In what may signify a shift in the way that the SRA deal with conduct investigations in the future, on 29th June 2022, the SRA was given new powers to issue fines of up to £25,000 (more than 12 times the current amount). Under the rules before this change, the SRA could only levy fines on wrong-doers of up to £2,000 or refer matters to the SDT, which could issue more substantial penalties. In this article, we will look at the reasons for the recent change to the SRA’s fining powers and the impact this may have on cases handled by the SRA in the future.
Why were the SRA’s fining powers increased?
Back in November 2021, the SRA initiated a consultation on their approach to financial penalties for law firms and solicitors if found to have fallen short of the required professional standards. This consultation sought input into plans to increase fines to a maximum of £25,000. The purpose of increasing the maximum fine from £2,000 to £25,000, according to the SRA, was to increase the range of disciplinary matters that could be dealt with by them without referring to the SDT. They made the point that by increasing the maximum fine, matters would be handled faster, with less cost and less demand on existing resources. It was also argued it would allow the SDT to focus on the most serious cases of professional wrong-doing.
Following the consultation process, it was announced in May 2022 that the increases recommended would be taken forward and were approved by the Government in June 2022. As a result, the SRA will now have the power to decide on cases ranging from lower-level infringements up to more serious cases. The MoJ’s press release justified the move stating, “Given nearly 90 per cent of fines currently issued by the tribunal are under £25,000, these reforms will allow them to focus on fewer, more significant allegations, like firms working for sanctioned Russian oligarchs and businesses”.
In addition to the increase in fining power given to the SRA, the detail surrounding a new schedule of smaller ‘fixed penalties’ for lesser offences (e.g. administrative failings) will be considered in a consultation later in 2022. It was also confirmed that the SRA will consider the turnover of law firms and the financial means of individuals when making decisions on fines.
What will be the impact of increasing the fining powers of the SRA?
There is no doubt that by increasing the fining powers of the SRA, fewer cases will require referral to the SDT. Indeed, this is the stated intention of the MoJ and SRA. While there may be some merit in arguing that increasing the maximum fine will allow the SDT to focus on serious cases of wrong-doing, some within the profession have raised concerns about the:
- Lack of adequate legal safeguards
- Lack of transparency around SRA decisions
- Lack of independence from the profession and regulator
In response to the announcement of the changes, the Law Society stated, “…our members have concerns about the SRA acting as investigator, prosecutor and judge, in potentially many more serious and significant cases which currently go before the SDT…The independence of the SDT from both the regulator and the profession, as well as its clearly defined processes and transparency means that solicitors generally have more confidence in the SDT’s decision-making processes”.
While solicitors and law firms will have the right to appeal against a decision by the SRA, many may be, understandably, reluctant to do so. As the Law Society has made clear, the right to appeal is not an adequate safeguard; “Many firms and individuals faced with challenging an adverse decision from the SRA would find the prospect of an appeal (and the associated costs of appealing) daunting. A solicitor facing an SRA investigation has to be aware of the high likelihood that they will bear the regulator’s costs as well as their own”.
It remains to be seen whether, by increasing their own fining powers, the SRA will be on the receiving end of a wave of appeals against the fining decisions they make.
On face value, increasing the maximum range of fines that the SRA can levy, allowing them to directly handle more cases of professional wrong-doing, makes some sense. The problem is that this may directly alter the fine balance of regulation and discipline achieved by the separation of the SRA and SDT. Some within the legal profession are concerned that the right of the SRA to levy fines of up to £25,000 without referral to the SDT, will lead to unfair decisions. It will now be up to the SRA to show they can implement these changes in a manner that is transparent, objective, and fair.
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