The Law Society of England and Wales has opposed reforms to the Solicitors Regulation Authority’s (SRA’s) financial penalty regime, saying they are unfair and potentially unlawful.  

The society’s comments have come in response to the conclusion of a consultation launched by the regulator to develop its financial penalties framework.

The framework is being updated following recent legislation on economic crime, which gave the SRA unlimited fining powers for economic crime-related misconduct.

Under the proposals, the SRA would increase fines overall and introduce minimum fine levels for all bands for firms and individuals. It would also create two extra fine bands and penalise firms up to £500,000 – with such decisions approved by senior managers.

The proposed Band E fines would range from 6% to 10% of a firm’s annual domestic turnover and 113% to 145% of respondent income, while Band F fines would be higher and reserved for the most serious misconduct.

“The Law Society maintains its strong opposition to the SRA’s ambitions for any further extension to its fining powers and is strongly opposed to these unfair, disproportionate and potentially unlawful proposals,” said vice president Richard Atkinson.

“Should they go ahead, they would have serious repercussions for the legal profession and access to justice. Higher fines do not necessarily provide a credible deterrent or maintain public trust, and the SRA has not provided empirical evidence to support this claim,” he added.

Atkinson said the proposed new penalty bands should not be added to the existing framework, calling for a separate framework for economic crime-related misconduct, “which could take a more nuanced approach”.

The plans were also criticised by the influential City of London Law Society (CLLS) and the Birmingham Law Society (BLS), a substantial regional law society.

The CLLS raised many concerns over the SRA’s proposals, calling the way the SRA has gone about the reforms “flawed”. It said it found the SRA proposals to be arbitrary, not fit for purpose and inconsistent with its obligations in common law and statute.

Iain Miller, chair of the CLLS’s regulatory committee, commented: “The more we went into the SRA paper, the more confused it became.” He added the SRA had offered a policy without thinking through its ramifications and adequately considering underlying law.

Colin Passmore, chair of the CLLS, said: “The CLLS cannot agree with a policy which so many of our specialist lawyers consider is fundamentally flawed,” adding it was prepared to work with the SRA “to help produce a more sensible and proportionate policy”.

The BLS’s equivalent committee said the SRA’s plans lacked a proper evidential base and potentially handed the regulator almost unlimited power to issue significant fines.

BLS committee chair Jayne Willetts said: “We remain concerned by this ‘Robin Hood’ type approach where fines are calculated according to the firm’s or individual’s financial worth. A fine is like any other sanction. It must fit the seriousness of the breach.”

All three bodies expressed concerns about a perceived lack of independence and external scrutiny within the SRA’s decision-making process, with the Law Society saying it potentially undermined the Solicitors Disciplinary Tribunal’s (SDT’s) role and militated against the open justice principle.

Atkinson said: “The SDT has a much wider range of powers to sanction solicitors’ misconduct. The SRA is, in effect, proposing to cut the SDT out of the process by using only one limited type of sanction.”

He concluded it was “premature” for the SRA to seek additional powers before the investigations into its handling of the Axiom Ince and SSB cases had been published by the Legal Services Board.

The SRA’s chief executive, Paul Philip, previously called for a “robust approach which enables us to take action in a way that is fair, transparent and consistent to all” in implementing the new legislation.

The responses came as the Legal Services Board approved separate reforms to the Compensation Fund, administered by the SRA, which will significantly increase compensation fund contributions to cover the cost of the Axiom Ince and other interventions. 

The SRA subsequently warned firms involved in law firm mergers or takeover deals to put client and consumer responsibilities first.