The SRA is trying to lift penalties on traditional firms and solicitors but may be missing the mark.

Senior figures at the Solicitors Regulation Authority (SRA) have long held the view that the level of fines imposed on large law firms and their partners is too small.

That view perhaps underestimates the reputational impact. But regardless, the authority has just issued a second consultation on fines that seeks to make them more draconian.

The watchdog's ability to impose fines is complex. It can impose financial penalties on alternative business structures - firms that receive outside investment and have non-lawyer partners - up to £250 million and their "managers", be they directors or partners, up to £50 million.

But the authority can fine traditional law firms and their partners only up to £25,000. To obtain a higher penalty, the authority must apply to the Solicitors Disciplinary Tribunal.

The SRA has now proposed a scheme based on turnover for firms and income for partners. Not only will this be applied in relation to the newer, alternative structures and their managers, but it is also implicit that it will guide the SRA as to when it should refer traditional law firms and their partners to the tribunal because £25,000 is not enough.

However, the scheme for calculating fines is simplistic. A number will be assigned to a breach's seriousness and its impact, those numbers added together and then multiplied by a percentage of turnover for a firm or, for a solicitor, income. In other words, fines will be means based.

The scheme provides little scope for discretion to ensure that the outcome is fair and proportionate. The SRA seems to regard this as less important than consistency in its own decision making and of course the upward ratchet effect of the scheme.

Under the scheme, serious misconduct by a £50 million-turnover law firm could lead to a £2.5 million fine. However, it is in respect of individual solicitors that the scheme would produce odd outcomes.

If two solicitors committed identical breaches but one had an income of £21,000 and the other an income of £500,000 their fines would be £34,000 and £805,000, respectively. This contrasts with the tribunal's present approach, which is to assess a fine based on seriousness and then discount for financial means. Of course, both turnover and income are crude ways to measure wealth and can in themselves lead to unfair outcomes.

Most law firms and solicitors will hope they never get caught in such a scheme. But the SRA seems to be gearing up for an era of more and larger fines. Ironically, as more law firms and partners receive these big fines, that in turn may reduce their reputational impact.

This article first appeared in The Times on 15 September 2022.