Regulators are bracing themselves for large payouts after being put on notice about a number of potential investment scams involving law firms.

The Solicitors Regulation Authority today admitted it expects a rise in high-value claims on the Compensation Fund that will require settlement in the next 18 months, having had 12 reports since last September.

The organisation revealed that firm contributions to cover the fund will increase by 42% from £548 to £778 in the next year, with each solicitor paying £40 into the fund – a yearly increase of £8.

Recent cases subject to enforcement action have included a firm where investors lost money in a Brazilian eco-houses scheme, and a solicitor who was found to be acting for investment companies offering opportunities in diamond and art trading. In that case, his position as a solicitor was seen as a key factor in lending the scheme authority and credibility.

Paul Philip, chief executive of the SRA, stressed that the vast majority of solicitors would not knowingly become involved in fraudulent schemes, but the cost to the profession of those that do can be great.

‘Solicitors and law firms are rightly respected and their involvement in fraudulent investment schemes can give the impression of credibility or security,’ said Philip. ‘Their involvement in such schemes entices people to invest, which is leading to many individuals losing significant sums of money.’

The last SRA warning notice in September 2016 was prompted by 18 reports coming in concerning investment schemes in the previous 18 months. That rate has increased, along with the enforcement action taken against rogue firms.

Dubious or risky schemes are often presented as routine conveyancing or investment in ‘land’ when the reality is very different, and clients are unwittingly financing high-risk or fraudulent property developments. Other schemes have been designed to get round the rule banning firms from providing banking facilities.

The SRA stresses any involvement in a dubious scheme is likely to constitute serious misconduct.