Fining: SRA proposes three-step approach
The Solicitors Regulation Authority (SRA) is again lobbying the government to raise the amount it can fine traditional law firms after its previous attempt to catapult the limit from £2,000 to £250m was rejected last autumn.
Meanwhile, fines imposed on solicitors and alternative business structures (ABS) for disciplinary offences should be decided by SRA decision-makers by reference to ‘brackets’ or ‘bands’ of fines for particular offences, according to newly published draft SRA guidelines.
Last October the Ministry of Justice turned down an SRA request to increase its fining powers by such a massive margin, after objections by the Law Society and the Solicitors Disciplinary Tribunal (SDT). With the backing of the Legal Services Board, the authority argued enhanced powers to penalise ‘traditional’ law firms were necessary to match those it has for ABSs, where it can fine individuals up to £50m and the ABS itself up to £250m.
At present, if the SRA considers a fine of more than £2,000 is appropriate, it needs to refer the case to the SDT, which has unlimited fining powers.
Introducing a consultation paper on the proposed fining guidelines, the authority revealed: “We have… made a separate proposal that the maximum sum which the SRA can fine traditional law firms and those involved in traditional law firms should be significantly increased.
“We are currently discussing with the MoJ what increases, if any, could be made in the short- to medium-term to the SRA’s fining powers under the ‘traditional’ regime and the possible need for changes to primary legislation to achieve longer-term reform.”
Until the issue was resolved, the SRA admitted the guidelines would “currently be most relevant to ABSs and those working in them”. Guidance was necessary in order to “assist decision-makers to determine specific figures”, “maximise consistency, fairness and transparency”, and increase the “deterrent value” of fines.
The authority suggested adopting a three-step approach to fining. This involves first assigning a ‘score’ to the conduct in question according to its seriousness, in order to determine which penalty bracket it falls into – for instance, £500-£1,000 or £1,000 to £5,000.
Secondly, discounts to the penalty will be applied to take account of mitigating factors; and thirdly a check will ensure the penalty has removed any profit or gain arising as a result of the conduct.
In detailed discussion of the options, the SRA said its “preliminary view” was that where firms of great means were the subject of a fine, decision-makers should determine it as a percentage of turnover rather than assets or profit. Where individuals, such as solicitors, were involved, it said: “We do not favour determining penalties… as a percentage of income as we consider that fixed monetary sums will provide adequate deterrence… [and] the time involved… could be disproportionate.”
It continued: “More broadly, we do not propose to distinguish between fining entities and individuals as a significant number of ‘firms’ regulated by the SRA are sole practitioner solicitors.”
David Middleton, the SRA’s executive director for legal and enforcement, said: “Financial penalties provide a flexible method of deterring inappropriate conduct by those directed to pay them but also by sending a deterrent message others.
“The guidance would sit underneath the existing framework in the SRA disciplinary procedure rules for determining when a fine is appropriate and what sum should be levied. We’re keen to receive stakeholder views on our thinking here and on the new ideas discussed in the consultation.”
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