The Solicitors Regulation Authority ("SRA"), which regulates solicitors in England & Wales, has opened a consultation on financial penalties it can impose when solicitors' conduct falls below the standards expected of the profession. The consultation is open for online responses until 11 February 2022.

The current regime for penalties

Around 90% of the regulated legal market in England & Wales falls within the remit of the SRA, including more than 150,000 solicitors and 10,000 firms. The SRA currently has powers to issue reprimands (for misconduct taking place before 2010) and rebukes; and can impose financial penalties of up to £2,000. The stated purpose of fines is to: remove any financial or other benefit arising from the conduct in question; maintain professional standards; and uphold public confidence in the profession and in legal services provided by authorised persons. Penalties above £2,000 can only be imposed by the Solicitors Disciplinary Tribunal ("SDT"), which can impose an unlimited fine. This means that more serious cases require to be referred to the SDT, which the SRA considers increases both the time taken for resolution to be reached and the costs involved.

Proposals for change

The consultation seeks to explore five key issues:

  1. the principles underpinning the fining framework;
  2. which behaviours may not be suitable for a financial penalty;
  3. which behaviours may be suitable for a fixed penalty and the potential benefits of introducing fixed penalties;
  4. the appropriate level of fine to achieve a deterrent in order to maintain professional standards; and
  5. what level of fines should be imposed by the SRA before referral to the SDT.

The key proposals in the SRA consultation paper are as follows:

  • The SRA's limit should be increased to £25,000, based upon research which indicates that at least 75% of all fines issued by the SDT since 2014 were £20,000 or less.
  • For firms of "greater means", the SRA would be able to issue penalties up to 5% of annual turnover.
  • A more flexible framework would apply for determining firms of "greater means", beyond the current benchmark of £2 million annual turnover. The SRA's intention is to avoid an arbitrary cut-off, whereby a firm with £2 million annual turnover would attract a substantially larger fine than one with a £1.9 million turnover. It is proposed that the SRA would also take the earnings of an individual into account when determining the appropriate fine to levy.
  • A regime of fixed penalties for less serious offences, ranging from £800 for a first offence up to £1,500 for subsequent offences.
  • All fines would be capable of being appealed to the SDT.
  • The consultation is also seeking views on whether issues such as sexual harassment, discrimination and non-sexual harassment might be better dealt with by suspending or striking off the solicitor in question.

The SRA considers that these increased penalty powers would bring them more into line with other regulators, create greater transparency, and allow for fines to act as a credible deterrent for firms and individuals of varying means. The changes would also give the SDT greater capacity to deal with more serious matters. The fixed penalty regime is an approach taken by other professional regulators, some of whom also have the power to issue higher fines. For example, the consultation paper refers to the powers available to the Gambling Commission to issue fines of over £1m and draft guidance produced by the Bar Tribunals and Adjudication Service. 

In so far as solicitors in Scotland are concerned, the Law Society of Scotland can currently also impose fines of up to £2,000 in respect of unsatisfactory professional conduct (though the Scottish Solicitors' Discipline Tribunal can impose a fine of up to £10,000 for professional misconduct cases). Regulation of the Scottish legal system is also currently subject to a consultation which is due to close on 24 December 2021. A previous government review suggested that the sanctions available to the Scottish Tribunals should be reviewed and amended if necessary. However, the current consultation has a broader focus on the appropriate regulatory bodies for the profession and the streamlining of complaints procedures, rather than on penalties alone. The Law Society of Scotland and the Scottish Legal Complaints Commission have submitted opposing responses.

What will the future hold?

We will be following the SRA consultation closely and expect it to stimulate some lively discussion and produce a wide range of responses regarding the proposals on financial penalties in England & Wales. Following the conclusion of the consultation, any changes to the current regime will require to be made by the Ministry of Justice through secondary legislation.

It remains to be seen whether the Scottish Government will see fit to overhaul the current system in its entirety and lawyers practising in Scotland will await the consultation report with interest. Any changes to the regulatory framework fall within the remit of the Minister for Community Safety and the Scottish Government's Cabinet Secretary for Justice.

For more information, please get in touch with your usual contact or speak to Brodies' Professional Negligence, Discipline & Regulation team.

Contributors

Laura Fell

Legal Director

Jack Barratt

Trainee Solicitor