncan Wiggetts, ICAEW’s executive director of professional standards, said: “We are very disappointed at the lord chancellor’s unprecedented decision and struggle to understand the basis on which he has reached it.”

When the ICAEW’s Peter James spoke with AccountingWEB shortly after the legal services board recommended the ICAEW’s application to be a regulator on 23 June, the feeling was that a green light was a foregone conclusion.

At the time, James expected the reserved services would recoup work firms may lose due to tax digitalisation. The ICAEW’s scope for its reserved legal services regulation centred around taxation services.

But the lord chancellor raised concerns that such limitations would “add complexity to the regulatory landscape”, which would not be in the consumer’s interest. There were questions raised about the material distinction between the tax work which accountancy firms may currently undertake and the additional reserved legal activities they seek to undertake.

“It is one thing for accountancy practices to be an expert in taxation, but quite another to be proficient in the conduct or criminal litigation in courts,” Lidington concluded.

The lord chancellor also noted concerns from two professional bodies which represent the notarial profession.

Decision does not ‘seize the opportunity’

Disagreeing with the verdict, Wiggetts argued that the legal services board encouraged the Institute’s application and recommended it to the lord chancellor: “The decision also cuts across the recommendations of the Competition and Market Authority who, in its market study in 2016, had found that competition in legal services for individual consumers and small businesses was not working well and had indicated their support for the application.”

Wiggetts accused the lord chancellor and ministry of justice of not seizing this opportunity “to liberalise and regulate the market for legal services in England and Wales, to encourage more competition and to create better options for the consumer”.

However, Lidington closed the letter with a glimmer of hope for the ICAEW: “I believe that it is extremely important that regulation should be, and should also be seen and understood to be, sufficiently separate from any representative functions.

“I am of that before any extension of the ICAEW’s legal services regulatory work can be agreed, this and each of the other issues highlighted need to be fully addressed.”  

Back to the drawing board

Commenting on the decision Debbie Farman, Jordans corporate law's managing director, said that although this setback means the ICAEW will have to go back to the drawing board, the lord chancellor has given the Institute a clear indication where the failings in its original application are.

In terms of the ICAEW showing independence from its main board and governing council, Farman said: “It may well be that they have to work alongside another legal services regulator or look at an element of independence but has the inclusion of individuals revered in the legal profession that can see the benefits of having a regulator in this field as an alternative.”

However, Farman commented that an interesting point is the lord chancellor pushing back on the ICAEW not actively promoting its probate regulation outside the profession, which shows a lack of public and consumer interest.

On the lord chancellor saying the application is premature, Farman said: “That's a slightly unfair argument because you wouldn't want to start practices in an area where you haven't got a licence yet.”

About Richard Hattersley

Richard is AccountingWEB's practice correspondent. If you have any comments or suggestions for us get in touch.

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26th Sep 2017 10:11

This is a great shame. I was looking forward to the opening up of notarial services outside the current two bodies. On the occasions that we require notarial services it's very expensive, quite often overkill - and it's quite hard to get hold of a good local notary at times when it's convenient. All for something that a qualified chartered accountant should be able to provide with adequate training.

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26th Sep 2017 10:19

LCJ 'strongly opposed' now there's a surprise...... I have recently been involved in a small claims case where the costs are upwards of £80k and eventually my client won and very unusually got costs. This debacle was entirely down to the incompetence of the judge / recorders and the opposing parties deceitful lawyers ITS TIME FOR A BIT OF COMPETITION

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26th Sep 2017 10:57

I am afraid I would agree with the decision. I am an accountant and have taken cases as a Mackenzie friend for no remuneration. I think a lot of chartered accountants would struggle to come to terms with the issues of litigation. To be disappointed with the decision is like saying, well I am an accountant, so I can be a brain surgeon. Accountants don't understand the legal process and I am saying that as someone who has a legal qualification as well as my accounting degree.

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to Donald6000
26th Sep 2017 11:10

its not all services just certain ones isnt it?

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to carnmores
26th Sep 2017 16:34

I am not going to waste words on this; it is a fact that Chartered Accountants are not legally qualified, whether for weddings or barmitzvahs. Either that, or I will go and practise as a judge for two or three days a week; on the basis of what you have just said, no-one will notice.

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26th Sep 2017 11:02

Farman said: “That's a slightly unfair argument because you wouldn't want to start practices in an area where you haven't got a license yet.”
I assume he meant 'licence' not 'license'!

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to tim hervey
26th Sep 2017 11:40

Thanks for that Tim, that grammatical snafu has been updated now.

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29th Sep 2017 09:07

Phew..... The ICAEW would not investigate my concerns with an accountant who had a Fiduciary Duty of Care as an executor. I cant see them being any more vigilant if their powers of accessing other peoples money was increased.

Mr Wiggets (above said) “We are very disappointed at the lord chancellor’s unprecedented decision and struggle to understand the basis on which he has reached it.”

Indeed I wrote to Duncan Wiggetts requesting independent review of my concerns and the matter (one issue being that the accountant did not even provide an invoice for over £10,000 that he withdrew from my fathers estate.) I was passed onto someone else and was told that the 'independent' panel was only 50% 'independent'. Ultimately (and now, to us after prior communications, unsurprisingly) their conclusion was 'We have decided not to investigate'.

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