SRA: Breaches only rectified because of investigation
The Solicitors Regulation Authority (SRA) has slapped a law firm with a £45,000 fine for multiple failures in its conduct of financial mis-selling claims.
The penalty again highlights the disparities in the regulator’s fining powers, which are limited to £25,000 for traditional law firms but £250m for alternative business structures, which is what Bournemouth firm TMS Legal is.
The firm specialises in claims against banks for mis-sold packaged bank accounts and, according to a regulatory settlement agreement published on Friday, handled around 30,000 matters in the year to 30 June 2020.
The SRA began an investigation after complaints from two banks about TMS’s conduct and the quality of the claims it was submitting. An officer reviewed 37 files highlighted by the banks and six randomly selected matters.
This found that TMS did not carry out sufficient client due diligence, which led it to submit some claims with inaccurate information and continue to act on two matters where the clients had asked it to stop.
In some instances, the firm’s lawyer – listed by the Law Society as Penelope Hill – failed to supervise non-legally qualified staff properly.
In addition, the information TMS put in packaged bank account questionnaires – a document produced by the Financial Ombudsman Service – used standard wording that did not necessarily reflect what its clients had said.
TMS admitted the breaches but the SRA acknowledged in mitigation that, with most of the files provided to the SRA by the banks, “there is no suggestion that the issues identified… transcended the firm’s books”, while the two failures to cease acting “represented isolated and inadvertent errors”.
Further, TMS took “swift action to revamp its client identification and due diligence procedures once shortcomings were identified such that the risk of repetition is judged to be low”.
Clients were informed about the standard wording system used in the questionnaires “and there is no suggestion that there was any deliberate attempt to misrepresent and/or enhance claims”.
Other mitigation was that, at the same time as finding ineffective supervision, there were also “examples of direction and supervision to file handlers”, and “supervisory responsibilities of the firm’s legal practitioner have since improved such that it is now effective”.
TMS has worked with a compliance consultancy to update its policies, train staff and draft amended client questionnaires.
The SRA said a fine was appropriate because, “although the breaches were rectified and remedial action was taken, they persisted longer than reasonable and were rectified mainly as a result of the SRA’s investigation”.
Its penalty guidance pointed to a fine of between £25,000 and £50,000 and the SRA said the highest figure – less a 10% reduction to take account of the mitigation – was the appropriate outcome.
TMS’s website says that “an ethical and professional standard is at the heart of what we do”.
The SRA recently renewed its call for unlimited fining powers, while the Legal Services Board is to recommend that the government increase them beyond the £25,000 limit.
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