Solicitors Regulation Authority plans to link new fining powers to firms’ and individuals’ income will lead to penalties that are neither fair nor reliable, the Law Society said today.

The regulator unveiled proposals in August to raise the maximum fine it can impose on firms to 5% of its turnover. The SRA also wants to take the means of solicitors into account when setting a fine and has created a table of bands for punishments that can be issued.

This would mean, for example, that the lowest level of offence would incur a basic proposed penalty of 2% of income, but this would rise to 161% for misconduct considered the most serious. In theory this would mean that a solicitor earning £500,000 could be fined as much as £805,000 in the most serious cases.

Consultation on the new policy – announced shortly after the SRA increased its maximum fining powers from £2,000 to £25,000 – closed this week.

Chancery Lane said the SRA had produced no new evidence to support its proposals and suggested that fining firms up to 5% of their turnover was both ‘excessive and unjustified’ and would provide no extra deterrent. It was argued that annual turnover was not a reliable indicator of profitability and did not always demonstrate ready availability of cash.

The Society's response states: ‘The SRA seeks to adopt as comparators other regulators such as Ofcom, the Water Services Regulation Authority (Ofwat) and the Financial Conduct Authority (FCA). However, we reiterate that these are not fair comparisons given the nature of the industries, numbers of entities regulated, types of breaches, impact on the public and the resources available to the comparator regulators.’

The proposal to take account of individuals’ income was also criticised, as the Society said this took no account of financial responsibilities. ‘We firmly believe that it would be unfair for the SRA not to make any inquiry about an individual’s means and thereby the real affordability to pay any fine imposed by the SRA.’

In practice, the SRA would be able to deal with more serious misconduct for individuals with lower salaries, whereas individuals on the highest salaries are more likely to be referred to the tribunal for breaches of a similar nature.

The Society has further concerns about the process for issuing fines and the transparency and accountability of the SRA enforcement procedure.

It was submitted that adjudicators needed to be completely independent but that, as SRA employees, they would have access to the regulator’s records and could see a solicitor’s past history, which could lead to an unfair decision.

The Society wants information available to adjudicators to be restricted and for solicitors under investigation to be present when witnesses are interviewed. Current proposals state this right would be at the discretion of adjudicators.

Society president Lubna Shuja added: ‘The SRA has not provided the criteria for when or how an adjudicator may exercise such a discretion meaning these proposals are ill-defined and could lead to unfair outcomes. We have serious concerns that adjudicators would not be acting purely in their capacity as decision makers but would instead be acting as investigators.’

 

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