Towards the end of 2021 and into the start of 2022, the Solicitors Regulatory Authority (SRA) held a consultation on proposals to increase their fining powers. The core reasoning behind initiating the plans were:
To ensure lower level breaches could be dealt with promptly – reducing time, cost and stress for those concerned with a fixed-penalty system;
Increase the maximum fine they could issue internally – fines had previously not increased since the £2,000 maximum fine was put in place in August 2009; and
Have the ability to consider the turnover and financial means of firms and individuals when setting fines – it had become apparent that a more structured method was needed to be put in place for fining, say, a junior solicitor compared to a senior equity partner.
With more than 7,500 people engaging in the consultation process, on 20 July 2022 the Ministry of Justice brought in a change to legislation which broadly supported the plan to increase fining powers.
From that date the maximum fine the SRA can impose increased from £2,000 to £25,000. This applies to solicitors, traditional firms (recognised bodies or recognised sole practices) and the individuals who work in them. This is a massive 1,150% increase and reflects a shift in responsibility. A broader range of disciplinary cases can now be dealt with by the SRA directly, moving away from referrals to the Solicitors Disciplinary Tribunal (SDT). This will in turn free up resources at the SDT to consider the more serious matters.
In contrast to firms, the SRA can directly fine Alternative Business Structures (ABS) and the individuals working in them up to £250m and £50m respectively. These figures remain unchanged.
A further consultation is in hand to cover the remaining plans on fining powers, in particular:
The detail of how a new fixed-penalty regime would work to mostly cover lesser or administrative breaches; and
The ability to consider the turnover and financial means of firms and individuals when setting fines.
It is worth noting that of the 7,500+ respondents to the initial consultation, the vast majority were broadly in favour of the plans. The Law Society did however voice concerns that an increase in fining power would result in ‘the SRA acting as investigator, prosecutor and judge without independent scrutiny’, with independence having been previously provided by the SDT. The SRA responded to agree that better alignment with the SDT is required and has committed to working with the Law Society to develop updated guidance on financial penalties, and the new rules that support the introduction of a fixed penalty scheme.
Alternatively, if you need advice around the SRA Accounts Rules, understanding your obligations and best practice to help avoid these new SRA fining powers, then please call one of our team who will be happy to help. In the meantime, watch this space for the next consultation opening.
