Introduction to legal services and regulation - Regulatory o...

Learning Outcomes

This article outlines the regulatory objectives and professional principles that underpin legal services regulation in England and Wales, including:

• Regulatory objectives in the Legal Services Act 2007
• Core professional principles for solicitors and other authorised persons
• Ethical conduct, public trust, and the proper administration of justice
• Balancing of objectives in regulatory practice
• Embedding of the professional principles in the SRA Standards and Regulations
• Oversight and enforcement mechanisms, including the Legal Services Board’s oversight role and SRA/SDT powers
• Consumer protection, competition, and the rule of law across reserved and non‑reserved legal activities

SQE1 Syllabus

For SQE1, you are required to understand the regulatory objectives and professional principles that govern legal services in England and Wales. These underpin the ethical and professional standards expected of solicitors and other regulated legal professionals, with a focus on the following syllabus points:

• the regulatory objectives set out in the Legal Services Act 2007
• the role of the Legal Services Board and approved regulators
• the professional principles required of authorised persons
• how these objectives and principles guide ethical legal practice and public confidence
• the relationship between regulatory objectives, professional principles, and the SRA Standards and Regulations
• how regulation applies across reserved and non‑reserved legal activities, including activity‑based authorisation under the Legal Services Act 2007
• the role of risk‑based, entity‑focused regulation and the distinction between conduct enforcement (SRA/SDT) and consumer redress (Legal Ombudsman)
• how transparency, complaints handling, anti‑money laundering controls and financial services restrictions align with the objectives and principles

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What are the eight regulatory objectives set out in the Legal Services Act 2007?
2. Which body oversees the regulation of legal services in England and Wales?
3. Name three professional principles that solicitors must follow in their practice.
4. True or false? The regulatory objectives only apply to solicitors, not to other regulated legal professionals.

Introduction

Legal services in England and Wales are regulated to protect the public, uphold the rule of law, and maintain high standards of professional conduct. The Legal Services Act 2007 introduced a set of regulatory objectives and professional principles that guide the work of solicitors and other authorised persons. Understanding these objectives and principles is essential for SQE1 and for ethical legal practice. Regulation is “activity‑based” (focusing on reserved legal activities such as rights of audience and conduct of litigation) but approved regulators also set and enforce standards across wider legal work. Modern regulation emphasises risk‑based supervision and entity regulation (regulating practices as well as individuals), overseen by the Legal Services Board (LSB). This framework is complemented by consumer redress through the Legal Ombudsman (LeO), and by statutory requirements such as anti‑money laundering controls, financial services restrictions, and transparency/complaints rules that collectively advance the statutory objectives.

Key Term: regulatory objectives
The statutory goals set out in the Legal Services Act 2007 that guide the regulation of legal services and the conduct of authorised persons.

Regulatory Objectives: The Basis of Legal Services Regulation

The Legal Services Act 2007 sets out eight regulatory objectives that apply to all approved regulators and the Legal Services Board. These objectives shape the regulation of legal services and guide the behaviour of solicitors and other authorised persons.

Key Term: Legal Services Board (LSB)
The statutory oversight regulator responsible for ensuring that approved regulators meet the regulatory objectives set out in the Legal Services Act 2007.

Key Term: approved regulator
A professional body authorised under the Legal Services Act 2007 to regulate a specific branch of the legal profession (e.g., SRA for solicitors, Bar Standards Board for barristers).

The regulatory objectives are:

1. Protecting and advancing the public interest
   Legal services must be provided in a way that benefits society as a whole, not just individual clients. This objective underpins high‑risk areas like client money handling and anti‑money laundering, and supports robust enforcement to deter misconduct that harms the public or the justice system.

2. Supporting the constitutional principle of the rule of law
   Lawyers must act to uphold the law and ensure justice is accessible and applied fairly. This objective anchors duties to the court and the administration of justice and takes precedence where professional duties conflict (for example, where a client’s wishes cannot override duties to the court).

3. Improving access to justice
   Regulation should make legal services available and affordable for all, including through legal aid, pro bono initiatives, and by enabling a competitive market that offers different service models. Practice rules supporting competence, supervision and complaints handling all contribute directly to this objective.

4. Protecting and advancing the interests of consumers
   Clients must be treated fairly, with clear information about services, costs, and complaint procedures. This objective is reflected in the SRA Transparency Rules (cost information and digital badge), SRA complaints provisions, and the jurisdiction of the Legal Ombudsman to resolve service complaints and award redress.

5. Furthering competition in the provision of legal services
   Regulation should encourage a diverse and competitive legal market, supporting innovation and choice. Alternative Business Structures (ABSs), permitted referral arrangements, and proportionate activity‑based authorisation broaden supply while regulators maintain safeguards on independence, integrity and client protection.

6. Encouraging an independent, strong, diverse, and effective legal profession
   The profession must be robust, impartial, and reflect the diversity of society. Equality, diversity and inclusion obligations, competence rules, and firm‑level governance controls support this objective in practice.

7. Increasing public understanding of citizens’ legal rights and duties
   The public should be informed about their legal rights and responsibilities. Transparency duties, accessible complaints information, and plain‑language client care support informed decision‑making by consumers.

8. Fostering and maintaining adherence to professional principles
   All authorised persons must act with integrity, independence, proper standards, in the best interests of clients, and keep client affairs confidential. Regulators are required to make rules and take enforcement action in ways that are compatible with these principles.

Balancing the objectives often requires regulatory judgment. They are broad and aspirational, and regulators must decide how best to meet them in complex, real‑world situations—for example, weighing competition and innovation with consumer protection and public interest safeguards. Risk‑based supervision and proportionate enforcement enable regulators to target the highest risks to the public, justice system and market integrity.

Professional Principles: The Standards for Ethical Legal Practice

The Legal Services Act 2007 also sets out professional principles that all authorised persons must follow. These principles are reflected in the SRA Standards and Regulations and underpin ethical legal practice.

Key Term: professional principles
The core ethical standards required of all authorised persons, including acting with integrity, independence, proper standards of work, in the best interests of clients, and maintaining client confidentiality.

The main professional principles are:

• Acting with independence and integrity
  Independence means advice and representation are not compromised by personal, commercial or third‑party pressures. Integrity requires adherence to ethical standards that go beyond mere honesty, such as avoiding unfair advantage and ensuring undertakings are performed as promised.

• Maintaining proper standards of work
  Competence, supervision and timely service are central. Firms must have effective governance and risk controls, and individuals must keep professional knowledge up to date. Poor service can trigger both conduct action and consumer redress.

• Acting in the best interests of clients
  Solicitors must place clients’ interests ahead of their own, manage conflicts diligently, and tailor communication and service to each client’s needs and circumstances. Acting in a client’s best interests never permits misleading the court or breaching the law.

• Complying with duties to the court and the administration of justice
  The duty not to mislead the court or others, to draw the court’s attention to material law and procedural points that may affect the outcome, and to respect court orders, all flow from the rule of law objective and take precedence where necessary.

• Keeping client affairs confidential
  Maintaining confidentiality—even beyond the end of the retainer and after a client’s death—is fundamental, subject only to legal duties that require or permit disclosure (e.g., anti‑money laundering reporting obligations or court orders). Regulators expect careful judgment to avoid tipping off while complying with statutory regimes.

These principles apply to all regulated legal professionals, not just solicitors. They are designed to ensure that lawyers act ethically, support public trust, and uphold the rule of law.

How Regulatory Objectives and Professional Principles Work Together

The regulatory objectives and professional principles are not just theoretical—they guide the day-to-day work of solicitors and other authorised persons. Regulators, such as the SRA, must act in a way that is compatible with these objectives and principles when setting rules, supervising lawyers, and taking enforcement action.

Key Term: SRA Standards and Regulations
The rules and principles published by the Solicitors Regulation Authority that set out the ethical and professional standards expected of solicitors and regulated law firms.

In practice:

• risk‑based supervision prioritises issues that present the greatest harm to consumers, the public interest or the administration of justice
• entity‑level requirements (governance, supervision, risk controls) complement individual duties by ensuring firms are set up to comply effectively
• transparency duties (website badge, cost information, regulatory status) and robust complaints processes advance consumer interests and understanding
• anti‑money laundering policies, risk assessments and due diligence mitigate public interest risks and support the rule of law, while confidentiality remains subject to statutory disclosure gateways
• financial services restrictions and designated professional body (DPB) exemptions allow limited regulated activities, provided client interests and transparency about commissions are respected

Worked Example 1.1

A solicitor is asked by a client to keep quiet about a planned action that may break the law. The solicitor is concerned that reporting the information could breach client confidentiality, but not reporting it could allow a crime to occur.

Answer:
The solicitor must balance the duty of confidentiality (a professional principle) with the regulatory objectives of protecting the public interest and upholding the rule of law. In some cases, disclosure may be required or permitted by law to prevent serious harm or crime.

Worked Example 1.2

A law firm receives a complaint from a client about unclear billing and poor communication. The client feels they were not informed about costs or their right to complain.

Answer:
The firm has failed to meet the regulatory objectives of protecting consumer interests and improving access to justice, as well as the professional principle of providing proper standards of work. The firm should review its client care procedures and ensure compliance with SRA requirements.

Worked Example 1.3

A conveyancing practice publishes online marketing material stating “we are a solicitors’ firm” but it operates a separate, unregulated business arm offering will‑writing services without clarifying regulatory status or displaying the SRA digital badge.

Answer:
Misleading publicity and failing to explain regulatory protections undermine consumer interests and public understanding. The firm should comply with SRA transparency requirements by clearly stating which services are SRA‑regulated, displaying the digital badge prominently on its website, and ensuring separate businesses are not represented as SRA‑authorised.

Worked Example 1.4

During a residential purchase, the borrower’s solicitor is asked to act for both borrower and lender on standard mortgage terms. A survey identifies issues likely to affect the lender’s security, and the borrower instructs the solicitor not to disclose the report to the lender.

Answer:
There is a client conflict or a significant risk of one. The duty of confidentiality to the borrower conflicts with the duty of disclosure to the lender if acting for both. It will usually be improper to continue for both parties. The solicitor should cease acting for the lender (and consider whether to continue for the borrower), ensuring that confidential information is not disclosed without consent or a legal basis.

Worked Example 1.5

A solicitor advising on a share sale receives a commission from a third‑party broker for an introduction but does not tell the client or account for the payment.

Answer:
This risks breaching integrity and best‑interest duties and undermines consumer interests. Under professional rules, a solicitor must account to the client for any financial benefit received as a result of acting unless the client has agreed otherwise, and must provide transparent information about such arrangements.

The Role of Regulators and Enforcement

The Legal Services Board oversees approved regulators, ensuring they advance the regulatory objectives and enforce professional principles. Regulators set rules, supervise compliance, and take action against misconduct. The SRA, for example, can investigate solicitors and firms, require cooperation and documents, impose sanctions and controls within its fining and disciplinary powers, and refer serious cases to the Solicitors Disciplinary Tribunal (SDT).

Key Term: Solicitors Disciplinary Tribunal (SDT)
An independent tribunal that hears serious cases of alleged misconduct by solicitors and can impose sanctions such as suspension or striking off.

Key features:

• regulators apply an assessment threshold to decide whether to investigate alleged misconduct (e.g., identifying a potential breach, seriousness capable of regulatory action, and whether it can be proved)
• the SRA’s Enforcement Strategy prioritises public interest protection and deterrence; aggravating and mitigating factors include intent, harm, vulnerability and engagement
• sanctions range from advice and warnings through financial penalties, practising restrictions, controls on firm authorisation, and referral to the SDT for the most serious cases (e.g., dishonesty or criminal offending)
• the Legal Ombudsman provides consumer redress for poor service, including requiring apologies, remedial steps, refunds, and compensation within its scheme limits; alleged professional misconduct is referred to the SRA
• the LSB must act compatibly with the regulatory objectives and maintains a Consumer Panel to represent consumers’ interests across the sector

Regulatory overlap is common (for example, barristers in SRA‑authorised firms), and firms must ensure compliance with all applicable regulators. Some legal services outside the Legal Services Act—such as claims management or immigration advice—are regulated by other statutory bodies, but ethical standards and consumer protections remain central.

The Importance of Public Trust and Ethical Conduct

Public confidence in the legal profession depends on solicitors and other lawyers acting ethically and upholding the regulatory objectives and professional principles. Misconduct, dishonesty, or failure to act in the public interest can damage trust and lead to disciplinary action. Behaviour outside practice can also attract regulatory attention where it undermines public trust. Regulators treat discrimination and abuse of position, offensive communications, misleading conduct, and failures to safeguard client assets as serious matters. Independence, honesty and integrity are non‑negotiable; in situations of conflict, duties that protect the rule of law and public confidence take precedence over client interests.

Exam Warning

For SQE1, you may be asked to identify which regulatory objective or professional principle applies in a scenario, or to explain how a solicitor should resolve a conflict between principles (e.g., client confidentiality vs. public interest). Watch for facts indicating conflicts of interest, duties to the court, transparency obligations, or consumer protection concerns—these typically determine which objective or principle governs the correct course of action.

Revision Tip

When revising, focus on how the regulatory objectives and professional principles interact, and be able to apply them to practical situations involving ethical dilemmas or professional conduct issues. Tie rules back to their purpose: for example, transparency and complaints handling advance consumer interests and public understanding; AML systems protect the public interest and the rule of law; governance and supervision ensure proper standards of work.

Key Point Checklist

This article has covered the following key knowledge points:

• the Legal Services Act 2007 sets out eight regulatory objectives for legal services regulation in England and Wales
• the Legal Services Board oversees approved regulators, ensuring compliance with these objectives, and maintains a Consumer Panel focused on consumer interests
• professional principles require solicitors and other authorised persons to act with integrity, independence, proper standards, in clients’ best interests, and to maintain confidentiality, while complying with duties to the court
• the SRA Standards and Regulations reflect these objectives and principles in rules for solicitors and law firms, including transparency, complaints handling, supervision and governance
• risk‑based and entity‑focused regulation targets the greatest harms, with enforcement ranging from warnings to referral to the SDT for the most serious misconduct
• public trust in the legal profession depends on ethical conduct, effective consumer redress, and adherence to regulatory objectives and professional principles across both reserved and non‑reserved legal work

Key Terms and Concepts

• regulatory objectives
• Legal Services Board (LSB)
• approved regulator
• professional principles
• SRA Standards and Regulations
• Solicitors Disciplinary Tribunal (SDT)