COFA sanctioned after client account was used as banking facility
SRA: maximum sanction
A practice manager who is his firm’s compliance officer for finance and administration has been rebuked and fined by the Solicitors Regulation Authority (SRA) for letting his firm’s client account be used as a banking facility among other offences.
Accountant Jonathan Beck of Merseyside practice Black Norman was recently appointed a committee member of the Law Society law management section, according to his profile on the firm’s website.
In a regulatory settlement agreement published yesterday, Mr Beck admitted that he permitted the provision of banking facilities through client account, along with withdrawals and transfers that he should not have done, and that he failed to meet his obligation as a compliance officer.
The SRA said it considered that Mr Beck’s “culpability” was less than that of the firm’s senior partner, Howard Samuel Norman, who it said has been referred to the Solicitors Disciplinary Tribunal.
The tribunal applies the higher (criminal) burden of proof, while the SRA uses the civil standard.
The SRA said that the firm had provided a banking facility for two clients over nearly five years. They were said to be long-standing personal friends of Mr Norman and spent much of their time abroad.
In relation to one of the clients, the agreement said, the client ledger recorded sums received of nearly £6m via nine transactions and payments out of approximately the same amount in 45 transactions. “But no bills were recorded on the office side of the client ledger.”
Further, a number of transactions occurred after the initial meeting with an SRA official who expressed concerns about the use of the client account ledger as a banking facility.
“When interviewed during the SRA investigation, Howard Norman appreciated that it could be interpreted that the firm was providing banking facilities but he never saw it as such,” the agreement stated.
The other client, called JJ, gave the firm nearly £300,000. “During the SRA’s investigation, Howard Norman advised that the monies were held for JJ to be used by JJ should an investment opportunity arise. Mr Norman accepted that a banking facility had been provided for JJ as there had been no specific underlying legal transaction.”
Another admitted offence related to work done for a client on a litigation matter, during which the firm “improperly transferred excessive amounts of costs received from the client account to office account. Subsequent transfers from office to client account were necessary to put the ledger in funds in order to allow a payment to the client”.
In mitigation, Mr Beck said he was unclear about the obligation not to allow client account to be used as a banking facility for client; that the firm’s procedures have been amended to mitigate the risk of a repetition of such withdrawals in error; that “he intended in good faith to carry out his role in the firm effectively in accordance with proper governance and sound financial and risk management principles”; and that while accepting that his actions have fallen short of the standard of conduct expected, it was as a result of “misunderstandings and unintended breaches”.
He was rebuked and fined £2,000 – the highest penalty the SRA can impose – and also agreed to pay costs of £1,339.
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