- Publication Date
- 2022-12-22
The Solicitors Regulation Authority (SRA) carried out an audit, uncovering several issues regarding the systems and processes at a law firm. Between September 2014 and June 2020, the firm's controls for identifying, monitoring, and managing risks to client money were found to be ineffective in certain cases. Specifically, the firm's accounting procedures did not prevent funds from being wrongly transferred between client ledgers or payments being made to unrelated clients, leading to a conviction of fraud for one of the fee earners involved. Another set of instances involved two cases where the firm did not resolve credit balances within a reasonable time, resulting in damages being retained by the firm for over three years.
Between October 2014 and June 2020, the systems for supervising client matters in parts of the firm concerning the work of fee earners were also found lacking. In 18 cases, the matters were inadequately supervised, and some were not progressed for significant periods. In 20 cases, court proceedings were discontinued without clients' instructions and without notifying them. In a further 21 cases, court directions were not complied with, leading to some cases being struck out. There were other instances where clients were either not informed of or were misinformed about the progress of their matters. Additionally, the firm identified 660 matters between November 2017 and December 2018 where clients were incorrectly informed that they had after-the-event insurance at the inception of their matters. This issue was later resolved by the firm with no loss to clients.
The firm reported that these breaches represented less than 0.18% of all cases dealt with during the relevant period. Following its acquisition in December 2017, the new management identified and self-reported several issues to the SRA. These matters were reported between August 2017 and November 2019. The firm has since made extensive self-reports and has taken substantial steps to improve its compliance and risk management procedures.
In deciding the level of the financial penalty, the SRA considered the firm's significant annual domestic turnover, determining that a penalty of 0.15% of the firm's average annual turnover of £90,000,000 was appropriate. This resulted in a basic penalty of £135,980.44, which was reduced by 40% due to mitigating factors such as self-reporting, corrective actions, and improvements to systems and training. The agreed penalty amounted to £81,588.26, which the firm agreed to pay.