Client protection – Annual Report 2023/24

An intervention involves taking away client money and files from a firm's or a solicitor's practice. This is to keep the money and files safe. This will effectively close down the firm or solicitor's practice and they will no longer be able to operate. We do this if we consider that people are at risk of receiving legal services from a dishonest solicitor, or it is otherwise necessary to protect the interests of clients.

Number of interventions carried out per year

Year	Number of interventions
2017/18	33
2018/19	37
2019/20	40
2020/21	26
2021/22	25
2022/23	65
2023/24	59

Reasons for interventions

There are statutory grounds which apply when deciding whether to intervene into a solicitor's practice or a firm. We apply one or more of them if an intervention takes place. The three most common statutory grounds on which we decide to intervene are:

• to protect the interests of clients
• for serious breaches of our rules
• suspected dishonesty.

The compensation fund is a discretionary fund of last resort for clients of law firms and solicitors. It can make payments where money has been taken or not accounted for by someone we regulate. In some circumstances, it can also make payments where a loss should have been covered by a firm's indemnity insurance, but the firm did not have a policy in place. More information on making payments can be found in our rules.

Law firms and solicitors pay into the compensation fund through an annual contribution. Each year, our Board carefully considers and sets the contribution to the compensation fund that the firms and individuals we regulate must pay.

The total payments we make each year depends on several factors, including the number and nature of interventions we have carried out, some of which may have taken place the previous business year, the number of law firm clients affected, the value of individual claims and whether we are able to make a payment.

Examples of circumstances where we would refuse a claim include when it:

• should be dealt with by the firm's insurer
• is from a business with a turnover of £2m or more per year
• is for losses resulting from activity that is not part of the usual business of a solicitor
• is made outside the time limit
• arises from the client not taking proper care of their money.

Compensation fund payments in the past seven years

	Number of interventions	Total comp fund payments
2017/18	33	£18.1m
2018/19	37	£7.5m
2019/20	40	£10.2m
2020/21	26	£27.0m
2021/22	25	£15.0m
2022/23	65	£41.0m
2023/24	59	£27.9m

Please note that the total compensation fund payments for 2019/20, 2020/21 and 2021/22 differ slightly from what we have reported in previous years (with no more than a £200,000 margin). This is so the figures reflect the published accounts (where previous figures were based on grants approved rather than actually paid during the financial year). We made these corrections in our Client Protection Annual Report 2022/23.

Compensation fund claims history – headline numbers

Not all claims made and closed are handled within the same 12-month time period. This is why in some years more claims were closed than were made.

	Claims made	Claims closed	Claims leading to payment	Approx. average value of successful claim rounded to nearest thousand	Largest payment made
2017/18	2,648	3,217	1,553	£12,000	£820,000
2018/19	1,425	1,553	488	£15,000	£794,000
2019/20	1,120	1,146	367	£28,000	£550,000
2020/21	1,311	1,286	655	£41,000	£1.6m
2021/22	1,209	1,409	710	£22,000	£680,000
2022/23	2,506	2,043	1,102	£37,000	£1.2m
2023/24	2,468	2,253	1,341	£21,000	£2m

Please note that, due to a data error, we previously misreported the approximate average value of a successful claim for 2020/21 and 2021/22. The figures shown now are correct.

Compensation fund – payments made linked to areas of practice

When we make payments from the compensation fund, it is usually linked to areas of practice where large financial transactions take place, such as conveyancing and probate. These areas of practice are reflected in the table below.           

	1	2	3
2017/18	Probate – £5.3m	Conveyancing fraud – £3.7m	Sale proceeds – £2.8m
2018/19	Probate – £2.7m	Mortgage fraud – £0.9m	Theft of client money – £0.8m
2019/20	Sales proceeds – £2.9m	Return of deposit – £2.7m	Probate – £2m
2020/21	Probate – £5.6m	Return of deposit – £1.7m	Sales proceeds – £0.9m
2021/22	Probate – £7.8m	Sales proceeds – £1.4m	Return of deposit – £1.4m
2022/23	Probate – £23.1m	Sales proceeds – £6.1m	Return of deposit – £6m
2023/24	Probate - £17.1m	Return of deposit - £7.7m	Sales proceeds - £1.8m

We seek to recover the costs of intervening into a firm. This includes:

• the costs of using an external law firm to assist us in intervening
• any payments we make from the compensation fund
• any court and internal investigation costs from the firm involved.

Our funding comes from the law firms and the solicitors we regulate. Recovering our costs is not only important so we can reduce the financial impact on those we regulate, but also because ultimately that financial impact  will likely be passed onto the public who buy legal services.

We will consider all avenues in recovering costs, including taking action against the intervened solicitors or managers, the firm's insurer and, in certain cases, the firm's former partners and directors.

The table shows the combined recoveries of intervention costs and compensation fund payments over the past seven years.

Year	Costs recovered
2017/18	£4.7m
2018/19	£2.5m
2019/20	£2.9m
2020/21	£1.1m
2021/22	£2.1m
2022/23	£1.1m
2023/24	£3.5m