CLLS Response to Financial Penalties Consultation

This is the response of the City of London Law Society (“CLLS”) to the SRA’s Consultation “Financial Penalties: further developing our framework” issued on 28th June 2024.

Notwithstanding our shared agreement as to the overall basis of fines, the CLLS has grave concerns in relation to the scheme proposed by the SRA. In particular:

1. The SRA does not appear to have developed its scheme with any regard as to the nature of those whom it regulates. It has had no proper regard as to the question of the likely impact of fines on firms and individuals. As such it is difficult to understand how the SRA considers its scheme can be consistent with the SRA’s own obligations in Section 28 of the LSA and its own Enforcement Strategy which states: “the public and the profession have a right to expect that wrongdoing will be met by robust and proportionate sanctions, and that we as a regulator will enforce our standards or requirements evenly, consistently and fairly. We need to be accountable for our actions and to demonstrate that we will act fairly and proportionately”.
2. The SRA’s scheme is inconsistent with the underlying and well-established common law in relation to the regulation and discipline of solicitors and the way in which this is applied by the Solicitors Disciplinary Tribunal. The SRA has not explained why it considers that its scheme should be different and therefore inconsistent to those principles of common law. No explanation is provided by the SRA as to whether it considered these issues and if so why it chose to reject them. The consultation, in many respects, falls short of providing relevant information to enable an informed response;
3. The SRA has proposed an arbitrary scheme that on its face leads to disproportionate and unfair outcomes without any apparent recognition by the SRA as to the inherent unfairness and therefore unlawfulness of its scheme;
4. This approach is compounded by an apparent refusal by the SRA to contemplate that the SRA’s existing decision making processes are no longer fit for purpose as they were designed at a time when the SRA had no fining power and are significantly less fair and robust than other regulators that have similar fining powers.

We observe that, without a significant reconsideration of its proposals, the SRA risks placing the LSB in the position of being asked to approve a scheme that is vulnerable to challenge by way of judicial review. In addition, any Respondent to the exercise of the SRA’s powers under the proposed scheme would be entitled to raise by way of a defence the lawfulness of the scheme. As such the SRA’s current course will, absent any reconsideration, lead to years of cost and uncertainly for the profession and thereby undermine the regulatory objectives in Section 1 of the Legal Services Act.