SRA bid for maximum £805,000 fine for solicitors “excessive and unjustified”

Fines: New maximum levels not fair, says Law Society

Solicitors Regulation Authority (SRA) plans to double the upper limit on fines for law firms to 5% of turnover and to £805,000 for individuals are “excessive and unjustified”, the Law Society has argued.

Chancery Lane also called for SRA adjudicators, who would have expanded powers in the new fines regime, to be “completely independent” from the regulator’s investigators.

The SRA can now fine solicitors at traditional law firms £25,000, rather than £2,000 – it could already fine alternative business structures and those working in them up to £250m and £50m respectively.

Other changes planned by the SRA include taking into account the turnover of firms and income of individuals when setting fines and introducing fixed penalties for lower-level breaches.

In a detailed consultation on how it will implement these policies, the SRA proposed that the limits on fines for law firms should be raised from 2.5% of annual turnover to 5%, and for solicitors from £50,000 to £805,000 – although those at traditional firms would have to be referred to the Solicitors Disciplinary Tribunal to approve any fine over £25,000.

The society said in its response that turnover was “neither a fair nor a reliable indicator of profitability and does not always demonstrate ready availability of cash” and would have an unfair impact on small firms.

“What considerations have been given to the introduction of this increase during a national cost-of-living crisis and at a time when many firms (particularly those most likely to be impacted by this proposal) are still facing the financial impact of the Covid 19 pandemic?”

The society said that basing fines for individuals on gross income may be the simplest model for the SRA to administer, but it would “fail to reflect an individuals’ real economic circumstances” and was likely to result in “inequitable outcomes”.

While remaining “strongly opposed” to the plan, the society said if the SRA went ahead, solicitors should be able to submit a statement of their income and outgoings.

The solicitors’ body welcomed the proposal to introduce panels, rather than single adjudicators, to determine the most serious fines.

“We consider that panels should be made up of both legally qualified members and lay members, but that legally qualified members should be the majority and chair the panels.”

However, it had “serious concerns” over giving single adjudicators the power to invite people, such as witnesses, for interviews, and said there was a need for a “clearer functional separation” of the roles of investigators and adjudicators.

One way to address this was to prevent adjudicators from accessing solicitors’ records before making a decision, to avoid them being prejudiced.

The Law Society did not oppose the proposal that cases of sexual misconduct, discrimination and should be referred to the tribunal in all but exceptional cases, but called for the SRA to provide specific examples of the type of cases could be suitable for a fine instead.

The response opposed a pilot of personal impact statements for victims of sexual misconduct, discrimination and harassment. “It is not clear to us why the pilot is needed or whether its potential repercussions have been properly considered.

“The SRA currently obtains information about the impact on victims as part of its investigation process, which is already taken into account by decision makers.”

The society said the proposed fixed penalties for low-level offences, at £750 and £1,500 for a second offence within three years, were “on the high side”.

“We would also make the point that additional money generated by increasing fines will not benefit the profession as it will be retained by the Treasury.”

The SRA’s plans have also been strongly criticised by Birmingham Law Society, the largest local law society.

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