The Solicitors Regulation Authority’s (SRA) is planning to increase its power to fine law firms from £2,000 to £250m, and to £50m for individuals, Legal Futures can reveal.
The move would bring traditional firms in line with rules which already exist for alternative business structures (ABSs), but the Law Society has described it as “misconceived”.
An SRA spokesman said: “We have previously asked in a public consultation in 2010 whether we should be able to impose the same level of fine for equivalent misconduct for both types of entity we regulate.
“The substantial majority of those who replied thought that we should. The SRA believes there are extremely convincing policy reasons why the fining limit for traditional law firms should be increased, including the need for efficiency, fairness, consistency and delivery of a credible deterrence.”
The ABS fine levels were set by the Legal Services Board last year , when it said: “The maximum penalty must be a suffici
ent deterrent to non-compliance and that in setting the level of a penalty a licensing authority must have sufficient flexibility to eliminate financial gain from non-compliance yet impose a proportionate amount.”
There is a relatively straightforward mechanism in the legislation by which the Lord Chancellor already has the discretion to order an increase. The SRA is currently in discussions with a number of stakeholders, including the Ministry of Justice, the Legal Services Board, the Law Society and the Solicitors Disciplinary Tribunal (which already has unlimited fining powers) about the proposals.
The Law Society pointed out that during the passage of the Legal Services Act 2007, Parliament did not see the need for regulators to have equivalent fining powers in respect of both ABSs and traditional firms.
A spokeswoman added: “Our initial view is that the current SRA proposals are misconceived. While the Act does allow for the maximum fine to be amended – and the society can see there is a case for a modest increase – Parliament’s decision to set the limit at £2,000 suggests that any further rise should bear a reasonable relationship to this figure.
“Discussions on this matter are at an early stage. Any changes to SRA’s fining powers will have to be publicly consulted on.”
The SRA said that once it has finished its discussions, it will consider with the Ministry of Justice whether the ministry is prepared to recommend an increase. That would then be the subject of a further public consultation.