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SRA Unveils New Financial Penalty Regime
July 3, 2024
  1. Introduction – SRA Unveils New Financial Penalty Regime

A recent announcement published by The Law Society Gazette revealed that The Solicitors Regulation Authority (SRA) is proposing a new financial penalties regime to stay effective should the government grant the request for greater fining powers. The decision to update its regime follows the regulator being granted unlimited fining powers for misconduct relating to financial crime. The SRA is requesting for similar powers to be granted for all breaches of its rules. The goal is to deter serious wrongdoing, especially among wealthy firms and individuals.

The consultation document, published by the SRA on Friday 28 June 2024, says:

The purpose of our sanctions, including financial penalties, is not to punish wrongdoing. We impose sanctions to:

  • protect clients and the public: controlling or limiting the risk of harm, and making sure the individual or firm is not able to repeat the offending or similar behaviour or is, at least, deterred from doing so.
  • send a signal to those we regulate more widely with the aim of preventing similar behaviour by others.
  • maintain and uphold standards of competence and ethical behaviour.
  • uphold public confidence in the provision of legal services.

The document also says, ‘Through this consultation, we are proposing changes to our fining guidance that we believe will help us to deliver a strong and credible deterrent against breaches of our standards. We expect this to help us to uphold public trust and confidence, alongside enhancing the clarity, transparency and consistency of our fining decisions.’

  • New Fining Bands E and F

The new regime is also introducing two new fining bands, E and F, for serious misconduct, particularly in cases involving economic crime. Band E penalties range from 6%–10% of a firm’s annual domestic turnover and 113%–145% of an individual’s gross income. Band F would start at 11% for firms and 146% for individuals.

  • Minimum Fining Levels

There is also a proposal to introduce minimum fines for each penalty band, ranging from £5,000 for firms and £2,500 for individuals for minor misconduct, to £500,000 for firms and £100,000 for individuals for serious misconduct.

The consultation paper supports these proposed changes by saying, ‘We recognise that minimum fine levels will have the greatest impact on smaller firms and individuals with lower salaries. However, we consider that minimum fines are necessary to reflect the seriousness of the misconduct for which the fine is being imposed.’

The SRA is also considering fines based on metrics other than annual turnover or individual income and revising its approach to convictions for driving with excess alcohol.

SRA chief executive Paul Philip said: “The majority of solicitors do a good job. However, when this is not the case, it is important that we have a robust approach in place which enables us to take action in a way that is fair, transparent and consistent to all. The changes we are proposing will help to ensure we can continue to do that, including for the most serious cases, which by their very nature can and will attract the most significant penalties.”

The consultation is now open and closes on 20 September.

Sources:

The Law Society Gazette. Read the full article here: SRA revises fines regime in anticipation of unlimited power

Consultation paper: Financial Penalties: further developing our framework Consultation

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