Law Society: Concerns about SRA’s processes
The Law Society has backed a “moderate” increase in the Solicitors Regulation Authority’s (SRA) fining powers to between £5,000 to £7,500, rather than its proposed £25,000.
However, the society opposed removing fines from the SRA’s sanctions guidance as an option for sexual misconduct, discrimination and harassment, arguing that decision-makers’ discretion should not be fettered.
In a consultation begun in November, the SRA said increasing its internal fining power from the current £2,000 to £25,000 would allow it to deal with a broader range of disciplinary matters without having to refer them to the Solicitors Disciplinary Tribunal (SDT).
In its response, the Law Society accepted that “an appropriate increase” was reasonable and would assist the regulator in making decisions in a greater number of straightforward cases, “which is likely to speed up the process, save costs as well as reduce the stress on all parties”.
But a 1,150% increase was too high for several reasons, including concerns about the SRA’s decision-making and investigation processes generally, “but also more particularly disciplinary action in relation to Black, Asian and minority ethnic solicitors”.
Given the SRA was “investigator, prosecutor and judge” for such fines, raising the threshold to £25,000 would potentially encompass “many more serious and significant cases” which currently go before the SDT to scrutinise and lay out its reasoning.
The right of appeal to the SDT was not an adequate safeguard, the society added.
“Many firms and individuals faced with an adverse decision from the SRA would find the prospect of an appeal (and the associated costs of appealing) daunting, as it would in effect be challenging the regulator.”
Also, a large commercial law firm could be in “a much stronger position to negotiate and resist any pressure to accept a higher fine” than a small firm.
Given that fines above £15,000 were “relatively rare” at the SDT, the Law Society questioned why the SRA would seek fining powers well above that level.
Rather, figures showed the majority of fines the SDT handed out were above £7,500, suggesting that the SRA’s internal fining limit “should sit somewhere between £5,000 and £7,500.”
While discrimination and harassment should be treated “with the utmost seriousness”, the response argued that such misconduct covered “a very wide spectrum of behaviours and can arise in a wide range of circumstances and it is right that the individual circumstances of each case should be considered in making a decision about an appropriate penalty”.
Listing a fine in the sanctions guidance as ordinarily inappropriate for such cases would “undermine confidence” in the SRA and could lead to numerous challenges to the regulator.
“The SRA’s proposals would severely limit the scope for taking those circumstances into account and may mean that all breaches are treated similarly. This may mean that inappropriate penalties are given for some of the breaches concerned.
“For example, the case of an individual who makes offensive remarks in a private Facebook group, such as the case of Jain, is very different to a case of someone who makes offensive comments openly on Facebook, for example in the case of Mahmood.”
The society opposed the proposal for a fixed penalty regime for lower-level breaches of the SRA rules or non-compliance with its more administrative requirements or failure to respond to requests.
“We do not consider there is a sufficient evidential basis to justify [this]… without specific data about the numbers of such matters handled by the SRA or the range of fines imposed, it is difficult to place this proposal in its proper context.”
Further, the consultation failed to provide any information about the potential cost of setting up and administering such a scheme or any costs savings.
The response was also against the proposed turnover based assessment for all firms when calculating the level of financial penalty.
“A model based exclusively on turnover will not necessarily incentivise better compliance. Instead, we believe that concern for reputation is the prime motivator of good behaviour, and that this will operate regardless of the level of any potential fine.
“We therefore see no good reason as to why a turnover based model is preferable to the existing model.”
Using turnover could also lead to much higher fines and in turn increased insurance costs.
“Self-evidently an increase in overheads could lead to further financial stress for legal businesses.
“At a time when access to justice is a real issue, the SRA must take care that the introduction of further regulatory burdens does not lead to unintended negative consequences, particularly for consumers of legal services.”
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