Principles and risk-based regulation - Other regulated provi...

Learning Outcomes

This article outlines principles and risk-based regulation for barristers, licensed conveyancers, and legal executives, including:

• Setting and enforcement of core duties by the BSB, CLC, and CILEx Regulation for practitioners and entities
• Reserved legal activities authorised by each regulator and when entity regulation applies alongside individual regulation
• Risk-based regulation in supervisory actions and interventions by the BSB, CLC, and CILEx Regulation
• Regulatory overlap in SRA-regulated firms and mixed-practice entities, and the regulators able to take action
• Comparison with SRA principles-based regulation, with focus on client money, insurance, and complaints-handling requirements.

SQE1 Syllabus

For SQE1, you are required to understand the principles and risk-based regulation of other regulated providers of legal services, with a focus on the following syllabus points:

• the main regulatory bodies for barristers, licensed conveyancers, and legal executives
• the core principles and duties imposed by each regulator
• the concept and implications of entity regulation
• the meaning and application of risk-based regulation and supervision
• how these frameworks compare to those for solicitors.

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. Which regulatory body oversees barristers in England and Wales?
2. What is meant by 'entity regulation' in the context of legal services?
3. Name two core principles that licensed conveyancers must follow.
4. What is the main purpose of risk-based regulation?

Introduction

Legal services in England and Wales are regulated by several bodies, each responsible for different types of legal professionals. While solicitors are regulated by the Solicitors Regulation Authority (SRA), barristers, licensed conveyancers, and legal executives are overseen by their own regulators. All regulators set out core principles and use risk-based approaches to supervision and enforcement. Understanding these frameworks is essential for SQE1.

Key Term: Reserved Legal Activities
Legal work that only authorised or exempt persons may carry out under the Legal Services Act 2007, including rights of audience, conduct of litigation, reserved instrument activities, probate, notarial activities, and the administration of oaths.

Key Term: Alternative Business Structure (ABS)
A licensed body authorised to provide reserved legal activities in which non-lawyers may have management or ownership interests, supervised by an approved regulator designated as a licensing authority.

Regulatory Bodies and Their Principles

Barristers and the Bar Standards Board (BSB)

Barristers are regulated by the Bar Standards Board (BSB). The BSB sets out core duties for barristers, including acting with independence, honesty, and integrity, and upholding the administration of justice. Barristers practise under the BSB Handbook (which includes the BSB Code of Conduct). In addition to the overarching duties, the Handbook contains detailed rules on competence, client confidentiality, equality and diversity, and duties to the court, clients and third parties. Self‑employed barristers must have appropriate professional indemnity insurance (usually via Bar Mutual), and a complaints process that informs clients about the Legal Ombudsman.

The BSB regulates both individuals and, since the introduction of the BSB entity model, advocacy‑focused firms (including entities with litigation authorisation and licensed bodies/ABSs). This means the BSB may supervise and enforce requirements against a chambers‑style entity or law firm it authorises, as well as against individual barristers. Barristers can now seek authorisation to conduct litigation (subject to requirements), which has expanded the scope of BSB regulation beyond pure advocacy.

Key Term: Bar Standards Board (BSB)
The independent regulator for barristers in England and Wales, responsible for setting standards, authorising practice (including BSB entities and certain ABSs), supervising compliance, and enforcing discipline.

Key Term: Core Duties (Barristers)
Fundamental obligations imposed on barristers, including upholding the rule of law and proper administration of justice, acting with honesty and integrity, maintaining independence, acting in the best interests of each client, keeping client affairs confidential, not abusing status, and complying with equality and diversity obligations.

BSB supervision is risk‑based. For example, chambers or entities may be asked for returns about equality policies, harassment reporting procedures, or work allocation, and higher‑risk entities may be subject to thematic reviews or additional information requests. Where litigation is authorised, the BSB checks systems for client care, complaints, insurance and file management—areas historically outside the self‑employed Bar’s traditional model.

Licensed Conveyancers and the Council for Licensed Conveyancers (CLC)

Licensed conveyancers are regulated by the Council for Licensed Conveyancers (CLC). The CLC’s code requires conveyancers to act with independence and integrity, maintain high standards, and act in clients’ best interests. The CLC is unusual in having been created by statute and has a comprehensive set of powers to regulate both individuals and entities undertaking conveyancing and (where authorised) probate work, together with administering oaths. CLC firms routinely handle client money and must comply with detailed client account, accounting and insurance requirements.

Key Term: Council for Licensed Conveyancers (CLC)
The statutory regulator for licensed conveyancers and probate practitioners, setting conduct rules, authorising individuals and firms (including ABSs), and supervising compliance with a risk‑based approach.

Key Term: Core Principles (CLC)
The main ethical and professional standards for licensed conveyancers, including acting with independence and integrity; maintaining high standards of work; acting in clients’ best interests; keeping client affairs confidential; ensuring equality of access and service; cooperating with the regulator and the Legal Ombudsman; and effective management of financial and client money risks.

In practice, the CLC’s emphasis on client money safeguards, cyber risk controls (e.g. source‑of‑funds checks), and undertakings management is particularly strong, reflecting the high‑risk nature of conveyancing transactions. Firms must maintain adequate and appropriate professional indemnity insurance and will be supervised more closely if their profile indicates elevated risk (for example, rapid growth handling large escrow balances, or weaknesses flagged by accountants’ reports).

Chartered Legal Executives and CILEx Regulation

Chartered legal executives are regulated by CILEx Regulation (also known as CILEX Regulation). Their code of conduct requires acting with honesty, integrity, independence, and in the best interests of clients, as well as maintaining competence and respecting diversity. CILEx Regulation authorises individuals with specific practice rights (e.g. litigation, advocacy, conveyancing, probate, immigration) and also regulates entities. Many chartered legal executives work within SRA‑regulated firms; some practise in CILEx‑regulated entities with reserved practice rights.

Key Term: CILEx Regulation
The independent regulator for chartered legal executives and CILEx‑regulated entities, responsible for authorisation, conduct, supervision and enforcement, including practice rights in specified reserved legal activities.

Key Term: Core Principles (Legal Executives)
The main duties for legal executives, including honesty and integrity; independence; acting in the best interests of each client; providing a competent standard of work and service; preserving client confidentiality; promoting equality, diversity and inclusion; and cooperating with the regulator and ombudsman schemes.

CILEx Regulation applies risk‑based supervision to individuals and entities, taking account of practice area, client populations served (including vulnerable clients), competence records and governance. Where legal executives hold their own practice rights to conduct litigation and advocacy, systems for file management, conflicts, client care letters, complaints and indemnity insurance are closely reviewed.

Entity Regulation

Entity regulation means that not only individuals, but also legal practices (such as law firms or chambers), are subject to regulatory requirements. This approach recognises that firm‑wide systems, culture, and supervision are essential for compliance. It also allows regulators to apply targeted, organisational controls proportionate to the scale and risk of the practice.

BSB‑regulated entities include advocacy‑led practices and certain ABSs. CLC regulates conveyancing and probate firms, and can license ABSs where non‑lawyers hold management/ownership roles. CILEx Regulation authorises entities undertaking the reserved activities for which it is an approved regulator. Across all three regulators, entity authorisation typically requires demonstrating governance arrangements, compliance roles, complaints processes, PII arrangements, financial stability, and (where applicable) client account controls.

Key Term: Entity Regulation
A regulatory approach where the organisation or firm, as well as individual lawyers, must meet regulatory standards and may be subject to supervision and enforcement.

Worked Example 1.1

A barrister is employed by a BSB-regulated entity (a barrister-only law firm). Who is responsible if a breach of the BSB Handbook occurs—just the individual barrister, or the entity as well?

Answer:
Both the individual barrister and the BSB-regulated entity may be held responsible for breaches. Entity regulation means the firm must have systems to ensure compliance, and the individual must also follow the rules.

Worked Example 1.2

A licensed conveyancer’s firm has recently expanded rapidly and now handles large sums of client money. The CLC identifies this as a risk factor. What action might the CLC take under risk-based regulation?

Answer:
The CLC may increase the frequency of inspections, require additional reporting, or review the firm’s systems for safeguarding client money, focusing resources on the higher risk.

Overlap and multi‑regulator environments

Regulatory overlap is common. A barrister may work in an SRA‑regulated firm; a chartered legal executive with litigation rights may work in an SRA or CILEx‑regulated entity; and a mixed‑discipline ABS might house CLC‑regulated conveyancers alongside SRA‑regulated solicitors. In such cases, the individual remains subject to their “home” regulator’s code, while the entity’s regulator supervises the firm systems. Each regulator expects cooperation, and information may be shared with the Legal Services Board (LSB) oversight and with the Legal Ombudsman (LeO) where service complaints arise.

Worked Example 1.3

A legal executive working in an SRA-regulated law firm is found to have breached CILEx Regulation's code. Can the SRA also take action?

Answer:
Yes. When working in an SRA-regulated firm, the legal executive must comply with both CILEx Regulation and SRA requirements. Both regulators may investigate and take action if appropriate.

Risk-Based Regulation

Risk-based regulation is a strategy where regulators focus their resources and supervision on areas, firms, or individuals that pose the greatest risk to the public, clients, or the integrity of the legal system. Under the Legal Services Act 2007, the LSB sets regulatory objectives (such as protecting and promoting the public interest; supporting the rule of law; protecting consumers; and promoting competition), and approved regulators align their risk frameworks to these objectives.

Key Term: Risk-Based Regulation
A regulatory approach where supervision, inspection, and enforcement are prioritised based on the likelihood and potential impact of risks to regulatory objectives.

How Risk-Based Regulation Works

Regulators assess risk by considering factors such as:

• the type of work undertaken (e.g., high‑volume conveyancing; litigation and advocacy with vulnerable clients; probate with complex assets)
• the firm’s size, structure, governance and history of compliance (including complaints, claims and disciplinary history)
• financial stability, insurance arrangements and client account handling
• equality, diversity and inclusion practices; bullying/harassment risks; and workplace culture
• AML/CTF risk indicators (e.g., source of funds in real property transactions; politically exposed persons; higher‑risk jurisdictions).

Firms or individuals assessed as higher risk may be subject to more frequent inspections, targeted supervision, thematic reviews, or additional reporting requirements. Conversely, compliant, lower‑risk practices may experience lighter‑touch, desk‑based monitoring.

Worked Example 1.4

A BSB‑regulated chambers receives intelligence about potential harassment and unfair work allocation. How might the BSB respond under a risk‑based approach?

Answer:
The BSB could seek information on equality, harassment and work allocation policies, require action plans, and, if concerns are substantiated, move to enhanced supervision or enforcement. The focus would be on culture and systems that prevent discrimination and protect clients, pupils and staff.

Worked Example 1.5

A small CILEx‑regulated entity has obtained litigation and advocacy rights. Its competence records are minimal and its complaints policy omits LeO details. What risk‑based steps might CILEx Regulation take?

Answer:
CILEx Regulation might require remedial actions (updating the complaints policy, competence planning and CPD records), request evidence of PII adequacy, and schedule a follow‑up review. Persistent non‑compliance could lead to sanctions.

Comparison with Solicitor Regulation

While the SRA, BSB, CLC, and CILEx Regulation all use principles‑based and risk‑based approaches, there are differences that matter in practice.

• Scope of entity regulation. SRA regulates all authorised firms, with mandatory firm‑based authorisation. The BSB historically regulated individuals and chambers, adding entity/ABS authorisation more recently for advocacy/litigation‑focused practices. CLC and CILEx Regulation both authorise and supervise entities in their remits, including ABSs.
• Client money controls. SRA and CLC firms routinely handle client money and must comply with detailed accounts rules and accountants’ reports. Many BSB‑regulated practices historically did not hold client money; BSB entities that do must meet specific safeguards. CILEx‑regulated entities with practice rights must ensure client money controls appropriate to the activity.
• Professional indemnity insurance (PII). The SRA prescribes minimum terms for firms; the CLC requires adequate and appropriate cover (with sector‑specific features); barristers are usually insured via Bar Mutual, while BSB entities and ABSs must arrange adequate and appropriate entity‑level cover; CILEx‑regulated entities must maintain PII suitable for their practice.
• Complaints and redress. All regulators require clear complaints information, including signposting to the Legal Ombudsman within eight weeks if unresolved, but the format and timing can differ slightly between regulators’ codes.
• Duties to the court and equality. All codes contain strong duties to the court and to act with independence, honesty and integrity. The BSB has prominent equality and anti‑harassment rules (reflecting chambers‑style working), and all regulators expect fair treatment and inclusion under their principles.

These differences drive how each regulator designs supervision (e.g., CLC’s focus on client money and cyber‑fraud in conveyancing; BSB’s emphasis on advocacy integrity, litigation authorisation safeguards and equality/harassment systems; CILEx Regulation’s focus on competence and scope when practice rights are granted).

Worked Example 1.6

A BSB‑authorised entity begins to conduct litigation and hold client money without updating its PII or client care procedures. Could this trigger regulatory action?

Answer:
Yes. The BSB would likely regard this as a material risk. It could impose enhanced supervision, require immediate remedial steps (PII, client care letters, client money safeguards), and take enforcement action if risks to clients or the public are not addressed.

Worked Example 1.7

A CLC firm’s accountant’s report identifies repeated delays in bank reconciliations and unclear policies for Source of Funds/Source of Wealth checks. What follow‑up is likely?

Answer:
The CLC may request an action plan, conduct a targeted inspection, and impose additional reporting. If deficiencies persist, sanctions may follow due to heightened risks of client money loss or money laundering.

Summary

Key Point Checklist

This article has covered the following key knowledge points:

• The main regulatory bodies for barristers, licensed conveyancers, and legal executives are the BSB, CLC, and CILEx Regulation.
• Each regulator sets out core principles and duties, including independence, integrity, and client care, with particular emphases reflecting their practice profiles.
• Entity regulation means that firms, as well as individuals, must comply with regulatory standards; authorisation typically requires robust governance, PII and (where relevant) client money controls.
• Risk-based regulation focuses supervision and enforcement on higher‑risk areas, firms, or individuals, using data, thematic reviews and targeted interventions.
• Regulatory overlap can occur where professionals work in SRA‑regulated firms or mixed‑discipline ABSs; individuals remain accountable to their home regulator and the entity regulator.
• Differences from SRA regulation include historical models (e.g., chambers), client money handling, PII arrangements, and equality/harassment requirements; all regulators align to the Legal Services Act regulatory objectives.

Key Terms and Concepts

• Reserved Legal Activities
• Alternative Business Structure (ABS)
• Bar Standards Board (BSB)
• Core Duties (Barristers)
• Council for Licensed Conveyancers (CLC)
• Core Principles (CLC)
• CILEx Regulation
• Core Principles (Legal Executives)
• Entity Regulation
• Risk-Based Regulation