SRA Compensation Fund Rules 2021
For applications made before 5 July 2021 read the archived 2019 Compensation Fund Rules
These rules govern the way that we operate the SRA Compensation Fund.
It is funded by contributions from individuals and firms authorised by us.
Part 1: The Fund
- The SRA shall establish and maintain a fund for making grants in respect of applications made in accordance with these rules.
- Solicitors, RELs, RFLs, recognised bodies and licensed bodies must make contributions to the Fund in such amounts and at such times as may be prescribed.
- Any unpaid contributions may be recovered as a debt due to the SRA.
- The SRA may at any time:
- The Fund is a discretionary fund of last resort and no person has a right to a grant enforceable at law. The SRA retains a discretion to refuse to consider an application or to make a grant notwithstanding that the conditions in these rules for making a grant are satisfied.
- The circumstances in which the residual discretion in rule 2.1 may be exercised include, but are not limited to, circumstances in which the SRA considers that the loss suffered is not material in all the circumstances or has been appropriately compensated through another means.
- The SRA may refuse or reduce a grant where the loss or part of the loss is, or was, capable of being made good or appropriately compensated by some other means, including another compensation scheme.
Part 2: Payment of grants from the Fund
- A person may apply for a grant out of the Fund, if the loss referred to in rule 3.3 relates to services provided:
- A person who is not a client of the defaulting practitioner may apply for a grant out of the Fund if they:
- were a party on the other side of a legal matter on which the defaulting practitioner was acting; and
- have suffered, or are likely to suffer, financial loss in accordance with rule 3.3 arising as a result of the defaulting practitioner failing to apply funds for the purpose intended where they should have been used (whether on completion of certain conditions or otherwise) to complete a transaction for their benefit, or to make a settlement or other payment to them.
- For any grant to be made out of the Fund, an applicant must satisfy the SRA that the applicant is eligible in accordance with rule 4 and (save in respect of a grant made under rule 3.4) has suffered, or is likely to suffer, financial loss directly resulting from:
- the dishonesty of a defaulting practitioner or the employee or manager or owner of a defaulting practitioner; or
- failure to account for money which has come into the hands of a defaulting practitioner or the employee or manager or owner of a defaulting practitioner, which may include the failure by a defaulting practitioner to complete work for which the defaulting practitioner was paid,
in the course of an activity of a kind which is part of the usual business of a defaulting practitioner and, in the case of a defaulting licensed body, the act or default arose in the course of performance of an activity regulated by the SRA in accordance with the terms of the body’s licence.
- The SRA may make a grant to alleviate direct losses suffered as a result of the civil liability of a defaulting practitioner or a defaulting practitioner's employee, manager or owner in circumstances where:
- the defaulting practitioner in accordance with the SRA Indemnity Insurance Rules should have had, but did not have, in place a policy of qualifying insurance;
- the liability of the defaulting practitioner or the defaulting practitioner's employee or manager would have been covered by a policy of qualifying insurance; and
- the loss is not covered by the SIF.
- No grant will be made under rule 3.4 where due to the insolvency or cessation of the insurer the defaulting practitioner's policy of qualifying insurance has been disclaimed or otherwise ceases.
- The SRA may make a grant as an interim measure in relation to part of an application before the application has been fully assessed.
- A person is eligible to apply for a grant out of the Fund if, at the time the application is made, they are:
- an individual;
- a sole trader, partnership, body corporate, unincorporated association or mutual association with an annual turnover or assets of less than £2 million;
- a charity with annual income net of tax in the most recent financial year of less than £2 million; or
- a trustee of a trust with an asset value of less than £2 million.
- The SRA may take into account such evidence as it sees fit when determining eligibility under rule 4.1 and may make a broad estimate of any relevant amount.
- A defaulting practitioner means:
- a solicitor or an REL who at the date of the relevant act or omission was:
- a solicitor or an REL who at the date of the relevant act or omission:
- was self-employed and practising in their own name, and not through a trading name or service company;
- did not employ anyone in connection with the services they provided; and
- was engaged directly by their clients with their fees payable directly to them;
- an RFL who is a manager or owner of an authorised body;
- a recognised body; or
- a licensed body,
- A grant may be made where, at the date of the relevant act or omission:
- a defaulting solicitor had no practising certificate in force;
- the registration of a defaulting REL or defaulting RFL had expired or been revoked;
- the authorisation of a defaulting recognised body or defaulting licensed body had been suspended or revoked;
- The SRA may make a grant to a defaulting practitioner who or which has suffered or is likely to suffer loss by reason of their liability to any client in direct consequence of an act or omission of:
- in the case of a defaulting solicitor, defaulting REL or defaulting RFL, any of their employees or any fellow manager;
- in the case of a defaulting recognised body, any of its employees or managers or owners;
- in the case of a defaulting licensed body, any of its employees or managers or owners, provided that such act or omission arose in the course of performance of an activity regulated by the SRA in accordance with the terms of the body's licence,
- The SRA may make a grant under this rule by way of a loan upon such terms as the SRA specifies.
- In the case of a defaulting recognised body or a defaulting licensed body, the SRA may make such grant payable to one or more of the managers or owners of the defaulting recognised body or defaulting licensed body. If a loan is made to more than one person, they shall be jointly and severally liable for the repayment of the loan.