Onside Law, a specialist sports law firm, has been fined £36,000 by the Solicitors Regulation Authority (SRA) for improperly using its client account as a banking facility. The firm also faced additional scrutiny with its Compliance Officer for Finance and Administration (COFA), Simon Thorp, being formally rebuked for his role in the breach.
The incident came to light when Onside Law self-reported to the SRA regarding the movement of $4.1 million through its client account in July 2021. This transaction was conducted on behalf of a long-standing corporate client in relation to the sale of a minority shareholding in another company. However, the SRA found that Onside Law had done “very little work” on this transaction, which did not justify the money passing through its client account.
Further investigations revealed that part of the money did not belong to Onside Law’s client but was instead intended for a third party for whom the firm did not act. This raised serious concerns about compliance with the SRA’s accounts rules, which mandate strict control and justification for the use of client accounts to prevent misuse.
Simon Thorp, who was responsible for overseeing the transaction, failed to ensure compliance with the SRA’s standards. The SRA noted that Thorp’s lack of knowledge contributed significantly to the breach. Despite being the COFA, Thorp did not acquire the necessary understanding to avoid such violations.
The SRA emphasized that this was not a minor infraction. As COFA, Thorp had a significant responsibility to ensure that the firm adhered to regulatory standards, which he failed to do. Consequently, Onside Law allowed its client account to be used for transactions without providing sufficient regulated services or having a contract with the rightful owners of the money.
Thorp’s awareness of the minimal work done and the small fee billed should have alerted him to the risks of allowing substantial sums to flow through the client account. The SRA highlighted this oversight as a critical failure in maintaining the integrity of the firm’s financial practices.
The regulator deemed the firm’s actions as “greater than moderate seriousness,” citing breaches of principles and rules designed to prevent the misuse of client accounts and to uphold trust in the legal profession. The SRA acknowledged mitigating factors, such as the absence of lasting harm, the isolated nature of the incident, and the firm’s proactive self-reporting and cooperation.
The financial penalty was calculated at 0.8% of Onside Law’s domestic turnover and was reduced by 30% due to the firm’s cooperation, resulting in a fine of £36,517, along with additional costs of £600. The cap of £25,000 for fines applicable to traditional law firms did not apply to Onside Law, as it operates as an alternative business structure.
In conclusion, the SRA determined that a rebuke for Simon Thorp was sufficient to maintain public confidence in the profession and uphold professional standards. This decision underscores the importance of stringent adherence to regulatory requirements in the management of client accounts within law firms.