SRA uncovers 205 more firms to probe over lack of compliance officers

SRA: data cleansing exercise

The Solicitors Regulation Authority (SRA) is working its way through the hundreds of firms and individuals facing enforcement action over compliance officer failures – but has now found another 205 firms that require investigation.

The news comes amid some encouraging signs about the historic disproportionate representation of black and minority ethnic (BME) solicitors among those facing regulatory action from the SRA.

The report of chief executive Antony Townsend to tomorrow’s meeting of the SRA board revealed that the new firms – where there appear to be no compliance officers in place for reasons unknown – have been identified as a result of a data cleansing exercise.

“It is likely that some firms are in the partial waiver pool and some have closed, but each will need to be reviewed to ascertain what action – if any – needs to be undertaken,” he wrote.

Of the four main categories of rule breaches, the non-disclosure of suitability issues has been the largest, with around 550 individuals affected.

The SRA has adopted a tiered approach to the level of seriousness, risk identified by the failure and in light of any aggravating or mitigating factors. As a result, it has decided to take no further action in respect of 188 matters, issued 133 ‘dear senior partner’ letters and a further 133 more formal letters of advice.

Desk-based investigations continue in relation to 75 matters. “These relate to the more serious issues that were not disclosed to us, for example a sanction imposed by the Solicitors Disciplinary Tribunal within the last five years, multiple internal sanctions or a failure to disclose a criminal conviction,” Mr Townsend said. “These matters are likely to proceed to formal adjudication.”

Of the 60 firms that have still not nominated compliance officers, 33 have been identified as low risk because they have either closed, sought a waiver or merged and the new body has approved officers in place.

The remaining 27 are under close scrutiny and the possible outcomes for them include revocations and disciplinary sanctions, including referrals to the tribunal.

Some 279 firms have received a letter of advice over failing to nominate by the 31 July 2012 deadline, while 15 have received a formal finding and warning. A further 42 investigations are continuing.

In 15 cases, the failure to nominate led to visits from the SRA and further “issues of risk” were identified.

Finally, 310 firms have received a ‘dear senior partner’ letter over a delay of at least 35 days in providing information to the SRA as part of the nomination process.

The SRA is to publish a diversity profile of those firms that have been subject to enforcement action over compliance officer failures; the disproportionate numbers of solicitors from a BME background featuring in its regulatory work has been an issue for several years now.

However, the SRA’s annual equality report – which will be presented to the board tomorrow – indicates a downward trend in the level of disproportionality for BME solicitors in 2012 when compared to the total number of individuals involved in conduct and regulatory investigations that year.

Nevertheless, BME solicitors are still over-represented in the SRA’s work as compared to the practising population.

The SRA also received a disproportionate number of reports against male solicitors and solicitors over the age of 40 alleging breach of the code of conduct.

Finally, the SRA board will be asked to approve a reduction in the compensation fund levy despite absorbing the extra costs of intervention being racked up this year. Assuming the board approves the use of the fund to pay for these – which seems a fait accompli following the recent consultation – the fee for individuals will be £56 and £836 for firms holding client money, compared to £92 and £1,340 in 2012/13.

The SRA response to the consultation – which received 24 submissions – said respondents were wrong to suggest that the it was not appropriate to use the compensation fund, whose main task is to compensate the victims of fraud or of a failure to account, to cover the cost of intervention.

It said: “As set out in section 36A(9) of Solicitors Act 1974, the purposes of maintaining a compensation fund are to have provision outside an annual budgeting process, requiring reliance on forecasting, to deal with significant unpredictable or one-off events and to ensure that monies are available to protect the public following an intervention and the payment of grants.”


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