• Application 11609-2017

• Hearing 17-18 October 2017

• Reasons 13 November 2017

The SDT ordered that the first respondent (admitted 1999) and the second respondent (admitted 2012) should each pay a fine of £15,000.

The firm of which the first and second respondents were the principals had failed to allocate receipts of £4,755.12 into client account and withdrawals of £108,778 from client account in a client ledger account for the client concerned, in breach of principles 6, 8 and 10 of the SRA Principles 2011, outcome O(7.4) of the SRA Code of Conduct 2011 and rule 29.2 of the SRA Accounts Rules 2011.

The firm had failed to obtain (or preserve) bank statements relating to six client accounts operated in the firm’s name, in breach of principles 6, 8 and 10, outcome O(7.4) and rule 29.11 of the rules.

A shortage existing on the firm’s client accounts was not shown within the relevant reconciliation statements, in breach of principles 6, 8 and 10, outcome O(7.4) and rule 29.14 of the rules.

Although the shortage was brought to the respondents’ attention on 25 February 2015, it remained unremedied as at 9 October 2015, in breach of rule 7.1 of the rules.

While being the firm’s only directors and principals, the respondents had failed to participate in the management of the firm’s practice and discharge their duties as its directors, in breach of principle 8. The first respondent had acted recklessly.

They had allowed the practice of the firm to be carried on subject to the direction, management and control of two unadmitted persons and a former solicitor, either acting by themselves or in concert with other unadmitted persons, in breach of principles 3 and 7. The first respondent had acted recklessly.

The first respondent alone, being the firm’s COFA, had failed to record the firm’s failures to comply with the rules, in breach of principle 7 and rule 8.5(e)(i)(B) of the SRA Authorisation Rules 2011, and had failed to report a material breach of the rules, in breach of principle 7 and rule 8.5(e)(iii) of the SRA Authorisation Rules 2011.

The harm caused by the first respondent had taken the form of the shortage on the client account. The first respondent had acted recklessly and confidence in the profession relied upon those in positions of responsibility in firms to discharge their duties to a high standard. His misconduct was aggravated by the fact that the situation had continued over a significant period of time, but mitigated by the fact that he had shown genuine insight.

The appropriate sanction was a financial penalty.

The second respondent’s case was distinguished from that of the first respondent in that he did not hold the roles of COLP and COFA. However, he was the owner of the firm, unlike the first respondent.

As with the first respondent, matters were aggravated by the fact that the second respondent’s misconduct continued over a significant period of time but mitigated by the fact that he had shown some insight and had made admissions, albeit at a very late stage.

The extent of the obligations on the second respondent had not been made clear to him when he agreed to become a director and owner.

The appropriate sanction was a financial penalty.

The respondents were each ordered to pay costs of £12,948