New SRA fining powers will weaken regulation, not strengthen it

The Solicitors Regulation Authority is seeking to update its approach to financial penalties, following newly conferred powers by the Economic Crime and Corporate Transparency Act (ECCTA) 2023 enabling it to impose unlimited fines for misconduct connected to economic crime. The consultation also references the regulator’s ambitions to extend its powers to unlimited amounts for all types of misconduct. It is the latest in a string of attempts by the SRA to increase its fining powers.

In its latest consultation, the SRA has doubled down on its previous policy positions by effectively proposing to cut the Solicitors Disciplinary Tribunal out of the process by using only one limited type of sanction, namely fines.

The SDT has extensive expertise and safeguards in its transparent decision-making and defined processes. Its independence from the regulator and the profession, together with its full range of sanctions, means that the public and solicitors have confidence in it.

The SDT has the power, where the protection of the public or the protection of the reputation of the legal profession requires it, to strike a solicitor’s name off the roll. In other circumstances they may suspend a solicitor from practice, reprimand a solicitor or impose an unlimited fine. Serious cases must be referred to the tribunal. They should not be dealt with by the SRA internally by way of a high financial penalty.

In July 2022 – despite strong opposition from the Law Society – the Ministry of Justice raised the SRA’s fining powers by more than 1000% from £2,000 to £25,000 for traditional law firms and individual solicitors.

At the time, we raised serious concerns about the SRA acting as investigator, prosecutor and judge, without any kind of independent oversight or scrutiny of its decisions.

Financial penalties framework

By seeking to have a single framework for all misconduct, the SRA is not only conflating separate policy issues, but risking confusion, as it has unlimited fining powers for economic crime matters but limited fining powers for other types of misconduct for traditional firms and individuals.

The proposed new fining framework is fundamentally flawed and potentially unlawful. The SRA does not have the power to impose fines on individuals and traditional firms above £25,000 unless the powers under the ECCTA are triggered.

Nowhere in the proposed framework does the SRA make it clear that the suggested minimum fine levels above this amount (Bands D, E and F for firms and Bands E and F for individuals) can only be for misconduct relating to economic crime.

Without a general increase to its fining powers – which was not part of the consultation – the SRA could never fine firms or individuals for other non-economic crime-related misconduct fining in those bands.

The SRA’s plans for a ‘one size fits all’ fining framework is not fit for purpose. Instead, one of our recommendations was that there is a separate financial penalties framework for misconduct related to economic crime, with specific guidance and examples.

The SRA should work with members in the profession with specialist knowledge to help develop the framework, due to the complex and distinct nature of economic crime, especially money laundering.

We remain strongly opposed to the SRA’s ambitions for any further extension of its fining powers. Instead, we urge the SRA to focus on making improvements to its policies and procedures in relation to its core functions at a time when the SRA itself is under scrutiny for the exercise of its existing powers and regulatory responsibilities in respect of the Axiom Ince and SSB Group cases.

We question the timeliness of it advocating for even greater powers in the absence of applying the lessons learned from these reviews.

On behalf of our members, we will continue to oppose any further proposals by the SRA to extend its fining powers, particularly in the absence of any evidence they are needed or would drive the intended outcomes.

Resources available for our members

If a solicitor is facing disciplinary action or faces a difficult ethical issue, they can contact the Law Society’s Practice Advice Service helpline to access free and confidential advice.

If a member needs legal advice, then they are able to contact the Solicitors Assistance Scheme (SAS).

The SAS has a panel of regulatory/disciplinary specialists who can give up to an hour’s worth of free legal advice by phone.

Firms may also consider taking out Directors’ and Officers’ (D&O) insurance, to cover partners for legal costs in disciplinary proceedings.

We also regularly publish articles on how our members can adhere to their professional obligations.

Richard Atkinson is the new president of the Law Society