Fines: Firm maximum to double
The Solicitors Regulation Authority (SRA) is planning huge increases in the fines it can impose for misconduct by wealthy solicitors – from the current £50,000 to £805,000 – while reducing them for lower earners.
The regulator is also planning to pilot ‘personal impact statements’ for victims of sexual misconduct, discrimination and harassment.
As part of an overhaul of the SRA’s financial sanctions framework, the Ministry of Justice last month increased the maximum amount the SRA can fine solicitors at traditional law firms from £2,000 to £25,000 – it could already fine alternative business structures (ABSs) and those working in them up to £250m and £50m respectively.
Other changes approved by the SRA board following an first consultation exercise included taking into account the turnover of firms and income of individuals when setting fines and introducing fixed penalties for lower-level breaches.
Also, the SRA said fines would only in future be appropriate for cases of sexual misconduct, discrimination and harassment in exceptional circumstances – having tempered an original proposal not to allow them in such matters at all.
The SRA yesterday published a further consultation on the detail of the regime.
The current fines system – four bands based on the seriousness of the offence – limits the maximum fine the SRA can hand out to any solicitor to £50,000, despite the £50m ABS cap.
The proposed new system would set at £805,000 the upper limit of the top band for solicitors earning £500,000 or more. This means that wealthier solicitors at non-ABS firms would be referred to the Solicitors Disciplinary Tribunal (SDT) more frequently, as only it could fine them more than £25,000.
Meanwhile, fines for misconduct by solicitors earning £21,000 or less would be reduced. The lowest band for them would be between £420 and £630, instead of £500 to £1,000 at present.
The upper limit of firm fines will be doubled to 5% of turnover, while the SRA proposed discounting the sum imposed on either an individual or a firm by up to 40% in recognition of an early admission, whether the harm was remedied and whether the respondent co-operated with the investigation.
The SRA said the new income-based system would “help us to achieve our aim of ensuring that the fine serves as a credible deterrent and upholds public confidence through fines that are proportionate to the means of the individual”.
The consultation said the ‘exceptional circumstances’ proviso for sexual misconduct, harassment, or discrimination might include cases where the complaint has arisen due to “inappropriate or insensitive behaviour” but the SRA was satisfied there was no ongoing risk.
“This is likely to reflect a one-off incident or remark that is poorly judged but not ill-motivated.”
The SRA said it intended to pilot personal impact statements for victims such cases. This would “allow us to embed and evaluate our approach, before taking any decision as to whether to apply personal impact statements more widely”.
The fixed penalties – £750 for a first offence and £1,500 for a second offence within three years – would be piloted with a small number of breaches by firms only and reviewed after a year.
These will be failing to comply with the transparency rules; failing to provide information or documentation requested or required by the SRA, such as firm diversity data or a declaration of compliance with anti-money laundering requirements; and failing to ensure approval of role holders like compliance officers.
“The firm diversity data collection exercise in summer 2023 will provide us with valuable information about how and whether the fixed penalty regime has had an impact on compliance with those requirements,” the consultation said.
The regulator also outlined how it would be more transparent in its decision making in light of the greater powers, such as requiring adjudication panels, rather than individual adjudicators, to decide on the most serious fines.
It planned to clarify the rules for when adjudicators may interview a respondent or a witness, or conduct a hearing, which it may decide should be held in public.
A further consultation will cover the SRA’s decision-making processes and procedures, “to better demonstrate the existing functional separation and the independence of the adjudication function as well as the safeguards in place to ensure a fair and transparent process”.
It was also working “closely” with the SDT to develop a joint statement on how they both determine what represents a serious case, appropriate levels of fining, “and agreeing what our criteria for referring a matter to the tribunal should be”.
One change already implemented is that, where regulatory settlement agreements provide for a fine of more than £2,000, they have to be approved by a more senior SRA manager than before.
Anna Bradley, chair of the SRA board, said: “The changes we proposed will help to resolve issues more quickly, saving time and cost for everyone and, importantly, reducing the inevitable stress for those in our enforcement processes.
“We received broad support for our original proposals, but we recognise that with stronger powers comes a need for even greater transparency and accountability.”
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