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SRA plans to reduce compensation fund payments
Today, the Solicitors Regulation Authority (SRA) announced the results of its latest public consultation about changes to its Compensation Fund.
The result is that the maximum payment for a single grant will be reduced from £2 million to £500,000.
The Compensation Fund is a discretionary fund of last resort, managed by the SRA. It is used to make grants to people whose money has been misplaced or stolen by SRA-regulated entities or individuals, and to relieve losses which should have been, but were not, insured.
Most of these reforms were first proposed as part of a wider consultation on client protections in 2018.
The Law Society opposed most of these reforms, and last year the SRA abandoned its plans to make substantial changes to the professional indemnity insurance requirements for solicitors.
However, they revised their proposals around changes to the Compensation Fund and launched a new consultation in March.
We had misgivings about some of the proposals, and in our consultation response we said that the SRA had not provided sufficient evidence to reassure us that the reforms would deliver cost savings without compromising client protections.
Simon Davis, president of the Law Society, said: “We are aware that the Compensation Fund is a burden, and agree with the SRA that steps should be taken to reduce costs, but we also believe that it provides a vital safety net to clients.
“The news that the SRA is going ahead with most of the proposed changes to the Fund is disappointing, but at least they are dropping the issue which caused us the most concern.
“In our consultation response, we opposed the move to limit eligibility to apply to the Fund, because it could have resulted in circumstances where innocent people with legitimate claims could be left without assistance, which would be damaging to them and the reputation of the profession.
“If the reforms can ensure that the Compensation Fund is sustainable into the future, that must be regarded as positive, and any cost savings would be welcomed by the profession. The Law Society hopes that the SRA is correct, and that the reforms will continue to provide adequate protection to the public.”
The SRA’s recent submission to Legal Services Board, to set the level of individual and firm contributions to the Compensation Fund, to be levied in October, is 17% lower than last year.
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Press office contact: Naomi Jeffreys | 020 8049 3928