SRA Reduce All Compensation Fund Contributions For 2019/20
The Solicitors Regulation Authority (SRA) are reducing all compensation fund contributions for 2019/20.
Individual contributions will now decrease from £90 to £60. Law firms will also save £530 as their contributions fall from £1,680 to £1,150.
In total, the compensation fund paid out £18.1 million in 2017/18 to the 1,553 claims that were deemed worthy of a payment.
The average pay out was £11,650. However, the largest single payment totalled £820,000. In this case the SRA were forced to close a firm down while it was administering an estate. The beneficiary was paid all money owed with the loses being recouped from the estate at a later date.
However, SRA interventions fell considerably last year. The SRA have stated that the main reason for reducing the contributions next year was due to a fall in the number and complexity of interventions, which are at a three year low.
In 2016/17, the SRA intervened and closed 50 law firms for breaches of accounts rules, breaches of dishonesty, PII issues amongst others. However, last year, this figure fell to 33 interventions which is also an improvement on the 37 interventions in 2015/16.
Whilst there was a reduction in interventions, the contribution fund still paid out £2.9 million more than in 2016/17; this was attributed to the number of high value claims.
Last year 2,648 claims were made to the SRA and 3,127 claims were closed by the SRA, some of which were backlogged from the previous year. Whilst the total number of claims that led to a payment jumped from 680 in 2016/17 to 1,553 last year, the SRA feel as though the hike in compensation contributions last year was more than the fund needed to cover their costs.
The SRA press release commented:
“The level of contributions is set by our Board considering historical and existing claim numbers, and an analysis of potential future claims. The Compensation Fund makes discretionary payments to those that have lost money in certain circumstances, when a solicitor misappropriates or fails to account for money when providing legal services. It is a key part of the regulatory framework and helps to maintain trust and confidence in regulated law firms.
“We do not want to impose unnecessary costs on those it regulates, but it is important that the Fund has a sufficient reserve to meet anticipated claims. This is why we increased the contributions in the previous two years.”
Paul Philip, SRA Chief Executive, said:
“The Compensation Fund provides an essential safety net for those who need it, helping to maintain trust in the profession.
“We have to make sure there are enough funds to cover potential claims, both on current applications and those we expect to receive. The two year on year rises in contribution reflected forecasts of potentially significant increases in claim values on the Fund, especially from involvement in investment schemes.
“With fewer than expected interventions over the last year or so, I am pleased that we have now been able to bring contributions down.”