An international law firm has been fined £21,000 by the Solicitors Regulation Authority (SRA) for holding millions of pounds in its client account for cases in which it was not involved.
Milberg is an affiliate of US class action practice Milberg Phillips Grossman. It had previously owned a litigation funding business Ferguson Litigation Funding (FLF) which it had sold in 2016.
In 2017 FLF was backing a group litigation action against a car manufacturer involved in an emissions scandal. Milberg allowed four payments totalling £3 million to be paid into its client account to cover disbursements and insurance premiums – despite the firm having no involvement in the action. Milberg also did not check the source of the funds from the investment companies.
Later in 2018, Milberg allowed £175,000 to be paid into its account by FLF relating to a breach of contract claim. Again Milberg had no involvement in the case.
Milberg admitted to the SRA that it had broken the SRA’s rules by providing a ‘banking facility’ to FLF. It was fined £30,000, which was reduced to £21,000 due to Milberg’s early admission of fault and its prompt action in returning the funds once it was aware of the breach.
“Firms must be doubly careful not to hold client money in their client accounts if there is no underlying transaction or legal service being provided.
Not only are they in breach of SRA rules, but also the matter is not covered by their professional indemnity insurance if something goes wrong,” warns James Burgoyne, Director – Claims & Technical, Brunel Professions. “In effect they are ‘acting as a bank’ and their PI policy only provides cover when they are ‘acting as a solicitor’.”
Brunel Professions is a leading provider of professional indemnity insurance broking to the legal profession. To find out more call Mark Sommariva on 0203 475 3275.