The Solicitors Regulation Authority (SRA) has dropped controversial plans to cut Compensation Fund pay-outs from £2 million to £500,000 following an intervention by the Legal Services Board (LSB).
The Compensation Fund makes payments to people who have lost money due to a solicitor’s dishonesty which are not covered by professional indemnity insurance. The planned cut had proved highly unpopular with Law Society and Legal Services Consumer Panel (see Brunel News, October 2020).
The SRA’s U-turn was revealed in the minutes of the regulator’s April board meeting
The SRA had wanted to reduce pay-outs to cut the cost of the fund to the profession, but it changed its mind after being warned-off by the LSB. LSB Chief Executive Matthew Hill wrote to the SRA in April to tell the SRA it was considering whether to refuse to allow the cut to go through. Matthew Hill wrote that “granting the application would be prejudicial to the regulatory objectives, in particular, protecting and promoting the interests of consumers, and protecting and promoting the public interest.”
The SRA’s U-turn was revealed in the minutes of the regulator’s April board meeting. It said the cut in compensation was removed from the plans to allow the rest of the package of reforms to be implemented “in a more timely fashion”. The minutes also report that the regulator could revive the plans in the future.
James Burgoyne, Divisional Director – Claims & Technical, Brunel Professions said the decision would be popular with many, but observed: “The emphasis on Consumer protection, whilst laudable in itself, does mean increased costs for the solicitor profession, whether they manifest in the Compensation Fund levy or premiums driven by the breadth of the SRA Minimum Terms and Conditions. The costs are ultimately passed on to clients of solicitors as part of the operating costs of the firm, so these issues do affect everyone.”
The LSB’s warning notice and the SRA’s board minutes are available on the organisations’ websites. Reports about the regulator’s change of plan have been published by Law Society Gazette and Legal Futures.
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.