Kershaw: Concerned about a lack of effective fining powers
The Legal Services Board (LSB) is set to make a direct request to the government to increase the Solicitors Regulation Authority’s (SRA) fining powers beyond the current £25,000 limit.
The oversight regulator is on record as describing the case for a higher amount as “compelling” and on Friday announced plans to review the enforcement and investigative tools available to all the legal services regulators.
“This could include increasing financial penalties available to regulators, as well as enabling regulators to proactively gather information and share intelligence to help them detect and address misconduct,” it said.
“This is in response to the LSB’s long-held view that existing penalties may be insufficient to deter wilful and serious misconduct in some areas.”
The LSB has statutory power to recommend to the Lord Chancellor changes to the functions of legal services regulators, including the level of financial penalties they can impose.
It said the review was being carried out “with a view to framing, subject to statutory process and consultation, an appropriate recommendation”.
The LSB has previously announced that it would this year review regulators’ disciplinary and enforcement processes, following weaknesses identified in its annual regulatory performance assessments.
“The LSB will assess the progress made by regulators in addressing these weaknesses as it considers the case for strengthening the enforcement tools available to them.”
The SRA has been pressing for higher fining powers for many years, calling to bring them in line with the separate regime for alternative business structures, which it can fine up to £250m, and £50m for those working within them.
The Ministry of Justice only agreed to increase the limit for traditional firms from £2,000 in June 2022, but has since amended the Economic Crime and Corporate Transparency Bill currently going through Parliament to allow for unlimited fines in cases of economic crime.
The SRA last week used the Daily Mail investigation into immigration solicitors it accused of helping clients cheat the system as justification for an across-the-board increase.
LSB chair Alan Kershaw said: “For some time, we have been concerned that a lack of effective fining powers among some regulators, particularly the Solicitors Regulation Authority, may hamper their ability to tackle wilful and serious misconduct.
“We are anxious to ensure that regulators have the most effective tools available to identify and deal with such misconduct.
“At the same time, the LSB needs to have confidence that first class enforcement powers are accompanied by first-class enforcement processes that are fair, transparent and timely.
“We will address these issues to help build public trust and confidence in legal services – an objective we hope everyone will get behind.”
The Law Society opposed the increase to £25,000 – recommending no more than £7,500 – and argued in response to the LSB announcement that there was “no evidence that the SRA’s current fining powers are insufficient”.
President Lubna Shuja said the moves to increase them were a “knee-jerk reaction” to the Daily Mail coverage.
She said: “The SRA does not exist on its own in the regulatory process. It sits alongside the Solicitors Disciplinary Tribunal (SDT), which already has draconian powers to sanction any wrongdoing in the solicitors’ profession.” These include unlimited fines.
She argued that the SDT remained “the appropriate forum for serious cases of alleged misconduct”.
“It is independent from the regulator and has clearly defined processes. This transparency means that solicitors, clients, and the general public can have confidence in the SDT’s decision making processes.
“Further extending the SRA’s powers risks undermining the SDT’s role and authority and potentially reducing the sanctions imposed on bad conduct.”
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