SRA: Lack of control and oversight persisted for a long time
A solicitor who failed to properly supervise his firm’s bookkeeper – who went on to steal £25,000 – has been fined £2,000 by the Solicitors Regulation Authority (SRA), the second such sanction he has received in four years.
Michael Elwyn Morgan first signed a regulatory settlement agreement with the SRA in 2016 over several admitted breaches of the accounts rules in relation to his handling of client money. Along with the firm’s other manager at the time, he was fined £2,000.
Mr Morgan is a principal and compliance officer for finance and administration at Stockport firm O’Neill Morgan.
Later in 2016, the firm employed a new bookkeeper who, unbeknown to Mr Morgan, had been convicted of theft two years earlier while working as head of accounts receivable at now defunct Wilmslow law firm Roberts Jackson.
According to the newly published agreement, Kayleigh Tunnicliffe was directly managed by Mr Morgan. He verbally checked the balance of the office account regularly.
“However, he did not adequately supervise or check her work. Between November 2016 and January 2018, the bookkeeper took at least £24,500 from the firm’s office account and its client account.”
She did this by accepting cash from clients which she kept for herself rather than pay into the firm’s client account, and making BACS and cheque payments to herself from the firm’s office account.
O’Neill Morgan’s three-way client bank account reconciliation in October 2017 showed a number of unreconciled items. Mr Morgan did not investigate these at the time and no further three-way reconciliations were undertaken until April 2018.
However, in September 2017, due to concerns about Ms Tunnicliffe’s performance, Mr Morgan instructed the firm’s accountants to undertake a full review of its accounts. She left the firm before this work started and the missing client money was discovered.
Further investigation uncovered Ms Tunnicliffe’s actions and Mr Morgan became aware of her previous conviction. Mr Morgan replaced the missing monies.
Last year, the SRA banned Ms Tunnicliffe from working in a legal practice without its consent, and also rebuked and fined her £2,000. It said she drew a cheque for £1,250 in cash from office account without permission and cashed this for her own use.
Mr Morgan admitted failing to establish and maintain proper accounting systems and internal controls, to carry out reconciliations, and to protect client money as a result.
The agreement said: “The SRA considers that a fine is an appropriate outcome because Mr Morgan’s behaviour showed a disregard for his regulatory obligation to exercise proper management over the firm.
“The lack of control and oversight persisted for a long period of time and made it easier for the bookkeeper to commit serious misconduct.
“Mr Morgan was not directly responsible for the losses that arose as a result and has since remedied them in part from his own resources.
“However, having been fined in early 2016, he ought to have been particularly cognisant of the need to have in place proper governance and oversight of the firm’s handling of client money.”
Setting out how it reached the level of fine, it was agreed that the nature of the misconduct was high but the impact low because Mr Morgan was not directly responsible for the loss and made it good. This meant a fine of between £1,001 to £5,000 under the SRA guidance.
In mitigation, Mr Morgan said the misconduct arose due to the actions of a dishonest employee; that he took steps to replace the missing monies from his own resources, which included selling his home; he has improved the firm’s processes and procedures; and he co-operated fully with the SRA investigation.
Balancing the mitigation “against the fact that this matter appears to form a pattern of behaviour”, the SRA decided that a basic penalty of £3,500 was appropriate.
This was then reduced to £2,000 to reflect Mr Morgan’s early admission and insight, as well as replacing the missing money.
Conveniently, £2,000 is the most the SRA can fine a solicitor at a traditional (ie, non-alternative business structure) firm without having to refer them to the Solicitors Disciplinary Tribunal.
Meanwhile, in another regulatory settlement agreement published yesterday, non-solicitor Javaid Iqbal – who was a self-employed consultant at Bradford firm Reiss Solicitors – has also been banned from legal practice for having a client pay £8,480 into his personal bank account.
Reiss dismissed Mr Iqbal when it became aware of what he had done, and he repaid the money. The firm used this to pay disbursements which were owed in connection with the matter, the client having moved to another firm.
Leave a Comment