Money: accounts rules breaches
A solicitor who provided two longstanding clients with banking facilities, and also accepted more than £400,000 in loans from them without insisting that they take independent legal advice, has been fined by the Solicitors Disciplinary Tribunal (SDT).
The £10,000 fine for Howard Samuel Norman followed publication of a regulatory settlement agreement in which his practice manager accepted a rebuke and £2,000 fine for the accounts rules failures.
Mr Norman, who was born in 1949 and qualified in 1976, was at the relevant times the sole principal of Liverpool firm Black Norman (it is now a partnership).
Both clients lived abroad. In relation to one of them, the client ledger recorded sums received of nearly £6m via nine transactions and payments out of approximately the same amount in 45 transactions. “But no bills were recorded on the office side of the client ledger,” the SDT said.
In relation to the other client, the firm received £300,000 in respect of a proposed property purchase in the UK, which did not proceed and Mr Norman was asked to retain the money, eventually returning it seven months later.
The tribunal said there was no suggestion that the clients were engaged in money laundering or any other improper practices, but the firm was exposed to this risk.
“The rules against providing a banking facility were in place to protect the profession as well as the public. Where a solicitor was used as a bank, there was reputational damage to the profession. The sums involved in this case were considerable, and were held and used over a long period.”
Mr Norman admitted the charge, but said that at the time he had not realised that the arrangements broke the accounts rules.
In all, Mr Norman accepted £408,000 in loans from different clients, mainly to pay a tax bill. The Solicitors Regulation Authority (SRA) had accepted, and the tribunal found, that the clients were content to make the loans and were asked to take independent advice, but refused to do so. The SRA said he should have insisted that they do and not accepted any money if they did not.
The tribunal ruled: “There was an inherent conflict between the lender client and the borrower respondent. Whilst the loans were convenient for the respondent, and were repaid, accepting the loans was in contravention of the respondent’s professional obligations.
“In taking loans in the circumstances set out, the respondent acted where there was a conflict of interest, had failed to act in the best interests of his clients Mr JJ and Mr JB, allowed his independence to be compromised (as he was in debt to clients).”
In deciding the sanction, the tribunal took into account Mr Norman’s previous appearance before the SDT in 2013, when he was fined £15,000 for accounts rules breaches.
It said: “The tribunal noted and accepted that the respondent had not realised that he was acting in breach of the rules against providing a banking facility and taking loans from clients who had not taken independent legal advice.
“He had not intended to breach any rules but had acted for his own convenience and that of his clients, without proper consideration of whether he was thereby acting in accordance with his professional obligations… There was no breach of trust; the clients involved were wealthy and competent individuals who were not exploited.”
The SDT accepted that there had been no direct harm to the clients, but “the reputation of the profession was damaged by a solicitor acting where there was a clear and inherent conflict between his own interests and those of a client, particularly where there was a risk (albeit it did not transpire) that the client would lose out financially”.
It said the misconduct in the 2013 matter had more serious and it was concerned that the defaults had happened despite Mr Norman having attended training on the accounts rules. “He had failed to learn from his previous mistakes. The tribunal was careful to avoid imposing a fresh sanction for the respondent’s previous misconduct, but regarded it as a significant aggravating factor.”
Saying the loans were a more serious matter than the other banking facilities charge, it concluded that a fine would be sufficient to reflect the seriousness of Mr Norman’s misconduct and set the figure at £10,000, plus £10,000 in costs that had already been agreed by the SRA.
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