Decision - Agreement
Outcome: Regulatory issue agreement
Outcome date: 4 March 2020
Published date: 10 March 2020
Firm or organisation at date of publication and at time of matters giving rise to outcome
Name: O’Neill Morgan Solicitors Limited
Firm ID: 447656
This outcome was reached by SRA decision.
1. Agreed outcome
1.1 Mr Michael Elwyn Morgan, a solicitor, agrees to the following outcome to the investigation of his conduct by the Solicitors Regulation Authority:
- he is fined £2,000
- to the publication of this agreement
- he will pay the costs of the investigation of £600.
2. Summary of Facts
2.1 Mr Morgan became a principal of O'Neill Morgan Solicitors Limited (the Firm) in 2006. For much of the relevant time he was the sole principal and for all of the relevant time, he was the sole owner of the Firm. He is the Firm’s Compliance Officer for Finance and Administration.
2.2 In February 2016 Mr Morgan admitted to several breaches of the SRA Accounts Rules 2011 in relation to his handling of client money. Mr Morgan, along with the Firm’s other manager at the relevant time, was fined £2,000, in respect of those breaches.
2.3 In November 2016 the Firm employed a new bookkeeper. Unbeknown to Mr Morgan, the bookkeeper had been convicted of theft in 2014.
2.4 The bookkeeper was directly managed by Mr Morgan. He verbally checked the balance of the office account regularly. However, he did not adequately supervise or check her work.
2.5 Between November 2016 and January 2018, the bookkeeper took at least £24,500 from the Firm’s office account and its client account. She did this by:
- accepting cash from clients which she kept for herself rather than pay into the Firm’s client account, an
- making BACS and cheque payments to herself from the Firm’s office account.
2.6 The Firm’s three-way client bank account reconciliation in October 2017 showed a number of unreconciled items. Mr Morgan did not investigate these at the time. The Firm did not carry out three-way client bank account reconciliations between November 2017 and April 2018.
2.7 In September 2017, due to concerns about the bookkeeper’s performance, Mr Morgan instructed the Firm’s accountants to undertake a full review of its accounts. The bookkeeper left the Firm, before this work started.
2.8 By the time the accountants had undertaken the work it discovered that client money was missing. Mr Morgan reported this to both the Firm’s insurers and the SRA.
2.9 Following further investigation, the bookkeeper’s actions were uncovered. Mr Morgan also became aware of the bookkeeper’s previous conviction for theft.
2.10 In September 2018 Mr Morgan replaced the missing monies.
2.11 In April 2019 the SRA made the bookkeeper subject to a control order, restricting her ability to be involved in a legal practice. She was also issued with a written rebuke and ordered to pay a fine.
3.1 Mr Morgan makes the following admissions which the SRA accepts:
- because he did not adequately supervise the bookkeeper or check her work, he failed to establish and maintain proper accounting systems and internal controls in breach of rule 1.2 (e) of the SRA Accounts Rules 2011
- that by not doing three-way client bank account reconciliations between October 2017 to April 2018 he breached rule 29.12 of the SRA Accounts Rules 2011
- by virtue of the above he failed to protect client money in breach of Principle 10 of the SRA Principles 2011.
4. Why a financial penalty is appropriate
4.1 The SRA considers that a fine is an appropriate outcome because Mr Morgan’s behaviour showed a disregard for his regulatory obligation to exercise proper management over the Firm. The lack of control and oversight persisted for a long period of time and made it easier for the bookkeeper to commit serious misconduct. Mr Morgan was not directly responsible for the losses that arose as a result and has since remedied them in part from his own resources. However, having been fined in early 2016, he ought to have been particularly cognisant of the need to have in place proper governance and oversight of the Firm’s handling of client money.
4.2 A financial penalty is appropriate to maintain professional standards because Mr Morgan’s conduct was serious, and any lesser sanction would not provide a credible deterrent to Mr Morgan and others. A financial penalty therefore meets the requirements of rule 4.1 of the Regulatory and Disciplinary Procedure Rules.
5. Amount of the financial penalty
5.1 The amount of the fine has been calculated in line with the SRA’s published guidance on its approach to setting an appropriate financial penalty (the Guidance).
5.2 Having regard to the Guidance, the SRA and Mr Morgan agree that the nature of the misconduct was high because Mr Morgan failed to properly supervise his bookkeeper and protect client money. It also forms part of a pattern of misconduct when viewed with the breaches for which Mr Morgan was fined in February 2016. The Guidance gives this type of misconduct a score of three.
5.3 The SRA considers that the impact of the misconduct was low because Mr Morgan was not directly responsible for the loss and did make good the loss caused by the bookkeeper. The Guidance gives this level of impact a score of two.
5.4 The nature and impact scores add up to five. The Guidance indicates that a fine of between £1,001 to £5000 is appropriate to deal with this. In deciding the level of fine within this bracket, the SRA has considered the following mitigation which Mr Morgan has put forward:
- the misconduct arose due to the actions of a dishonest employee
- that he took steps to replace the missing monies from his own resources, which included him selling his home
- he has improved the Firm’s processes and procedures to mitigate the risk of similar conduct arising in the future
- he cooperated fully with the SRA investigation.
5.5 On this basis, the SRA consider that the lack of direct responsibility for the harm caused and the remedial action taken by Mr Morgan indicate a fine at the lower end of the bracket. However, this must be balanced against the fact that this matter appears to form a pattern of behaviour. The SRA considers a basic penalty of £3,500, which is in the middle end of the bracket, to be appropriate.
5.6 The SRA considers that the basic penalty should be reduced to reflect the early admission made by Mr Morgan to the SRA, when it investigated the matter. That early admission helped to minimise the inconvenience and impact to clients. Mr Morgan has also shown insight into his conduct, which is evidenced by him improving systems and procedures within his firm to mitigate the risk of similar misconduct arising again. Mr Morgan also replaced the missing money from his own resources. To reflect this the SRA considers that the fine should be reduced to £2,000.
5.7 The SRA considers it appropriate that this agreement is published in the interests of transparency in the regulatory and disciplinary process.
6. Acting in a way which is inconsistent with this Agreement
6.1 Mr Morgan agrees that he will not act in any way which is inconsistent with this Agreement such as, for example, by denying the admissions made in this agreement.
6.2 If Mr Morgan acts in a way which is inconsistent with this agreement, the conduct which is subject to this Agreement may be considered further by the SRA. That may result in a disciplinary outcome or a referral to the Solicitors Disciplinary Tribunal on the original facts and allegations. Acting in a way which is inconsistent with this Agreement may also constitute a separate breach of Principles 2 and 5 of the Principles.
7.1 Mr Michael Morgan agrees to pay the costs of the SRA's investigation in the sum of £600. Such costs are due within 28 days of a statement of costs due being issued by the SRA.