SRA Announces Financial Penalties Plan

SRA financial penalties fines

The Solicitors Regulation Authority (SRA) has published details of how it intends to move forward with its plans to update its approach to issuing financial penalties to law firms and solicitors who fall short of the expected professional standards.

A public consultation was launched last year putting forward proposals to adopt a robust approach designed, it was claimed, to protect the public and to provide a more appropriate deterrent.  The aim wa also to ensure that cases could be resolved much more quickly – theoretically reducing costs and stress for all involved.

More than 7,500 people engaged with consultation, with most broadly in favour of the principles outlined, including the public, profession and their representative groups, although some did provide differing views on the detail of how specific proposals would be implemented.

Based on the feedback received, the SRA is to move ahead with plans to:

  • take into account, in all cases, the turnover of firms and financial means of individuals when setting fines;
  • seek an increase to the maximum fine that they can issue internally to traditional firms, and those working in them, from £2,000 to £25,000;
  • amend the SRA guidance to highlight that for cases involving sexual misconduct, discrimination or any form of harassment, financial penalties will only be considered in exceptional circumstances, with restrictions on practice, suspension or strike off being seen to be a more appropriate sanction;
  • introduce a schedule of ‘fixed penalties’ for lower-level breaches – enabling cases to be dealt with more quickly for all concerned.

A key area for concern was around a lack of alignment in approach between the SRA and Solicitors Disciplinary Tribunal (SDT). This included feedback that the SDT regime provides more confidence due to greater transparency and independence, while an increase in the SRA’s fining powers risked a misalignment with the SDT’s approach.  The SRA have now agreed that better alignment with the SDT should be aimed for and they have said that they are committed to working with the SDT to develop updated guidance on financial penalties, and the new rules that support the introduction of a fixed penalties scheme.

The SRA is also planning to develop its processes in such a way as to increase transparency. This will include a consultation on the publication of regulatory decisions, to make sure that information about decisions is accessible, clear, transparent, and consistent. They will also undertake further work to explain the checks and balances in place in their processes, communicate the safeguards in place, including the use of separate adjudicators in decision making, and the options to appeal decisions, including appealing SRA fines to the SDT.

The SRA have stated that the ability to take account of turnover or individual income in setting fines will allow different levels of fine to be issued to a low-earning junior solicitor compared to a senior equity partner for similar offences.  They have also stated that increasing the threshold for fines to £25,000 will mean more disciplinary matters are able to be dealt with by the SRA without being referred to the SDT. This, it is hoped, will not only enable cases to be resolved more quickly, but also free up the tribunal to focus on more complex issues.The SRA plan to hold a further consultation later in the year to finalise the detail of how a new fixed penalty regime would work. The plan is that such penalties would mostly deal with lesser or administrative breaches – such as failures to comply with requests for information or requirements under the SRA Transparency Rules. The current SRA fining regime was introduced ten years ago and since then there have been significant changes, including the 2019 introduction of a new Enforcement Strategy and the SDT adoption of the civil standard of proof in line with that used by the SRA.

It is worth bearing in mind that the limit for fines applies ONLY to ‘traditional’ law firms. For alternative business structures (ABS), the SRA can fine up to a limit of £50 million for individuals and £250 million for firms.

The now closed Financial penalties consultation, can be found on the SRA website.

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