Slater & Gordon: Fined for failures on both sides of due diligence
Slater & Gordon has been rebuked and handed a record fine of £80,000 for an alternative business structure (ABS) for inspecting confidential client data during the due diligence that led to its acquisition of Quindell Legal Services (QLS).
The fine was split equally between the main ABS and Slater Gordon Solutions – a separate ABS which at the time was QLS – for allowing the data to be disclosed.
The firm will also have to pay the Solicitors Regulation Authority’s (SRA) costs of £26,000.
Though the SRA’s fining powers are limited to £2,000 for traditional law firms – it has to refer cases to the Solicitors Disciplinary Tribunal if it thinks the level should be higher – the Legal Services Act allows it to fine ABSs up to £250m.
This is the most it has fined an ABS, although the record fine for a firm, as approved by the tribunal, is £500,000 for US law firm Locke Lord.
The main firm was found to have inspected unredacted confidential information and documents from 7,087 client matter files of QLS without the knowledge or consent of the clients during the due diligence that took place in late 2014 and early 2015.
This breached principles 3 (“You must not allow your independence to be compromised”) and 6 (“You must behave in a way that maintains the trust the public places in you and in the provision of legal services”) of the SRA Principles.
It also breached those principles by disclosing the information and documents from a selection of the files to two other unnamed firms, against without the knowledge or consent of the clients.
SGS’s fine was for disclosing the information and documents when it was QLS.
This was in breach of principles 4 (“You act in the best interests of each client”) and 6, and QLS failed to achieve outcome 4.1 of the Code of Conduct, which requires solicitors to keep client affairs confidential.
A Slater & Gordon spokesman said: “We take our obligations relating to confidentiality extremely seriously.
“The SRA carried out a detailed investigation into matters that occurred in 2015, during the Quindell period. It is important to stress the SRA concluded there was no evidence that clients’ data was released outside of firms regulated by the SRA.
“However, we accept the SRA’s conclusion that a breach took place in relation to the due diligence process during this complex business transaction.”
In May, Slater & Gordon announced that it was to combine its two ABSs into one.
The SRA has long campaigned to have equivalent fining powers for traditional firms that is has for ABSs.
