Fines: SRA to base figure on firm turnover
The Solicitors Regulation Authority (SRA) has launched its latest effort to expand its fining powers, this time looking to increase the current £2,000 maximum to £25,000.
The regulator is also asking whether fines are an inappropriate sanction for sexual misconduct and for discrimination.
The proposals include taking into account the turnover of firms and income of individuals when setting fines, as well as introducing a schedule of fixed penalties of up to £1,500 for “lesser issues”.
The £2,000 cap contrasts starkly with the SRA’s fining powers for alternative business structures (ABSs), which under the Legal Services Act 2007 are £250m for firms and £50m for individuals working in them.
Ultimately it will be for the Ministry of Justice to decide as secondary legislation is required to change the cap – the Legal Services Board has historically supported the SRA’s call for an increase of some nature.
As long ago as 2012 the SRA failed to persuade it to extend the ABS figures to all firms, and a 2014 effort to increase it to £10,000 also petered out, but the regulator has continued to lobby on the issue.
Others, such as the Insurance Fraud Taskforce and most recently the Office for Professional Body Anti-Money Laundering Supervision, have highlighted it as a problem too.
In a consultation paper published today, the SRA said increasing its fining threshold 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).
“This would mean cases could be resolved quickly, potentially reducing the cost, resource and stress burden a hearing places on all involved. It could also free up time at the SDT to progress the most serious cases.”
The consultation said that, over the last seven years, at least half of all fines handed out by the SDT were for £10,000 or less, and at least 75% did not exceed £20,000. The majority of outcomes agreed by the SRA with offending solicitors and firms, and then approved by the SDT, were for no more than £25,000.
“This suggests that it may be appropriate for us to handle these fines under our internal powers and therefore without the need for the SDT to approve the outcome.”
The consultation argued that “societal views about what an appropriate sanction might be” were likely to have changed significantly in the eight years since the SRA issued its fining guidance.
“In that time, we have seen a change in the nature of the cases we handle, with a greater number of cases relating to ethical behaviour outside of the solicitor/client relationship, including sexual harassment cases and offensive and discriminatory communications.
“Therefore, we now need to undertake a more fundamental review to ensure the guidance remains appropriate and up-to-date.”
This included looking at types of misconduct where a financial penalty was inappropriate – the SRA’s current approach is that dishonesty/lack of integrity, abuse of trust or exploitation of vulnerability, and misconduct of a criminal nature all mitigate towards suspension or strike-off.
Its “provisional view” was that sexual misconduct should be added to this list, as the Bar Tribunals and Adjudication Service is in the process of doing.
The SRA said: “Many of the sexual misconduct cases that we have referred to the SDT in the past few years have received financial penalties.
“This includes the highest fine issued in 2020 for a serious allegation of sexual misconduct of £55,000. By contrast, a solicitor who inappropriately touched a paralegal on several occasions in front of colleagues and clients was fined £10,000.
“These findings have resulted in much debate, including in the media, often questioning whether any sanction short of restrictions on practice for behaviour of this nature can meet public expectations.”
Discrimination and non-sexual harassment should also be included for the same reasons, it went on. Such cases would “ordinarily require a sanction of suspension or strike-off given the issues these raise about the individual’s attitude and the risk they present to colleagues in the workplace, clients and others”.
While there might be cases with mitigating circumstances where a suspension or strike-off was disproportionate, “in this scenario, we consider that a rebuke may be a more appropriate than a financial penalty, given that a financial quantity cannot be applied to the harm caused”.
The consultation proposed sweeping away the current fining bands and instead basing fines on the size and financial position of firms, capping them at 5% of turnover.
“This appears to be with the normal range of many other regulators and is more likely to give flexibility to provide a credible deterrent and provide sanctions at a level more likely to instil public confidence, particularly for the more serious misconduct that might attract a financial penalty.”
It would also take account of income when setting fines for individuals: “This would, for example, allow different levels of fine to be issued to a low-earning junior solicitor compared to a senior equity partner for similar offences.”
Fixed penalties for certain lower-level misconduct “would not only allow more straightforward issues to be dealt with more easily for all concerned, but it would also provide greater transparency and consistency in how penalties were applied”.
Examples included not updating records when there was a change of role holder, not complying with rules on displaying certain information on a website, and not producing training records.
Penalties would usually start at £800 or less for a first offence and up to £1,500 for any subsequent offence.
All SRA fines could still be appealed to the SDT.
The consultation closes on 11 February 2022.
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