SRA to increase maximum fine to £25,000 and introduce fixed penalties for minor breaches

Previously, the SRA could fine firms up to £2,000

Following a consultation last year, the Solicitors Regulation Authority (SRA) has announced details of its plans to update its approach on issuing financial penalties to law firms and solicitors. Its plans include fixed penalties and an increased maximum fine for firms of £25,000.

The aim of the SRA’s consultation was to ensure the SRA takes a robust approach which protects the public; to provide a more appropriate deterrent; and to ensure cases can be resolved much more quickly to reduce costs and stress for all involved.

More than 7,500 people – including the public, profession and representative groups – provided responses to the consultation. Most were broadly in favour of the principles outlined, although some did provide alternative views on the detail of how specific proposals would be implemented.

Based on the feedback received, the SRA will now proceed with plans to:

• in all cases, take into account firm turnover and individual income when setting fines;
• increase from £2,000 to £25,000 the maximum fine it can issue to traditional firms and those working for them;
• amend its guidance to highlight that for cases involving sexual misconduct, discrimination or any form of harassment, financial penalties will only be considered in exceptional circumstances, with restrictions on practice, suspension or strike off the more appropriate sanction;
• introduce a schedule of fixed penalties for lower-level breaches to enable cases to be dealt with more quickly for all concerned.

The SRA said the ability to take account of turnover or individual income in setting fines would allow different levels of fine to be issued to a low-earning junior solicitor compared to a senior equity partner for similar offences.

The rationale for increasing the SRA’s fining threshold to £25,000 is that more disciplinary matters could be dealt with by the SRA directly without being referred to the Solicitors Disciplinary Tribunal (SDT). This would enable cases to be resolved more quickly, and also free up the tribunal to focus on more complex issues. The limit for fines applies to ‘traditional’ law firms. The SRA may fine alternative business structures up to £50m for individuals and £250m for firms.

A further consultation will be held later this year on how a new fixed-penalty regime would work. Such penalties would mostly deal with lesser or administrative breaches – such as failures to comply with requests for information or requirements under the SRA Transparency Rules. In terms of both fines and fixed penalties, solicitors and firms would retain the right to appeal any outcome or penalty imposed at the SDT.

One key area of concern in the consultation feedback was a potential lack of alignment between the SRA and SDT. Feedback suggested there was greater confidence in the SDT due to greater transparency and independence, while an increase in SRA fining powers risked a misalignment with the SDT’s approach.

The SRA agreed better alignment with the SDT should be aimed for. It said it has committed to working with the SDT to develop updated guidance on financial penalties, and the new rules that support the introduction of a fixed penalties scheme.

It will also seek to increase transparency around its processes, said the SRA. It recently launched another consultation around the publication of regulatory decisions. It said it will do further work to explain the checks, balances and safeguards it has in place – including its use of separate adjudicators in decision making – and options to appeal decisions, including SRA fines, to the SDT.

The SRA said other examples of consultation feedback that helped shape its final proposals included:

• commissioning independent research on whether turnover was the best metric against which to consider firm fines;
• retaining the option to consider if a financial penalty is most appropriate for specific cases of sexual misconduct, discrimination or harassment, but only in exceptional circumstances;
• recognising firm and individual misconduct are distinct, and a financial penalty may be appropriate where poor systems of controls allow poor behaviour to occur or persist.

Anna Bradley, SRA chair, said: “The overwhelming majority of solicitors meet the standards we all expect, but when they don’t, we step in to protect the public and maintain confidence in the profession. These changes will mean we can resolve issues more quickly, saving time and cost for everyone and, importantly, reducing the inevitable stress for those in our enforcement processes.

“It was good to see broad support for our proposals, as well as getting feedback that has helped us refine our approach. It is vital that everyone can be confident that our approach is fair and transparent.”