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Rebuke for law firm that paid £215,000 for referrals from unauthorised CMC

Injury claims: Referral fee was £396 as an average

A north-west law firm has been rebuked after paying more than £200,000 to an unauthorised claims management company for personal injury (PI) referrals.

The Solicitors Regulation Authority (SRA) said KG Solicitors in Blackburn accepted 544 referrals and paid £215,600 between 8 April 2016 and 18 September 2016 – which works out at an average of £396.

In addition to the written rebuke, KG was ordered to pay costs of £1,350.

The firm was found to have breached principle 8 of the SRA Principles, which requires solicitors to run their business or carry out their role in the business effectively and in accordance with proper governance and sound financial and risk management principles.

The firm also failed to achieve outcomes 7.2 and 7.3 of the SRA Code of Conduct – respectively that solicitors have effective systems and controls in place to achieve and comply with the Handbook, and that they should identify, monitor and manage risks to compliance.

The Law Society database lists five solicitors as working at KG Solicitors, whose website says it specialises in PI, immigration, care fees, industrial deafness, family and elderly client work. We have approached the firm for comment.

The SRA said it was “unable” to comment on whether any further disciplinary action was being taken against individuals.

The regulator has been dogged by questions over the effectiveness of its response to the ban on PI referral fees since it became law in 2013.

The SRA published a thematic review of the PI sector last month that painted a positive picture overall [1] but found there was still some bad practice, particularly around firms’ relationships with work introducers and other third parties.

A survey of solicitors that formed part of the review said the referral fee ban was “understood and accepted, but its effectiveness was questioned.

“We are also continuing a number of investigations around prohibited referral fee arrangements,” the SRA said in the report.

It made detailed visits to 40 firms for the review and found that nearly half of them had referral arrangements in place with claims management companies. The majority checked that they were registered with the Ministry of Justice’s claims management regulation unit.

“One firm was found to have breached LASPO and one firm was referred into our disciplinary processes for possible breaches of LASPO. No evidence of such breaches was found at any other firms.”