All’s fine at the Solicitors Regulation Authority

According to Susan Humble, regulatory specialist at RBG, law firms face the risk of higher fines for rule breaches if the SRA gets its way in its most recent consultation.

Did you know that fines imposed by the Solicitors Regulation Authority (SRA) and the Solicitors Disciplinary Tribunal (SDT) are paid to the Treasury for the Crown?

There may be a potential boost to the Royal Coffers in Jubilee Year on the horizon. The SRA is consulting (closing date 11 February 2022) on its:

• Ambition to increase its internal fining powers to £25,000 from the current £2,000
• Wish to consider turnover or income of firms or individuals when setting fines
• Aim to introduce a schedule of ‘fixed penalties’ up to £1,500

Financial Penalties 2021

The SRA can fine an ABS £250m and an ABS-related individual £50m. The current maximum financial penalty for law firms/individuals is £2,000. Conduct which falls short of strike-off/suspension but which might incur a fine of more than £2,000 must be referred to the SDT. The SRA has identified that an SDT referral adds costs and delay to enforcement. They may be right!

The SRA states that the purpose of a fine is to:

• Remove the financial or other benefit of the misconduct
• Maintain professional standards
• Uphold public confidence in the solicitors’ profession and in legal services provided by authorised persons

The SRA believes that increased fining powers will broaden the range of cases it can deal with. However, it is also consulting on whether sexual misconduct cases are unsuitable for a financial penalty and is considering adopting the same approach to discrimination and non-sexual harassment misconduct. That would tend to reduce the range. The SRA would plainly have the power to deal with cases that it perceives to be more serious than it does now.

The landscape has changed since the SRA’s last attempt to get an uplift, initially to unlimited levels and then to £10,000. The anti-money laundering regime requires a fast and furious approach to enforcement. It takes no prisoners, and the traditional tribunal route can be slow and contentious. This will add to the persuasiveness of the SRA’s consultation. Fixed penalties are a favourite tool of financial regulators. Cases involving deficient systems and controls or the taking of shortcuts receive a special mention in the consultation and fit neatly into the AML menu.

SRA decisions to take turnover and income into account when setting fines and to introduce a schedule of fixed penalties do not require legislation and look likely to be implemented as per the consultation proposals. However, increased fining powers will need secondary legislation supported by the Ministry of Justice (it will be forthcoming).

It is reasonable to expect the SRA to use enhanced fining powers with enthusiasm. The right to appeal to the SDT will remain; an appeal after the event is an unattractive prospect. The SRA, its staff and adjudicators are, no matter how the message is wrapped up, effectively investigator, decision-maker, jury, and judge. £25,000 is a lot of money for what could be a purely administrative failing, especially for firms with fewer resources to throw at compliance. To err is human. To forgive, less so in the regulatory world.

Consultations on important topics often fall under the radar of legal practice managers, which is a shame. It’s important to be alert to our regulator’s intentions and plan for the risks they will bring. Being aware of the risk keeps unpleasant compliance surprises at a lower level. You may feel sufficiently inspired to contribute and to make a difference.