Once again, the Solicitors Regulation Authority is consulting on the latest proposals to issuing financial penalties to law firms and solicitors. The last consultation paper, back in 2021-2022[1], resulted in the current fining regime which included increases to the maximum fines that could be levied and allowed the SRA to take into consideration the turnover of the firm and the means of individuals when setting the levels of fines. This new consultation, which closes on the 20 September and is entitled “Financial Penalties: further developing our framework”[2] seeks views on proposals to update the SRTA’s approach to financial penalties in light of its new powers to issue unlimited fines for certain breaches of its rules under the Economic Crime and Corporate Transparency Act 2023 (ECCTA).
The SRA have powers to impose a financial penalty when a regulated firm or individual does not meet the professional standards expected of them. The alleged purpose of this financial penalty is to:
- maintain professional standards,
- uphold public confidence in the solicitors’ profession and in legal services provided by authorised persons, and
- remove any financial or other benefit arising from the conduct.
The SRA state that they want to make sure that they remain transparent when issuing fines, and to achieve this are proposing amendments to their band-based approach to determining specific penalties. These involve the introduction of new fining bands for more serious misconduct and some changes to process by which they calculate which fining band a given case may fall under. In addition, the SRA is also proposing changes to its published fining guidance. The intention is to make it clear that once fine levels have been determined, they will be further increased by the amount of any financial gain that resulted from the misconduct.
Paul Philip, Chief Executive of the SRA, said:
‘The majority of solicitors do a good job. However, when this it not the case, it is important that we have a robust approach in place which enables us to take action in a way that is fair, transparent and consistent to all.
‘The changes we are proposing will help to ensure we can continue to do that, including for the most serious cases, which by their very nature can and will attract the most significant penalties.’
It remains to be seen whether the level of fines imposed by the SRA do reflect the severity of the potential risk from the alleged misconduct. Many have criticised some of the fines that have been imposed recently – especially those imposed on firms for historic deficiencies that have subsequently been remedied and where there was never any real risk to clients or the public. It is highly likely that these proposals will be viewed in this light.
Further changes outlined in the consultation include:
- The introduction of ‘minimum fines’ across all fine bandings, applicable where a penalty based purely on percentage of income would not serve as an effective deterrent due to a firm or individual having no or a very low income.
- Greater clarity on how the SRA will judge and take into account the impact and harm caused by any misconduct when determining the level of a fine, including the potential impact that could have occurred.
- Clarifying the SRA’s approach to convictions for drink driving, where a warning or rebuke will be the most likely disciplinary outcome, unless there are aggravating factors or repeated incidences.
The consultation runs until Friday 20 September, 2024.
We would urge all firms to read the consultation and to respond appropriately to the consultation questions raised. Too often the profession is being portrayed as the “bad guy” in a system where many small, and perfectly compliant, firms are being forced into undertaking often onerous regulatory tasks for little or no reward and then being penalised when they fail to meet the impractically high standards imposed by the SRA and some of its investigators.
[1] (www.sra.org.uk/sra/consultations/consultation-listing/financial-penalties-2021/).
[2] (www.sra.org.uk/sra/consultations/consultation-listing/financial-penalties-further-developing-framework/).