Lawyers say fee hikes punishes profession for regulator blunders
The legal watchdog plans to raise its funding by increasing lawyer fees to address past shortfalls, but the legal profession is frustrated, arguing they are being forced to pay for the regulator’s own failures and legacy issues, writes Maria Ward-Brennan.
Lawyers are not chuffed at the regulator’s plan to increase its fees in the upcoming financial year after the new boss told the industry it “can’t meet today’s demands”.
Earlier this month, the Solicitors Regulation Authority (SRA) published its draft business plan and funding requirements for the upcoming financial year, with plans to increase its funding by 29 per cent.
Chief executive Sarah Rapson, who took over the role last November, told the legal sector, “Put simply, we need to change how we work.” She noted that the SRA can’t meet today’s demands while trying to do more.
The regulator revealed this week that it is under pressure due to a 30 per cent spike in misconduct reports against solicitors’ regulators.
The SRA is proposing an increase in overall funding requirements from £25m to £111.5m.
In order to generate the funding, the regulator is seeking to up its charges for its ‘compensation fund ‘ to £120 for an individual solicitor (up £70) and £3,600 for law firms (up £1,950).
The compensation fund is a financial safety net that protects clients who have lost money due to the actions of a regulated solicitor or law firm. But this fund has been the centre stage of the drama in the sector since the fallout caused by a few law firms over the past few years.
Most notably, Axiom Ince caused one of the biggest curfuffles for the regulator after £60m of client money went missing following the firm’s collapse. The SRA took a major reputational hit, and the compensation fund suffered a significant blow as the sector was left picking up the pieces.
Hikes brought about by its own failings
Plans to increase the size of its rainy day fund have not gone down well in the industry, as lawyers see themselves being asked to fork out even more money “to a broken system,” in their view.
Law Society president, Mark Evans, said, “The new CEO of the SRA, Sarah Rapson, has inherited a problematic legacy and we welcome her openness and commitment to address those problems. We do not doubt that this will require money and resources.”
“But we cannot forget that it is the hard-working front line of the profession that bears the cost of fixing an organisation, which had lost focus on its core role,” he added.
Nick Brett, partner at Brett Wilson, told CityAM, the planned increase “has been brought about by the SRA’s own failings in high-profile collapses of firms”.
“Whilst the SRA faces scrutiny from the Legal Services Board, it is little wonder that eyebrows are raised when it is solicitors who are required to compensate for the failings of their own regulator,” he added.
Even Colin Passmore, chair of Canada Law Society, added, “The profession is being asked to fund the cost of fixing problems it did not create.”
With anger bubbling, it remains to be seen whether an extra £25m will even help address the shortfalls at this stage, or whether the SRA will be coming back next year with its hands out for more.
Eyes on the Law is a weekly column focused on the legal sector.