In response to the Solicitors Regulation Authority’s (SRA) consultation on the proposed rise to the Compensation Fund levy, the Law Society of England and Wales has expressed serious concerns about the impact this could have on the sector, especially small firms and sole practitioners.
The proposed individual contribution to the Fund will rise from £30 in 2023-2024 to £90 in 2024-2025. For firms, proposed contributions will rise from £660 to £2,220.
Law Society chief executive officer Ian Jeffery said: “The substantial proposed increase in the Compensation Fund contribution this year – 200% for individuals and 236% for firms – is deeply concerning.
“Solicitors are steadfast in their wide support for the Compensation Fund, as a vital protection for clients, and it clearly delineates the profession from unregulated providers of legal services.
“However, we have to question whether the SRA has provided sufficient evidence to justify the increases. Its own principles call for transparency in determining the viability of the fund whilst keeping the levy amount and the approach to collection manageable for the regulated sector.
“We expect that when the SRA applies for the Legal Services Board to approve the levy, their application will include concrete evidence explaining the rationale for the huge increase to be collected in a single year.
“We are aware that there have been a number of recent failures that have placed considerable strain on the resources of the Compensation Fund – most notably the collapse of Axiom Ince – so we see the need to rebuild the Fund’s reserves over time.
“However, we also want to understand what measures the SRA is putting in place to minimise the risk of the rising number of calls on the Fund.”
The proposed individual contribution to the Fund will rise from £30 in 2023-2024 to £90 in 2024-2025. For firms, proposed contributions will rise from £660 to £2,220.
The SRA comment on the Compensation Fund, saying: ” The overriding principle will be to maintain the viability of the fund; We will ensure that the professional contributions to the fund are as manageable as possible for those we regulate; We will collect the contributions to the fund in a way that is manageable for those we regulate; We will be transparent about the fund monies and their management.”
One Response
What can be done? If there is nothing or little left in the pop from the Axiom Ince debacle it needs replacing and the funds to replace that will only come from one way. I believe there was comment at some point stating that the Government should intervene but I think that is a dangerous precedent to set. There is no doubt questions to be asked about how this is all controlled and what happened with the Axiom Ince situation but to protect clients, the pot needs topping up. The client will be the one that suffers ultimately as their fees will go up to pay for it. This is something that gets misunderstood or not accounted for regularly. Each time we are asked to do something more or put ourselves at further risk or adhere to some of the crazy stuff that gets placed on us, it is the client that suffers. Who are we meant to be protecting? The client….