Plans for SRA income-linked fines “unclear and unreliable”

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The Solicitors Regulation Authority’s (SRA) detailed approach to financial penalties has come under fire from the Law Society. In particular, the penalties to link new fining powers to firms’ and individuals’ income have been deemed “unclear and unreliable”.

The proposals were revealed in August and set out to raise the maximum fine it can impose on firms to 5% of its turnover, which the Law Society described as an “excessive and unjustified” amount.

The proposal also included plans to take the earnings of solicitors into account when establishing a fine, using a band system.

This would mean the lowest level of offence would incur a basic proposed penalty of 2% of income, but this would rise to 161% for serious misconduct, according to the Law Gazette. For example, fines could reach as much as £805,000 in the most serious cases for solicitors earning £500,000.

The consultation period for the proposals closed on 14 November, not too long after a decision was made in July to increase the SRA’s internal fining powers from £2,000 to £25,000.

The Law Society said: “The SRA seeks to adopt as comparators other regulators such as Ofcom, the Water Services Regulation Authority (Ofwat) and the Financial Conduct Authority (FCA). However, we reiterate that these are not fair comparisons given the nature of the industries, numbers of entities regulated, types of breaches, impact on the public and the resources available to the comparator regulators.”

It added, regarding the suggestion to take solicitors means into account, that it firmly believes “that it would be unfair for the SRA not to make any inquiry about an individual’s means and thereby the real affordability to pay any fine imposed by the SRA”.

In reality, the SRA would only be able to deal with serious misconduct of those on lower salaries, as individuals with higher salaries would likely be referred to the tribunal for similar breaches.

Law Society President Lubna Shuja further stated: “The SRA has not provided the criteria for when or how an adjudicator may exercise such a discretion meaning these proposals are ill-defined and could lead to unfair outcomes. We have serious concerns that adjudicators would not be acting purely in their capacity as decision makers but would instead be acting as investigators.”