SRA probes dozens of firms over bulk compensation claims

Cavity wall insulation: Focus of SRA investigations into bulk claims 

The Solicitors Regulation Authority (SRA) has been carrying out dozens of investigations into possible misconduct in bulk compensation claims, particularly around cavity wall insulation, its annual operational review has revealed.

The array of reports and statistics for the year to 31 October 2022 also showed the number of sole practitioners falling to the lowest level in memory.

The report on its enforcement work said the SRA received 10,121 reports of concerns in the year, a quarter coming from the profession and the rest from outside. Of those, 1,741 were referred for investigation.

During the year, the SRA completed 1,528 investigations that found no breach at all or no serious breach, while it applied an internal sanction of some sort in 301 cases, including 40 rebukes and 49 fines.

There were 14 appeals against internal sanctions, of which three were fully and two partially successful.

A further 76 cases were heard at the Solicitors Disciplinary Tribunal (SDT), leading to 36 strike-offs and 10 suspensions. The number of cases reaching the SDT has been falling steadily, having been 134 five years earlier.

In 2021/22, the SRA spent £16.5m on its disciplinary processes, an increase on previous years as it added resources to the investigation and supervision team to combat delays.

“[We] know we need to do more in improving the timeliness of our investigations and progressing the most serious matters,” it said. “We are currently carrying out a continuous improvement project, to allow us to carry out investigations more swiftly.”

The regulator detailed its activity on certain high-profile issues in 2021/22, such as opening 49 new investigations concerning allegations of aggressive litigation or SLAPPs (strategic lawsuits against public participation) that solicitors and law firms have been pursuing on behalf of their clients.

In the year, the SRA continued to investigate 23 ongoing cases related to non-disclosure agreements and closed 19, nine with letters of advice or a warning and one with a rebuke. The remainder resulted in no further action.

The regulator began investigations into 18 cases of potential solicitor involvement in dubious or risky investment schemes.

As of April 2023, 10 cases of alleged sexual misconduct were awaiting hearing at the SDT.

“In 2021/22 we continued to work on 54 investigations relating to solicitor and firm conduct when acting in bulk compensation claims. Of these, we closed 20 cases with no further action and issued one letter of advice,” the report went on.

“These matters relate to a range of issues where solicitors are not meeting the standards we expect. In some cases, solicitors are not investigating whether the claim is properly valid prior to making it, or failing to advise clients about their options and what will be expected of them when making a claim.

“We have also found that some firms have been acquiring clients by giving them incomplete or misleading information and that the work of some firms is not adequately supervised.”

Many of the claims related to faulty cavity wall insultation, following a government initiative in the early 2010s to help make homes become more energy efficient. The SRA said it has looked at the conduct of car finance claims and packaged bank account claims as well.

On the transparency rules, the SRA has carried out 184 investigations between November 2020 and April 2023. Some 159 firms were brought back into compliance, five received a warning or rebuke, 13 were fined and two, where there were other issues, were shut down. Investigation into five matters continues.

The number of interventions remained relatively constant from 2014/15 until 2019/20, at around 40 per year. This decreased to 26 and 25 firms shut down in 2020/21 and 2021/22, respectively.

The SRA said: “It may be that support packages offered during the Covid-19 pandemic provided a short-term financial solution to some firms that were otherwise struggling and could have faced an intervention during this time.

“We are starting to see a number of firms in financial difficulty and we have already carried out a significant intervention into a group of law firms in 2022/23.

“Figures from the first quarter of 2022/23 suggest that intervention numbers may be more in line with the average number of interventions seen in previous years. This may be because of the end of the financial support… or the poorer economic outlook in general.”

The SRA Compensation Fund made payouts for victims of fraud totalling £15.2m in 645 cases, roughly in line with the average of recent years – except for 2020/21, where payments peaked due to the intervention into the group of law firms owned by Kingly Solicitors, which costs the profession more than £10m.

The largest payment made in 2021/22 was £680,000 over a probate matter where a firm, which the SRA later closed down, had taken client money.

Probate (£7.8m), sales proceeds (£1.4m) and deposits (£1.4m) were the main causes of claims on the fund, which covers cases where there is no innocent partner, in which case indemnity insurance provides cover.

The authorisation report recorded that the overall number of law firms in England and Wales fell again to 9,636, of which a record 1,141 were alternative business structures. The number of sole practitioners has fallen below 2,000 for the first time, to 1,878.

But the number of solicitors continues to climb ever higher, with 160,676 practising solicitors and 219,424 on the roll.

Just over 4,000 practising solicitors and just under 400 head offices were based in Wales. Their turnover came to £480m in 2021/22, up £100m compared with six years before. Around a quarter of Wales-based firms and 40% of solicitors are in Cardiff.

The number of solicitor apprenticeships more than doubled in 2021/22, from 222 to 584.

SRA chair Anna Bradley said: “Overall, we are content that this work is efficient and effective but are aware that there is always room for improvement. One area of particular focus, where we already have a robust programme of work in hand, is looking to conclude cases in our enforcement processes more quickly.”

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