SRA fining powers – putting the SDT out of business?
The SRA is on a mission to increase its powers to levy financial penalties. The last 12 months have seen a substantial increase in its fining powers, and a grant of unlimited fining powers in matters relating to financial crime and SLAPPs is imminent. The SRA has now dramatically upped the ante, seeking the power to levy unlimited fines in all cases of serious misconduct. With the Legal Services Board appearing supportive, the proposal has the potential profoundly to affect the enforcement of professional discipline within the profession.
A little over 12 months ago, the SRA's power to fine traditional law firms, and individuals working at them, was limited to £2,000. Any greater financial penalty would require a referral to the SDT, which may levy an unlimited fine. (It is worth noting that the SRA has since 2011 carried much more significant powers in relation to alternative business structures ("ABS"), which fall outside the SDT's jurisdiction. The SRA can fine an ABS up to £250 million, and an individual working at an ABS up to £50 million.)
In July 2022, the cap for traditional law firms was increased to £25,000. The SRA's principal rationale for seeking that increase was to allow it to resolve "less serious matters resulting in relatively low fines" without referring them to the SDT.
The Government's Economic Crime and Corporate Transparency Bill 2022 took matters further, proposing to remove all caps on the SRA's fining powers in relation to economic crime matters. As mentioned in our July 2023 edition, the Government subsequently confirmed that the unlimited fining power would also extend to strategic lawsuits against public participation (so called SLAPPs).
These changes to the fining regime all took place against the backdrop of, and by reference to, the increased focus on economic sanctions following the Russian invasion of Ukraine. The Government's announcement of the Bill appeared to disclose concerns that the length of SDT proceedings was inhibiting the regulator's ability to police compliance with those sanctions.
Then, on 27 July 2023, the Daily Mail published a special investigation into immigration firms. By 31 July 2023, the SRA had intervened in three firms named in the investigation. The same day, Anna Bradley, chair of the SRA Board, wrote to the Lord Chancellor regarding the investigation. In that letter, she asked that the SRA be given unlimited fining powers in relation to all cases of serious misconduct. Interestingly, her letter indicated that the SRA had been lobbying for those powers "for some years", albeit not in public.
The Legal Services Board appears to support a radical increase to the SRA's powers. On 4 August 2023, Alan Kershaw, Chair of the Legal Services Board, announced a review of the regulator's enforcement powers, stating that: "For some time, we have been concerned that a lack of effective fining powers among some regulators, particularly the Solicitors Regulation Authority, may hamper their ability to tackle wilful and serious misconduct."
The grant of unlimited fining powers to the SRA would radically reshape the enforcement of professional discipline within the profession. The role of the SDT would be substantially diminished, perhaps being limited to cases justifying strike-off or other severe non-financial penalties, and appeals from sanctions levied by the regulator. We await details of the Legal Services Board consultation with interest.