Schedule 13
Legal Services Bill [Lords]
10:15 am
Bridget Prentice (Parliamentary Under-Secretary, Ministry of Justice; Lewisham East, Labour)
In all respects, I agree absolutely with the principle behind the amendment. The hon. Gentlemen are absolutely right about the operation of the approval requirements for investors. A key touchstone of part 5 of the Bill is the principle that non-lawyers should be permitted to invest in law firms only if they can demonstrate that they meet the standards set by schedule 13 and licensing authorities. The alternative would be to require licensing authorities to assume that all prospective investors were fit and proper unless they found evidence to indicate otherwise. I do not think that that is satisfactory and I get the impression that members of the Committee agree with me because that is not a reliable enough safeguard. However, we differ about whether further provision is needed to achieve that. The proposal as drafted ensures that that is already in the Bill.
The test for approval means that when an investor wishes to acquire a restricted interest of whatever kind, the licensing authority must be satisfied that the proposed acquisition will not compromise the regulatory objectives or the ability of ABS firms and the individuals in them to comply with the regulatory arrangements. That is the first test.
In addition, the licensing authority must be satisfied that the individual or firm in question is fit and proper to hold that interest by having regard, among other things, to that person’s associates, his or her probity and financial position, and any record of previous disqualification from an ABS firm. All that must be taken into account. If those requirements are not fulfilled, the authority may refuse to approve the proposed interest, or attach conditions to it. If it is in any doubt about whether a person meets the approval requirements, it can require further information from that person.
It is for the applicant to prove to the licensing authority that all those standards are met. If the authority is not certain that that is the case, it is under no obligation whatever to approve the interest. Indeed, I would go so far as to say that the authority would not be fulfilling its statutory duty if it granted its approval in a case where a person’s fitness was in doubt.