SRA proposes new fines regime with higher minimum penalties for law firms and solicitors

The Solicitors Regulation Authority (SRA) is seeking feedback on a proposed new fines regime in England and Wales, introducing minimum fines of £5,000 for law firms and £2,500 for individual solicitors who breach any rules, not just those involving serious economic crime, as reported by STEP.

In 2023, the SRA gained authority to link fines to the income of individuals or firms, implement fixed penalties for minor infractions, and impose fines up to 5% of a law firm’s annual UK turnover. The Economic Crime and Corporate Transparency Bill, enacted the same year, expanded the SRA’s powers to issue unlimited fines for economic crimes, such as criminal anti-money laundering (AML) offences, sanctions violations, fraud, theft, and misuse of client funds, starting March 2024. However, the SRA believes that the current fines, typically capped at £25,000, are insufficient as a deterrent and has petitioned the UK government for unlimited fining authority for all rule breaches.

The proposed amendments will adjust the SRA’s penalty determination approach, adding two new fining bands, ‘E’ and ‘F’, for severe misconduct, particularly economic crimes. For example, penalties under band E will range from 6% to 10% of a firm’s annual UK turnover, and for individuals, from 113% to 145% of their annual gross income.

Additionally, the SRA plans to revise the method of calculating the appropriate fining band for each case. Once a fine level is set for an offence, it will be increased by the amount of any financial gain resulting from the misconduct. The SRA aims to provide greater transparency on how it assesses the impact and harm caused by misconduct when determining fines.

Minimum fines will apply across all bands to ensure deterrence, even for less severe misconduct. The least serious cases will incur minimum fines of £5,000 for firms and £2,500 for individuals, while the most serious will face minimums of £500,000 for firms and £100,000 for individuals.

The consultation period will close on 20th September 2024.

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