ABSs to face fines of up to £150m

Print This Post

By Legal Futures

24 December 2010


Penalties: high figure will not constrain licensing authorities

Alternative business structures (ABSs) face a fine up of to £150 million for misconduct or non-compliance, with a figure of £50 million for individuals working within them, under plans released by the Legal Services Board (LSB).

The LSB said such large figures “will have strong deterrence in the market and avoid situations where any entity or individual may consider ‘pricing in’ non-compliance”.

A consultation paper issued yesterday explains: “Experience from other sectors indicates that the threat of significant penalties does work in terms of deterrence (and regulators do not have to use their powers often) and that in practice the level of penalties is not disproportionate. We consider that small firms should see that setting a high maximum will mean that they are not disadvantaged by their larger competitors” penalties being capped at a disproportionately low level.”

The figure for entities was set after looking “at the size of firms currently in the market, potential entrants to the market, the deterrence effect of penalties and the size of penalties imposed by other regulators”.

The figure for individuals was influenced by the miners compensation claims scandal, “where one partner is reported to have earned more than £30 million over a five-year period on matters that led to him being struck off the roll of solicitors”.

The LSB had planned to give licensing authorities the power to levy unlimited fines – in line with what the Solicitors Disciplinary Tribunal can award – but the Ministry of Justice advised that this was not possible under the Legal Services Act 2007.

The consultation says the LSB considered making the penalty a percentage of turnover but it saw various disadvantages to that, such as how to define turnover for these purposes. It would also be no use in setting a figure to fine individuals.

The LSB said a high fixed maximum would give a licensing authority “the flexibility to exercise its discretion and judgement in setting a penalty in a way that enables it to take into account the likely wide variation in the outcomes of investigations that it will encounter”.

It added: “We consider that this has the strongest deterrence and the simplicity of the construction means that challenge to the amount of a penalty will be considered in the application of the rules of the LA through the appeal process rather than through administrative appeals on the application of the maximum penalty rules.”

Tags: , , ,



Leave a comment

* Denotes required field

All comments will be moderated before posting. Please see our Terms and Conditions

Legal Futures Blog

Lawyers must now draw on the data and drive change

Chris Marston 2014

The results from this year’s legal services consumer tracker survey make for interesting reading. In its sixth year, the research finds that a firm’s reputation continues to grow in importance, holding its top slot as the number one factor influencing choice of lawyer, with price remaining a strong second, reflected in a shift towards higher numbers of fixed-fee transactions. Alongside, it reports that trust in lawyers has declined to 42%, from 47% in 2012. It’s useful information as far as it goes, but what is the sector going to do with it?

September 26th, 2016