The Law Society has questioned whether the Solicitors Regulation Authority has sufficiently justified eye-watering increases to the Compensation Fund levy.
The SRA’s proposals would see individual contributions – usually paid for by firms – jump from £30 to £90, while the £660 levy on firms would rise to £2,220. This is payable by all firms who hold client money and is a flat fee regardless of size of firm.
In its consultation response, the Society raised concern about the impact the higher contributions will have on small firms and sole practitioners.
Society chief executive Ian Jeffery said: ‘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.’
Jeffery acknowledged that a number of ‘recent failures’ had placed considerable strain on the fund’s resources, most notably the collapse of Axiom Ince, and reserves need to be rebuilt.
‘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,’ Jeffery said.
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