Law Society has serious concerns about proposed rise to the Compensation Fund levy
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.
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.”
Notes to editors
* 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’s Compensation Fund principles are: 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.
The Law Society’s consultation response on the SRA’s proposed rise of the Compensation Fund is available upon request.
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