SRA: Governance failures
Two managers of a collapsed personal injury alternative business structure have each been fined £18,000 for failing to declare commissions earned by a connected business which provided their clients with after-the-event insurance.
Lucy Allen, non-lawyer owner and director of LA Law Limited, and solicitor and head of legal practice Donna Prested were found by the Solicitors Regulation Authority (SRA) to have failed to tell clients about the commissions on ATE policies they were required to take out.
LA Law, based in Brighton, went into administration in December 2017.
The SRA said Ms Allen “acted for personal injury clients where there was a significant risk of a conflict between her obligations to act in her clients’ best interests and her own financial interests”.
Unless they already had ATE insurance, clients of LA Law were required to take out a particular ATE policy on which Ms Allen’s separate business received commission between March 2015 and January 2017.
“Ms Allen failed to tell clients how much commission from the sale of ATE insurance policies she received through her separate business.”
Ms Allen also “failed to ensure proper governance of LA Law in that there were inadequate systems and controls for monitoring the financial stability” of the firm.
“This resulted in the firm operating between June 2017 and December 2017 while it was in serious financial difficulties.”
Ms Prested failed to carry out a “sufficient investigation and identify that there was a significant risk” of a conflict of interest, while failing to inform clients of the amount of commission received by the connected business and details of the relationship with that business.
The solicitor “failed to run LA Law Limited effectively and in accordance with proper governance and sound risk management principles” in her role as head of legal practice.
Both Ms Allen and Ms Prested also breached SRA principles and the accounts rules by retaining money paid by clients for disbursements in the firm’s office account, failing to pay the money to “appropriate recipients” or return it to client account.
Ms Allen was fined £18,000, ordered to pay £4,819 in costs and banned from working for law firms. Ms Prested was fined the same amount and ordered to pay costs of £3,000.
Two former non-lawyer managers and heads of finance and administration (HOFAs) at LA Law were fined for breaching SRA principles and the accounts rules and banned from working for law firms.
Linda Slaughter, the HOFA between August and December 2017, received payments for disbursements but failed to pay them to recipients or return them to client account.
She failed to “adequately carry out her role as HOFA” in breach of the Legal Services Act.
Ms Slaughter was fined £9,750 and ordered to pay costs of £1,875.
Mary Carmel Guerin-Warrick, the previous HOFA, was found to have committed the same offences. She was fined £13,500 and ordered to pay costs of £1,875.