In February 2023, the Solicitors Regulation Authority (SRA) published details of its new approach to financial penalties, following a second consultation on its financial penalties framework.

Given some concerns raised by respondents to the consultation, the SRA returned to Economic Insight for advice on what metric would deliver proportionate and fair outcomes when setting fines for individuals.

In particular, the SRA asked us to consider whether gross or net income would be the fairer metric to use when setting individual fines.  Our view was that gross income would be fairest, as (i) higher and additional rate taxpayers pay a larger proportion of tax, but a lower proportion of their gross salary is likely spent on non-discretionary expenditure, such as utility bills; and (ii) taking account of savings would lead to inconsistencies, as the SRA would have to determine what is necessary and what is discretionary spending.

The SRA further asked us to assess whether the proposed fine bands were too high or too low at the top end.  Our view was that the proposed bands would likely lead to an increase in the fine for higher earning solicitors and a decrease for solicitors earning lower salaries.  However, compared to other regulators, when considering their fine bands as a percentage of gross income, we found that these were broadly in line with or higher than the bands the SRA had proposed.

Our full report can be found on the SRA website:
https://www.sra.org.uk/sra/consultations/consultation-listing/financial-penalties-new-approach/