Companies offering legal services under sweeping reforms this year could be hit by fines of up to £250m in the event of regulatory breaches, under recommendations from the Legal Services Board (LSB).

The proposals, published this week (1 March), come in light of a recently-closed consultation on the fines that could be levied on alternative business structures (ABS) – the regime to be introduced under the Legal Services Act to allow business other than traditional law firms to provide legal services.

The LSB had initially floated being able to levy unlimited fines on ABSs, which would have put such vehicles on a level playing field with traditional law firms, but was advised that such powers would conflict with the wording of the Legal Services Act.

As a result, the LSB set out a second consultation on the matter in December last year which floated setting the maximum fine for ABS entities at £150m and £50m for individuals.

The consultation saw five responses in total, comprising the Law Society, the Solicitors Regulation Authority (SRA), the Institute of Trade Mark Attorneys (ITMA), ILEX Professional Standards (IPS) and the Master of the Faculties. The Law Society had lobbied for an amendment to the Legal Services Act to allow for unlimited penalties while the SRA argued that the £150m figure was too low given the level of claims facing a number of law firms related to a Government-backed scheme to compensate injured coal miners.

The LSB argued that the higher £250m figure would be enough to deter serious regulatory breaches in this week's revised recommendations, which are subject to approval from the Ministry of Justice. The oversight body is still proposing to keep the maximum fine for individuals at £50m.

The ABS regime will come into effect 6 October this year and will allow law firms to admit non-lawyer owners and accept external funding.

The news comes as the LSB also this week issued an assessment on front-line legal regulators' efforts to comply with the Legal Services Act and to respond to LSB guidelines on handling consumer complaints.

The results of the review, published on 1 March, saw the LSB criticise the approved regulators for poor data collection and failing to learn from patterns of complaints. However, it did note that the regulators had generally made good progress in compliance with the Legal Services Act.

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