Financial Penalties Will Only Be Considered in Sexual Misconduct, Discrimination, or Harassment Cases In Exceptional Circumstances

In a recent article, we wrote about the increase in the SRA’s fining powers approved by the Lord Chancellor, from £2,000 to £25,000, which came into force on 20th July 2022, following a consultation process in 2021. In addition to seeking an increase in their fining powers, the SRA also stated it would press ahead with plans to:

  • take into account the turnover of firms and financial means of individuals when setting fines
  • amend their 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 drive these changes forward, the SRA opened a new consultation on financial penalties on 22nd August 2022, which contains proposed changes to their Enforcement Strategy.

Proposed changes to the Enforcement Strategy

The draft revised Enforcement Strategy (Annex 3 of the financial penalties consultation document) expands on how cases of sexual misconduct, discrimination, and non-sexual harassment should be handled. It explains that financial penalties are unlikely to provide an appropriate sanction in cases of sexual misconduct, harassment, or discrimination because the “underlying attitudes and behaviours displayed”:

  • present a risk to others and the legal profession
  • are incompatible with the continued unrestricted right to practise in the legal profession
  • mean that suspension or removal from the profession may be necessary to maintain public confidence in the solicitors’ profession and in legal services.

The SRA also make the point that it is typically not possible to quantify the level of harm caused by such actions, and it is not appropriate to do so.

Penalties in exceptional circumstances

Penalties other than suspension or striking off the Roll of Solicitors may be warranted in some exceptional cases according to the SRA, including where a complaint arises following “inappropriate or insensitive behaviour”, but they are satisfied there is no ongoing risk. This is only likely to be the case in one-off incidents or where it can be shown that a remark made was “misjudged” rather than “ill-motivated”. The individual in question must also have provided a timely and unprompted apology to the person affected, and there must be clear evidence that they have accepted all of the allegations made against them. This does not necessarily mean a financial penalty is appropriate in such exceptional circumstances as the SRA state they may consider action such as a formal rebuke of the individual; “In such cases, we may impose a rebuke, recognising that the behaviour has breached required standards of behaviour and that this needs to be sanctioned, or in extremely rare cases, we may impose a financial penalty”.

Firms may still receive financial penalties

The draft changes to the Enforcement Strategy make it clear that when it comes to firms, the financial penalties may still be warranted. This is because law firms need to create a culture where sexual misconduct, discrimination, and harassment are not tolerated, and any identified incidents are fully addressed. For this reason, the SRA may still levy a financial penalty on firms where it can be shown their poor systems and controls allowed such behaviours to develop and persist. If the SRA believes that there is evidence of serious failings at the leadership level of a law firm which allows the behaviour to develop, it may recommend referral to the Solicitors Disciplinary Tribunal (SDT) to allow a more serious sanction to be considered.

Piloting the use of personal impact statements

The SRA’s financial penalties consultation document also discusses the potential use of personal impact statements as a way of systematically considering the impact on victims in all disciplinary cases. As a result of feedback from the Legal Services Consumer Panel in the SRA’s post-consultation position paper, they now propose to carry out a pilot on the use of victim impact statements; “We said that we would consider how we might systematically consider the impact on victims in all of our disciplinary cases. Having considered this carefully, we propose that we will pilot the introduction of personal impact statements in relation to cases that relate to sexual misconduct, discrimination, and harassment”. The idea of the pilot is to assess how to use victim impact statements in a consistent and standardised way. The information contained in personal impact statements will then be used by decision-makers when determining the type and level of sanction to be applied.

Final words

While the recent announcement regarding the substantial increase in the fining powers of the SRA has received the greatest focus in the last few weeks, the proposals on the penalties for cases of sexual misconduct, discrimination, and harassment are noteworthy. They demonstrate the SRA’s intention to stamp out such behaviour within the profession by imposing more meaningful penalties and the importance of understanding the impact on those affected.

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