SRA plans will force firms into financial ruin, warns Law Society

Solicitors could be made bankrupt without proper oversight or scrutiny if the Solicitor's Regulation Authority is allowed to proceed with a massive increase in its fining powers, the Law Society has warned.

In the third high-profile rebuke of the SRA’s financial penalty regime proposals, the Society said planned changes are potentially unlawful, confusing, flawed and inconsistent with the Legal Services Act. The plans, it was submitted in a consultation response, also undermine the role and authority of the Solicitors Disciplinary Tribunal ‘without rationale’.

The SRA wants to add two new fining bands to its existing scheme and to have the powers to fine firms up to £500,000 and individuals up to £100,000. Band E would range from 6% to 10% of a firm’s annual domestic turnover, and 113% to 145% of an individual’s income. Band F would be for fines higher than these percentages and would only be applied for the most serious misconduct. New minimum fine levels would be introduced for all existing bands.

Law Society vice president Richard Atkinson said the proposed safeguards and monitoring processes were inadequate and appeared to violate the principles of open justice and decision-making. All fines in the top two bands would have to be approved by a senior member of the SRA, although the decision-making process would not be open to public scrutiny in the same way as SDT hearings. 

‘The SRA does not appear to fully appreciate the impact these proposals could have for smaller firms and individuals with lower incomes and protected characteristics – when it proposes to introduce minimum fine levels,’ said Atkinson. ‘Increased fines overall could lead to firm closures or bankruptcy for individual solicitors.'

The plans will have serious repercussions for the legal profession and access to justice, he continued. 'Higher fines do not necessarily provide a credible deterrent or maintain public trust and the SRA has not provided empirical evidence to support this claim. We strongly recommend the solicitors’ regulator re-thinks its proposals to ensure any changes to its financial penalties’ framework are proportionate and transparent.’

Atkinson added it was ‘premature’ for the SRA to seek additional powers and investigative duties before the investigations into its handling of the Axiom Ince and SSB cases had been published by the Legal Services Board.

The SRA has said changes are needed to take account of its new unlimited fining power for cases of economic crime. Chief executive Paul Philip has endorsed a ‘robust approach which enables us to take action in a way that is fair, transparency and consistent to all’.

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