The Solicitors Regulation Authority (SRA) has rejected calls for it to have greater powers to fine alternative business structures (ABSs) than traditional law firms.
It has also dismissed suggestions by the Law Society that it should not have substantial fining powers at all.
The Ministry of Justice is currently consulting on SRA proposals  to bring its fining powers for traditional firms – currently £2,000 – in line with those for ABSs, which are £250m for firms and £50m for individuals.
The SRA’s regulatory risk committee was told recently that one issue which has arisen is that some stakeholders feel higher penalties should be available within the ABS regime because ABSs may be of higher means or may be less deterred from misconduct by the prospect of being removed from future legal practice than a solicitor would.
However, the SRA said it was unconvinced by this. “A number of traditional law firms in England and Wales are reported to have global turnovers in excess of £1bn and so are of very significant means. Also, it is clear that a number of ABSs will be of comparatively low means and there is a danger in attempting to group together firms of significantly varying turnovers and structures into one category for disciplinary purposes.
“The early indications are that a number of ABSs will be former legal disciplinary practices which had operated under the traditional law firm regime and perhaps more closely resemble traditional law firms than the concept of a substantial corporate ABS. The better approach in our view is to apply the financial penalty criteria, which include consideration of the means of the paying party, on a case by case basis.”
When it came to having large fining powers as a way to deter misconduct of non-lawyers, the SRA pointed out that “such an approach has not been adopted in the past where non-solicitors or non-lawyers have been involved in legal practice”.
The Law Society has argued  that if Parliament had intended the SRA to have such powers, it would have provided for them in the 2007 Legal Services Act, and also contended that it should be for the independent Solicitors Disciplinary Tribunal to deal with more serious matters.
The SRA responded that other regulators commonly impose significant financial penalties. “It is particularly significant in our view that the Legal Ombudsman has powers to order redress and compensation of up to £30,000 and that the Council of Licensed Conveyancers has internal fining powers of £1m…
“We consider it improbable that the extent of the anomalies and potential for perceived unfairness posed by the present situation was envisioned or desired by Parliament at the time that the Act was made.”
The SRA said it was “significant” that section 69 of the Act gives the Lord Chancellor the power to modify the statutory provisions governing the regulation of legal services where this would allow a regulator to carry out its role more effectively and efficiently.
The Legal Services Board has strongly backed  the SRA’s proposals.