Raab: Swifter and firmer action
The government has today approved the increase in the Solicitors Regulation Authority’s (SRA) fining power, from £2,000 to £25,000.
The Ministry of Justice (MoJ) said the changes meant the regulator could now fine law firms and individual solicitors for a broader range of offences – “from lower-level cases involving inadequate staff training to those with more serious consequences including failure to implement the appropriate checks required to uncover signs of money laundering by clients”.
While most changes to SRA rules do not require government approval, this one did because it needs secondary legislation to implement.
Such a large increase was opposed by the Law Society and Solicitors Disciplinary Tribunal (SDT), which backed a limit of only £7,500 and £7,000 respectively. But the SRA reported strong public support for the proposal.
By contrast, the Legal Services Board urged the MoJ to go further than £25,000.
The SRA’s long-term aim is to align its fining power for ‘traditional’ law firms and those working in them with that for alternative business structures, which under the Legal Services Act 2007 is £250m for firms and £50m for individuals.
The MoJ said as nearly 90% of fines currently issued by the SDT were for less than £25,000, the reform would allow it to focus on “fewer, more significant allegations.
Lord Chancellor Dominic Raab said: “The UK can be proud of our world-leading legal services. But it is essential the sector retains its international reputation for the highest standards of probity.
“That’s why we are allowing swifter and firmer action to be taken against those who break the codes of conduct. And we’re freeing up the Solicitors Disciplinary Tribunal to focus on the most serious breaches, such as those involving Russian sanctions.
“The increased powers will reduce the number of cases referred to the SDT, shortening the average time taken for cases to be resolved.”
SRA chair Anna Bradley added: “This change will mean we can resolve issues more quickly, saving time and cost for everyone. It will reduce stress and allow more focus on the most complex and challenging or serious cases.”
The SRA investigates almost 2,000 cases annually and handed out over 250 fines in the last year, “which is only set to increase as the changes take effect”, the MoJ said.
It cited as an example a decision from January in which the SDT fined a solicitor £25,000 for failing to follow the appropriate processes to guard against the risk of money laundering.
This included failing to carry out appropriate checks on his client, and improper use of his firm’s client account as a banking facility allowing payments of around €300,000 to be made into and out of the firm’s account. The solicitor admitted all the allegations in full.
Law Society vice-president Lubna Shuja described the increase as “disproportionate” and accused the MoJ of ignoring “the majority views of opposition expressed in response to the SRA’s consultation on the matter”.
She continued: “We remain concerned about the lack of independence within the SRA between decision makers and prosecutors, as well as the lack of transparency around SRA decisions. We do not think that the right of appeal to the SDT is an adequate safeguard.
“We staunchly opposed this increase in fining powers and lobbied the MoJ to reconsider its position, however, it has decided to forge ahead.”
Ms Shuja argued that the SDT was the most appropriate jurisdiction for “more serious and complex matters and those that may involve higher fines”.
“It guarantees independence, transparency, objectivity, has adequate safeguards and much greater powers – including the ability to impose fines and strike-off a solicitor.
“We will monitor the impact of the increased fining powers to ensure regulation is proportionate and effective.”
Other changes to the SRA’s fines regime include taking into account the turnover of firms and income of individuals when setting fines, and introducing fixed penalties of up to £1,500 for lower-level breaches.
Also, fines will only be appropriate for cases of sexual misconduct, discrimination and harassment in exceptional circumstances.
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