The body approving potential hikes in solicitors’ contributions to the compensation fund has delayed its decision for up to three months.

In a letter to Solicitors Regulation Authority chief executive Paul Philip, Legal Services Board interim chief executive Richard Orpin has said the super-regulator needed more time to decide on such a large increase.

It is the first time that the LSB has invoked its power to delay a decision when considering potential fee changes by the solicitors’ regulator.

The increased contributions are required, according to the SRA, to rebalance the compensation fund following expensive interventions in recent years. The most costly of those was into national firm Axiom Ince, and the SRA is currently under investigation by the LSB for its response to the Axiom collapse. That review is now months overdue and the LSB has yet to explain why, meaning the oversight regulator is still investigating the SRA while simultaneously deciding whether to approve its fee hike application.

In his letter, Orpin said: ‘The application proposes significant increases to the level of contributions by authorised persons to the SRA’s compensation fund, an important component of the SRA’s consumer protection arrangements. Therefore, the LSB is extending the initial decision period to allow time to facilitate full scrutiny and consideration of the application.’

The LSB has the power under the Legal Services Act to postpone a decision on any application from an approved regulator to take a maximum of 90 days. This power is occasionally invoked but - until now - has never been on an issue relating to fees. The delay means the financial black hole the SRA was hoping to fill will remain open for longer than it expected. A decision must be made by November 3 although it could be that the LSB approves the application sooner than that.

The SRA wants to increase individual contributions from £30 to £90 and firm contributions from £600 to £2,220. In practice, most individual contributions are met by firms, meaning they will face huge costs increases in the next year if the plan is approved.

During the 2022/23 financial year the SRA intervened into 65 practices – a significant rise on previous years – and estimates that the cost of these rose from £4m to £20.5m in 12 months. Reserves in the compensation fund fell from £54.2m to £25.1m during the year to October 2023.

 

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