Fines: SRA approaching ABSs and traditional law firms in wrong way, says Law Society
Solicitors Regulation Authority (SRA) plans to introduce multi-million pound fines for law firms are a “significant breach of Parliament’s intentions” and in any case wrong on policy grounds, the Law Society has claimed.
In a strong response to a Ministry of Justice consultation on the SRA’s desire to be able to fine law firms up to £250m and individuals £50m – compared with £2,000 as at present – the society argued that the SRA’s fining powers should continue to be limited so that it can only deal with less serious regulatory matters.
“At the same time as introducing a modest fining power for the SRA, the Legal Services Act gave the SDT [Solicitors Disciplinary Tribunal] an unlimited power to fine,” wrote Russell Wallman, the Law Society’s director of government relations. “The public policy intent was thus clearly to have a sharp distinction between the nature of the fining power available to the Law Society/SRA and that available to the tribunal. It would be quite wrong for that approach to be overturned by regulations…
“It is important that more serious matters are dealt with by a tribunal which is independent of the prosecuting authority.”
Mr Wallman also contested the SRA’s argument about bringing its fining powers for traditional law firms in line with alternative business structures (ABSs), where the £200m/£50m limit already applies.
He said there was a distinction between the two; the possibility of ABSs being owned by large corporate bodies meant that an “effective deterrent for those owners may require very large financial sanctions, especially as the owners themselves might be unconcerned by the prospect of prohibition from future involvement in a law firm”.
If the two regimes need to be brought into line – which the society believes they should be, subject to the special considerations arising from external ownership – then the ABS regime should be aligned with that for traditional firms, rather than the other way round, he continued.
Mr Wallman added that before any significant changes are made to sanctions, the SRA needs to be able to assure stakeholders “that they had established a proper separation between their investigative, prosecutorial and adjudication functions, and that there were effective arrangements in place to ensure consistency of approach to sanctions”.
Last week, the Legal Services Board came out strongly in favour of a substantial rise in the SRA’s fining powers, the final decision on which rests with the Ministry of Justice.
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