Kerry Underwood

Archive for April 2014

SOLICITORS REGULATION AUTHORITY AND THE £250 MILLION FINE

with 8 comments


In November 2013 the Solicitors Regulation Authority issued a consultation paper where it sought power to increase its maximum fine on solicitors’ firms from £2,000 to £250 million. 

I have not made that up. 

The logic is that £250 million is the maximum fine that the SRA can impose on an Alternative Business Structure (ABS), this figure having been set by the overarching regulator the Legal Services Board. The maximum fine on an individual is £50 million. 

These are extraordinary and absurd figures given that punishment by the SRA, as compared with a referral to the Solicitors Disciplinary Tribunal, is meant to be “a considerably quicker, cheaper and more proportionate regime for levying fines.” 

Quite what aspect of a £250 million fine is proportionate to anything escapes me. This is Jackson-Mitchell on steroids. 

Apparently increasing the maximum fine to £250 million “could save considerable time, stress and cost for regulated persons”. Personally, and I may be at odds with my colleagues here, I find the prospect of being fined £250 million more, not less, stressful, than being fined £2,000, but that might just be me being quirky. 

The worrying aspect is the wish to impose financial penalties “in-house” to use the SRA’s wording, that is as an administrative, rather than a judicial process. It is the equivalent of a Fixed Penalty notice for a minor traffic offence, except that the proposed penalty would wipe out all but a very few of the biggest firms. 

The proposed maximum fine for an individual is £50 million. Putting aside the stereotypical jokes about the earnings of lawyers is there a single lawyer in England and Wales who has amassed so much from the law that they could afford such a sum? That would have meant saving £1.25 million after tax each year in a 40 year career. 

The argument is that the SRA already has these powers in relation to Alternative Business Structures. These limits were set by the Legal Services Board under the provisions of the Legal Services Act 2007. That begs the question of whether those figures for ABSs are appropriate. 

It also misses the point that the potential nature of ABSs – huge multi-national companies – led to these very high potential penalties. At Paragraph 32 of the consultation paper the SRA says: 

“One point that has been made to us by some stakeholders in the context of our proposal to seek commensurate fining powers is that higher penalties are necessary within the ABS regime because ABSs are of higher means or may be less deterred from misconduct by the prospect of being removed from future legal practice than a solicitor would”. 

It then rejects that analysis, pointing out that some ABS are small and of moderate means. Quite how that justifies a massive increase in fining powers for solicitors’ firms, rather than a reduction in fining powers in relation to small ABSs, is beyond me. 

Interestingly the highest fine ever imposed by the Solicitors Disciplinary Tribunal, which has unlimited fining powers, is £50,000. 

The consultation paper is useful in that it provides some facts about the powers of the various regulatory bodies and the penalties imposed. 

I have been qualified for 33 years but I must admit to having no idea of the punitive role of the Legal Services Ombudsman as compared with the SRA and the SDT and the overlap between the matters the Ombudsman can investigate and those that the SRA deals with. I still don’t. However the fining powers over solicitors are: 

Ombudsman:           £50,000

SRA:                          £2,000

SDT:                       unlimited 

Only the SDT can suspend or strike-off a solicitor. 

Crucially the SDT generally applies the criminal standard of proof whereas the SRA applies the civil standard and the Ombudsman is not bound by any legal principles. 

At the very beginning of its consultation the SRA says that it “is the independent regulatory body of the Law Society of England and Wales. We protect the public by regulating law firms and individuals who provide legal services”. 

Fair enough, but it is crucial to recognize that the job of lawyers is also to protect the public, often against the State and its manifestations, as well as big business. 

Driving small and medium sized firms out of business through massive fines, or the threat of massive fines, harms, rather than protects, the public. It is the small and medium-sized firms who do most to protect the public, rather than big business. 

Advertisements

Written by kerryunderwood

April 2, 2014 at 10:18 am

Posted in Uncategorized

%d bloggers like this: