Alternative business structures (ABSs) must face fines far in excess of the £150m maximum proposed by the Legal Services Board, the Solicitors Regulation Authority recommended last week.

Responding to an LSB consultation on the issue, the SRA said that ‘the largest commercial entities might require a fine of hundreds of millions of pounds’. It said that while the LSB’s suggested fines of £50m for individuals and £150m for entities might serve the current market well, ‘it must be remembered that the ABS regime will introduce new entrants to the market’.

Citing the fees earned by some law firms from handling claims under the government’s coal health compensation scheme, the SRA said that the £150m ‘could be too low to deal with a scandal equivalent to miners’ compensation’.

The regulator accepted that the £50m fine for individuals was sufficient.

The SRA said that it supported the proposal to set a fixed maximum for fining ABSs, rather than specifying a calculation based on turnover.

‘It is perhaps dangerous to rely too heavily upon turnover figures in the current market to assess appropriate fining powers for ABSs,’ it said in its response.

‘A fine commensurate to 10% of a small firm’s turnover, for example, may be thousands of pounds, but to achieve the same deterrent effect in respect of some of the largest commercial entities might require a fine of hundreds of millions of pounds. If the intention is that the maximum figure cover all possible scenarios, then this should take into account the fact that the market could change dramatically.

‘A cap of £150m could be too low to deal with a scandal equivalent to miners’ compensation, particularly if fewer firms gain contracts to carry out high-volume work; £1bn was paid to 500 law firms in miners’ cases. A similar scheme in the future might involve a much smaller number of firms with consequential rewards being much higher.’