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LSB increases maximum ABS fines from £150m to £250m

1 March 2011

The Legal Services Board has increased the maximum fines regulators can impose on ABS firms from £150m to £250m. The maximum fine that can be imposed on a manager or employee remains at £50m.

The LSB had originally proposed that there should be no limit on the fines that could be levied, but in October last year the Ministry of Justice said this would not be compatible with the Legal Services Act.

In December the LSB responded by publishing plans for fines of £150m for firms and £50m for individuals.

The SRA argued that the miners’ compensation scandal showed that £150m might not be enough. In its response to the consultation, it said that £1bn was paid to 500 law firms acting for the miners and, in the future, fewer firms might win contracts to carry out similar, high-volume work.

The Law Society said the LSB should get the Legal Services Act changed so that unlimited fines could be levied by regulators. The society said this was in line with the sanctions that could be imposed on solicitors’ firms by the SDT.

The LSB said it would consider asking for a section 69 order to amend the Act only if regulators told it that the maximum fines of £250m and £50m were not enough.

The umbrella regulator said it had “considered carefully” the SRA’s example of the firms which profited from the miners’ compensation claims, bearing in mind that the SRA would have a “significant role to play” in the regulation of ABSs.

“Taking all these issues into account, in our judgement we consider that it is reasonable and proportionate in all the circumstances to increase the proposed maximum from £150m to £250m.

“We have also considered whether the proposed maximum for an individual should be changed but have concluded that £50m is sufficiently high.”

The new limits require the Lord Chancellor’s approval before they can be introduced, by statutory instrument.

In a letter to Ken Clarke, David Edmonds, chairman of the LSB, said: “As with many regulators, financial penalties may be imposed for rule breaches and it is important in a world where much larger business entities will be operating that there is a credible and appropriate level for the maximum financial penalty that a licensing authority will be able to impose on an ABS.”

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