The clause sets up one of two new posts in licensed bodies—head of legal practice—and sets out the duties of the post holder. Clause 92 sets up the other new post, head of finance and administration. Both posts are self-explanatory, and it is clearly important that those responsibilities are divided. I can see the argument for that.
Schedule 11 is the other side of the coin. Part 2 of the schedule sets out “structural requirements” for the management of the organisations, including requirements for general management and for the heads of legal practice and of finance and administration. The schedule gives criteria for who is a “fit and proper person” to be head of legal practice, and I should like to ask the Minister a question about that from a lay perspective.
Each organisation will have a head of legal practice, who must be a lawyer in one of the authorised activities, so they could not be a lay person. They will take responsibility for all legal activity. Is it envisaged—this is not clear in the Bill—that the decision on the appropriateness of the organisation will be taken on the basis of the organisation as a whole, without considering who is its head of legal practice, or will it be a bit like the application for a licence currently made to a local authority and traditionally to a magistrates court whereby it is the prospective licensee whose fitness and propriety are considered? It is not sufficient to say that the Whitbread brewery owns a pub; it must ensure that the pub’s tenant is fit and proper. Both are material considerations. To give an example, there are some rogue business people with an extremely bad reputation for ripping people off and not having the public interest at heart. A Mr. van Hoogstraten comes to mind in that category.
He is certainly not. I sincerely hope for everyone’s sake that he is not a member of any party represented in this room. He has a terrible business reputation for being an exploitative landlord, but there is nothing to prevent him or one of his companies from applying to join a licensed body. The head of legal services might have worked for somebody like that for one, 10 or 20 years, passed their exams and qualified as a lawyer. I am keen to know what the test will be when the licensing authority decides whether to grant the licence.
Will there effectively be two tests—is the organisation considered legally and financially competent, and are the two people put up as heads of legal practice and finance and administration regarded as fit and proper? Finally, when the time comes and the procedures in the Bill are established for those tests, if the head of legal practice is replaced and someone else is nominated, is it expected that the licensing process should start in good time, so that, if someone else is nominated, there would be an opportunity for the licensing authority to say, “No, they are absolutely not satisfactory, and they are not a fit and proper person. We do not think that they have the experience, and we do not know enough about them, so unless and until you produce some different people, we will not continue to license you as an organisation”? It is in the consumer’s interest that both tests should be passed, and that both organisations and individuals are passed as being fit for purpose. I am keen to know that both tests should be passed in advance, before any green light is given by the licensing authority to the organisation, so that the licensing authority can do its job under the legislation.
The hon. Gentleman is absolutely right about the importance of those two posts under the new structure. As he points out, the head of legal practice must, of course, be a lawyer, so one would assume that they would follow the rules and the code of conduct established by the Law Society.
As for the licence application, it must set out the ABS’s structural arrangements, including the services that it intends to supply. However, it must also set out and identify the nominated holders of both of posts—the head of legal practice and the head of finance and administration. The whole application would then be considered. However, the nominated individuals will remain under consideration and will also be looked at. There are two tests, but they will invariably be made at one sitting, so to speak. Finally, in answer to the hon. Gentleman’s final question, any change in the holder of either of those positions would also have to receive approval.
May I ask a supplementary question? Is it envisaged that the licensing authority would regularly expect to see the people proposed for the posts of head of legal services and head of finance and administration, to satisfy itself, face to face as it were, that they were suitable? There is all the difference in the world between having a bit of paper that may or may not be true when it comes to people’s degrees or qualifications and seeing the people themselves. Furthermore, will there always be checks to ensure that claims that applicants make about qualifications, degrees and competence are accurate, so that we do not have the old story of the bogus degree, or the degree from the non-existent institution, or the qualification from an accountancy school that does not exist or that was closed down because it was fraudulent? Are we absolutely certain that those checks will be really rigorous and that people will not slip through the net on the basis of claims that are not true?
That would be entirely a matter for the licensing authority, acting within its rules. I would expect it to be fairly rigorous in making those checks. Of course, as the authority works through its system of checks, there would be nothing at all to stop it from making inspections, or from rechecking organisations to which it had given a licence. Certainly, that is very much the theme of the Bill. However, regarding the specificity of the checks, any checks would have to come within the rules of each licensing authority.