SRA consults on changes to fining powers

The Solicitors Regulation Authority (SRA) has launched a consultation on its approach to financial penalties for law firms and solicitors with the aim of resolving cases more quickly and reducing the need to refer to the Solicitors Disciplinary Tribunal (SDT)

The consultation will review how the SRA can create more consistency across its regulated entities and account for how other regulators have changed their approach in the 10 years since the fining regime was introduced. For example, unlike for alternative business structures, where the SRA has unlimited fining powers, the regulator can only currently issue fines to traditional law firms, or individual solicitors, of up to £2,000.

The consultation seeks views on initial proposals to:

  • Increase the maximum fine the SRA can issue to £25,000
  • Take into account the turnover or income of firms and individuals when setting fines
  • Introduce a schedule of ‘fixed penalties’ of up to £1,500 to enable lesser issues to be dealt with more easily for all concerned

The SRA have suggested that increasing its fining threshold to £25,000, would place a broader range of  disciplinary matters within its remit. The introduction of “fixed penalties” for certain lower- level misconduct would not only allow more straight forward issues to be dealt with more easily for all concerned, but it would also provide greater transparency and consistency in how penalties were applied.

The consultation references the work done around AML compliance where 21 fines of £800 for failure to respond to the AML risk assessment declaration were imposed. Other fixed fines of between £750 and £2000 have been imposed for other minor compliance failure including failing to publish information around transparency.

The SRA is proposing that for more serious cases it is able to fine firms up 5% of  annual turnover, as well as the  introduction of measures which would take account of income when setting fines for individuals, allowing for different levels of fines for junior solicitors compared to a senior equity partner for similar offences.

The SRA suggest that by taking on some of the burden away from the SDT cases could be “resolved quickly, potentially reducing the cost, resource and stress” while solicitors and firms would retain the right to appeal both the outcome of any decision and the penalty imposed at the SDT.

The consultation references work done in other areas of regulation such as gambling to introduce penalties which act as an “effective deterrent” with much larger and headline grabbing fines. During 2018/19 The Gambling Commission issued fines totalling nearly £20m far in excess of current SRA powers.

While previously consulting on “modest” changes to the system, a comprehensive review will enable the SRA to consider its Standards and Regulations, and accompanying Enforcement Strategy introduced in 2019 and account for what it describes as “societal views” on appropriate sanctions

“we have seen a change in the nature of the cases we handle, with a greater number of cases relating to ethical behaviour outside of the solicitor/client relationship, including sexual harassment cases and offensive and discriminatory communications. Therefore, we now need to undertake a more fundamental review to ensure the guidance remains appropriate and up to date.”

Anna Bradley, Chair of the SRA, said:

‘‘We know that the overwhelming majority of solicitors and firms do a good job, providing high-quality legal services to the public, and meeting the standards we set. But when those standards are not met, we need to step in to make sure that consumers are protected and confidence in the profession is well placed.

“Our proposals are designed to resolve issues much more quickly, saving time and cost for everyone and, importantly, reducing the inevitable stress for those who find themselves in our enforcement processes. Changes to our fining powers would also allow the Solicitors Disciplinary Tribunal to focus on the most serious cases where there is need for greater fines and sanctions such as suspension and strike off.”

“This is a real opportunity to update our enforcement approach and we would welcome views from across the profession, other regulators and more widely.’

You can read and respond to the consultation in full here: https://www.sra.org.uk/sra/consultations/consultation-listing/financial-penalties-2021/

The deadline for response is 11 February 2022.

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