Proposals for significant increases in the fining powers of the Solicitors Regulation Authority are set to be agreed this week.
The SRA regulatory risk committee will meet tomorrow to recommend new fining guidelines of between £500 and £50,000 for most firms and individuals.
For firms with domestic turnover of more than £2m, a fine of up to 2.5% of annual turnover can be imposed.
Currently, the SRA has the power to fine firms and individuals up to a maximum of just £2,000, with any regulatory breach that requires a higher penalty sent to the Solicitors Disciplinary Tribunal.
The recommendations are designed to reduce the number of cases that have to be referred to the SDT. The average cost of tribunal proceedings is around £8,000 – often meaning the cost of the tribunal is more than double the eventual fine.
The new powers will also address the imbalance between the fining limits for traditional firms and alternative business structures. The limit on fines for ABSs is currently £50m for individuals and £250m for firms, but these are seen as disproportionate given the large number of smaller entities that have applied for ABS status.
The SRA was forced to review its options for fining powers last November after the Ministry of Justice rejected an application to raise the limit for all firms to £250m.
The new fining powers come after a six-week consultation that received nine responses.
The City of London Law Society raised concerns about an earlier proposal for bigger firms to be fined up to 10% of their annual turnover. The organisation argued that was disproportionate and appears to have successfully lobbied for the limit to reduce to 2.5% of turnover.
The Law Society raised worries about the impact of higher fines on small firms.
The SRA said the draft guidance allows for exceptions to be made for firms of lesser means, with solicitors able to make representations to the regulator for leniency.A more detailed equality assessment will be made once the SRA has outcomes and data available on the effects of the guidance in practice.