Compensation fund payouts tumble by £5.9m in a year
Grants made to clients who have fallen victim to dishonest solicitors have dropped by almost 25% as the sector pulls away from economic crisis. The Solicitors Regulation Authority has revealed that the solicitors compensation fund made grants of £17.9m during the year to 31 October 2015, compared with £23.8m in 2014.
The number of claims coming into the fund also fell significantly, from 1,842 in 2014 to 1,174 last year. By the end of the year, the SRA had 292 open claims on the books, compared with 548 at the same point in 2014. The fall is largely due to a drop in the number of interventions by the SRA and the overall economic recovery.
During the financial crisis, a number of high-profile firm collapses meant significant raids of the compensation fund. One of the biggest of these involved Midlands firm Wolstenholmes, whose closure resulted in the payment of almost £13m to clients over four years.
The SRA has said it is now prepared to reduce accumulated funds – money set aside in case of a major firm going bust – to £25m, although it stressed there will be enough to deal with another significant collapse. By October 2015, funds set aside were down to £44.5m from £56m the previous year.
The compensation fund, paid for through contributions from solicitors, makes discretionary grants to clients who have suffered loss as a result of a solicitor’s dishonesty or failure to account for money.
The majority of these grants result from claims made following an intervention into a practice.
A contribution of £32 per individual and £548 per firm that holds client money was approved by the SRA board at its meeting in June 2015 and will stay in place next year.