The practising certificate fee is set to be frozen next year, but solicitors face a huge hike in their contributions to the compensation fund.
The Law Society Group, which includes the Law Society and Solicitors Regulation Authority, announced today that it plans to freeze the PC fee at £278, subject to approval from the Legal Services Board. Separately, however, the SRA has determined that solicitor and firm contributions to the compensation fund will more than double.
The proposed PC fee is enabled by efficiency savings in both organisations and represents a reduction of 28% since 2014, Chancery Lane said. Law Society president Joe Egan said: ‘Around the world we promote England and Wales as a global legal centre, open new markets and defend human rights. Our work helps underpin a growing legal services sector worth £25.7 billion annually to the economy. By making considerable efficiency savings across the Society, along with an increase in the number of solicitors on the roll, we are able to freeze fees while delivering greater value to members.’
The fee covers the cost of regulation work undertaken by the SRA, as well as the levy for the Solicitors Disciplinary Tribunal, the LSB, the Financial Conduct Authority (to focus on money laundering activity) and the Legal Ombudsman.
The PC fee does not, however, cover contributions to the compensation fund, which reimburses people who have suffered financial hardship because of a solicitor’s dishonesty or failure to account for client money. In 2018/19 contributions by individual solicitors will more than double, from £40 to £90, while firm contributions will increase by nearly the same proportion, from £778 to £1,680. The levies will be collected in October as part of the renewals process.
Those amounts are determined by the SRA taking into account historical and existing claims, and analysis of future claims. ’In the light of key risks to the profession, including solicitor involvement in dubious investment schemes, it has [been] decided to increase the levy for the second year running,’ the regulator said.
SRA chief executive Paul Philip added: 'The extra layer of protection the compensation fund provides helps maintain trust and confidence in regulated law firms. We are responsible for making sure there are enough funds to cover potential future claims and the rise in contributions reflects the forecasts of increased pressure on the fund.’
Speaking at a conference in March, Philip warned that that ‘get-rich-quick’ schemes fronted by law firms pose a real threat to the integrity of the profession’s client redress arrangements. He cited schemes that ‘offer a 15% return in a year from investing in car parking spaces, hotel rooms, or housing estates in Bulgaria that don’t exist’. Just one dodgy scheme could wipe out the entire £48m compensation fund, he said.
The SRA is currently consulting on changes to client redress arrangements. Its proposals include transforming the fund into a ‘hardship’ pool for those wronged clients who are most in need.
The proposed PC fee is now open for consultation and the results will be considered at the Society’s annual general meeting on 5 July. If approved, the fee passes onto the LSB to be rubber-stamped.