FUND: levy could drop from £400 to £340 or even lower


The number of law firms closed down fell last year to its lowest since at least 1993, it has emerged.



The board of the Solicitors Regulation Authority (SRA) last week also decided to defer a decision on setting the level of 2007/8 contributions to the Solicitors Compensation Fund (SCF), which it was going to reduce from £400 to £340. It followed a request from the Law Society to consider whether the fund - which compensates the victims of fraud - needs reserves at their present level, meaning contributions could go even lower.



There were 50 interventions last year, down from 60 in 2005 and a high of 113 in 2000. Dishonesty and accounts rules breaches were the main causes. The courts have often referred to the Draconian nature of the intervention power and the trend indicates that the SRA has taken this on board.



The board was told that the fall has come through closer scrutiny of intervention decisions, in part to ensure solicitors' human rights are not breached. SRA chief executive Antony Townsend said, 'We recognise that intervention is a Draconian measure and should be exercised only where it is necessary to protect clients and money. If there are appropriate alternatives, such as the imposition of practising certificate conditions, that still protect the interests of clients, we consider them carefully.'



Reasonable economic conditions also contributed to the improved picture, although fears of an increase in mortgage fraud have been borne out, the board was told. Some £9.5 million was paid out in 2006, the lowest since £7.6 million in 1999. In 2002, the fund paid out £20 million.



But the SRA remains concerned about the possibility of a catastrophic default and is seeking express powers in the Legal Services Bill that would allow it to raise a levy from the profession to ensure the fund has sufficient assets to meet claims.



The contribution level of £340 would keep the SCF's reserves at £51 million, the level it has been at for some years, although its currently outstanding liability is £18 million. Mr Townsend said the Society had raised 'a perfectly legitimate question... I don't think there's any magic in £51 million'.



Neil Rose