The Solicitors Regulation Authority (SRA) is facing significant criticism from city solicitors over its proposed reform of fining powers, with concerns about its legitimacy and potential for legal challenges.
The City of London Law Society (CLLS) has vocally opposed the SRA’s plans, arguing that they are arbitrary and fail to meet the necessary legal standards. According to the CLLS, the regime is so flawed that it is susceptible to judicial review, indicating potential legal battles ahead.
Under the proposed reform, penalty bands for various levels of misconduct will be introduced, with minimum fines for firms starting at £5,000 and reaching up to £500,000. For individuals, fines would range from £2,500 to £100,000. The SRA also plans to apply its unlimited fining power to cases involving economic crime, potentially resulting in fines exceeding 5% of a firm’s turnover.
Iain Miller, a leading regulatory specialist and chair of the CLLS professional rules and regulatory committee, expressed confusion over the SRA’s approach, describing it as lacking in clarity and legal consideration. “It looks as if the SRA has offered a policy without thinking through its ramifications,” he stated, urging a reconsideration of the proposals.
The committee highlighted a fundamental misunderstanding by the SRA of how law firms operate, particularly regarding the impact of fines on firms’ economic viability. They noted that significant fines could disproportionately affect partners’ profits, ultimately harming the firm’s stability.
Furthermore, concerns were raised regarding the rationale behind income-based fines for individuals, which might exceed their financial capacity. The CLLS pointed out that the SRA’s approach does not align with the statutory powers provided to the Solicitors Disciplinary Tribunal (SDT), which includes the ability to impose unlimited fines and additional penalties such as suspension or striking off.
The proposed fines also appear to target behaviours that common law and the SDT might consider worthy of more severe penalties, such as suspension or removal from practice. Moreover, the CLLS questioned the necessity of minimum fines and the approach to adjusting penalties based on aggravating or mitigating factors within specified bands.
The response from the CLLS also expressed broader concerns about the SRA’s decision-making quality in enforcement cases, citing prolonged resolution times and a tendency to assess cases at the most serious end of the spectrum. They cautioned that this approach might lead to inconsistencies with procedural fairness standards maintained by other regulators.
Colin Passmore, chair of the CLLS, stated that the proposed policies are fundamentally flawed. Despite this, he expressed willingness to collaborate with the SRA to develop a more reasonable and proportionate policy.
The proposed fining regime by the SRA has sparked a significant backlash from city solicitors who warn of possible instability and legal challenges within the profession if reforms proceed as planned. The criticisms highlight a disconnect between the SRA’s intentions and the operational realities of legal firms.
