Solicitors’ contributions to the Compensation Fund are to rise from £30 to £90 for individuals and from £660 to £2,220 for firms, the Legal Services Board (LSB) has confirmed
The increases, due to take effect this month as solicitors renew their practising certificates, have arisen as a result of Solicitors Regulation Authority (SRA) interventions ‘into 65 legal services practices in 2022/23 including Metamorph Group and Axiom Ince’, the SRA said. This brought total expenditure from the fund to £64.9m, up from £22.4m the previous year.
Consequently, the fund’s reserves dropped to a low point of £18.7m in July 2023.
The SRA says it anticipates collecting £31.6m in 2024/25—a ‘significant’ increase on this year’s £10m—which it considers ‘will set the Compensation Fund at a level where it can continue to be managed on a sound financial basis’.
However, Law Society chief executive officer Ian Jeffery described the increase as ‘deeply concerning’.
Jeffery said: ‘We also strongly encourage the SRA to prioritise its focus on core activities and only undertake additional workstreams based on evidence of regulatory need, or specific gaps in responding to consumer needs, rather than looking for additional fining powers.
‘In our consultation response, the Law Society asked the SRA to reconsider how the levy was apportioned, to ensure the burden was distributed fairly, and to take proactive measures to prevent future substantial claims. Solicitors are steadfast in their wide support for the Compensation Fund, as a vital protection for clients, and it clearly delineates the profession from unregulated providers of legal services.’
Tensions between the Law Society and SRA have also escalated over proposals to increase fining powers on solicitors. In June, the SRA proposed introducing two more fining bands: Band E, 6-10% of a firm’s annual domestic turnover and 113-115% of an individual’s income; and Band F, 11-25% of annual domestic turnover and upwards of 145% of an individual’s income.
However, Law Society vice president Richard Atkinson said the proposals were ‘unfair, disproportionate and potentially unlawful’, and risked cutting the Solicitors Disciplinary Tribunal ‘out of the process’ even though the tribunal has a wider range of sanctions available.
