SRA approves new fines regime

The SRA's regulatory risk committee has approved the new fining regime which will apply to law firms and ABSs.

An existing anomaly means that law firms can only be fined £2,000, while ABSs can be fined up to £250m or £50m for individuals.

The regulator said the MoJ had indicated that increasing fining powers without new legislation, under the Solicitors Act and Administration of Justice Act, might be possible but "would still take time".

Meanwhile "significant changes" could result from the LSB's review of disciplinary processes and the MoJ's review of legal regulation.

Under the indicative fining guidance agreed by the regulatory risk committee this week, most firms and individuals would pay fines of between £500 and £50,000.

Firms with an annual turnover of £2m or more could be fined up to 2.5 per cent of their annual turnover.

The draft guidance allows for exceptions to be made for "firms of lesser means as well as greater means".

The SRA rejected calls from the Law Society and the City of London Law Society to align the penalties imposed by the SRA with those of the SDT.

"The executive remains of the view that seeking to align the fines levied by the SRA in respect of ABSs with those levied by the SDT under the traditional law firm regime would be highly problematic.

"The two regimes are intentionally distinct and have significant inherent differences between them (such as the time and cost involved in a independent quasi-judicial assessment) which would remain."

The committee approved a three-step approach to fining.

The first step would determine a 'basic financial penalty' taking into account the seriousness of the misconduct, and taking into account principles of culpability, impact, proportionality and the desire to deter similar conduct in the future.

Step Two would discount the penalty by a maximum of 40 per cent to take into account mitigating factors such as early and full self-reporting, admission or rectifying the harm caused.

The third step would involve removing any profit or gain the firm had made as a result of the misconduct.