SRA: Wake-up call to profession
A US law firm has received the largest ever fine handed out by the Solicitors Disciplinary Tribunal and also become the first firm to be found to have lacked integrity in its conduct.
The tribunal has approved an agreement between Locke Lord and the Solicitors Regulation Authority (SRA) that means there will not be a hearing. The fine is £500,000.
Though the full ruling has not yet been published, the SRA said Locke Lord’s London office admitted failing to prevent one of its solicitors, Jonathan Irvin Denton, from involving himself – and holding out the firm as being involved – in transactions that “bore the hallmarks of dubious financial arrangements and investment schemes”.
The firm also failed to prevent the solicitor from using its client account – arranging payments in and out which were not related to an underlying legal transaction or “service forming part of the firm’s normal regulated activities”.
Further, the firm admitted that it failed to have effective systems and controls in place to enable it to identify and assess potential conflicts of interest, and to properly supervise the solicitor, even after “indicators became known to the firm of matters necessitating such supervision”.
Mr Denton has been referred to the SDT.
Allegations against him, as yet unproven, include involvement in suspect transactions, misleading “third parties by producing false invoices to individual investors” and knowingly making “statements which he knew to be untrue as to the status of individual investments”.
David Middleton, the SRA’s executive director of legal case direction, said the fine could have been even bigger had Locke Lord not been “very constructive and sensible” in its dealings with the regulator.
He said the SRA had always maintained that it was possible for a firm, as opposed to an individual, to be guilty of a lack of integrity, but that this was the first time the SDT had found it.
Mr Middleton suggested that the tribunal’s decision was a sign that it was “waking up to the importance of deterrence” over dubious investment schemes. It was also a “wake-up call” for the profession.
A spokesperson for Locke Lord said: “The matters investigated by the SRA concern the actions of Jonathan Denton and relate only to clients for whom he worked. None of the firm’s other clients were affected by Denton’s actions.
“We regret what has happened, but we are pleased to note that the SRA accepted our position that the firm and its senior officers did not act dishonestly or with conscious impropriety, or turn a blind eye to Denton’s conduct.
“After Denton’s departure from the firm – effective October 2015 – and in consideration of matters that came to light, steps were taken to review existing practices and procedure. A number of changes and improvements were made.
“We remain committed to ensuring that we are at the forefront of best practice, that we uphold the legal profession’s high standards, and that this situation does not arise again.”
The SRA has made a priority of warning both the profession and the public about solicitors’ involvement in such schemes, which it said has led to an increase in reports about possible scams.
It said that, since October 2016, in addition to Locke Lord, it has taken action against 10 other law firms or solicitors in cases where people have lost more than £50m.
The previous highest fine for a firm was £250,000, handed out to another US firm, White & Case, in June for client conflict and confidentiality rule breaches.
