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Andrew Swan

Member Article

MoJ’s CMR releases new Financial Penalties Guidance

From 29th December 2014, the Claims Management Regulation Unit will have more power to impose financial penalties on regulated Claims Management Companies which fail to adhere to the conditions of authorisation or engage in other non-compliant actions. The new powers are brought in under the Financial Services (Banking Reform) Act and the guidance explains them.

These additional enforcement sanctions will be used by the Regulator against those authorised persons who fail to comply with the Conduct of Authorised Persons Rules; fail to ensure proper professional indemnity insurance is in place; obstruct the Regulator executing a search warrant or seizing documents; and other similar non- compliances.

The Guidance states: “Where a financial penalty is deemed necessary an appropriate penalty amount will be considered. Overall, specific penalty amounts will not be attributed to specific individual breaches of the rules but rather the overall nature and seriousness of a breach or collection of breaches.“

In calculating the potential penalty the Regulator will refer to the turnover of the business to ensure it is proportionate. Businesses with an annual turnover of less than £500k may face a penalty of no more that £100k. However, those businesses with an annual turnover of £500k or more will face penalties based on a percentage of their turnover, which ultimately must not be more than 20% of the turnover.

The penalty will also be calculated by the Regulator using a scoring matrix in terms of both the nature and the seriousness of the breach or collection of breaches. That is, the type of breach and its impact. The worse the breach, the higher the likely penalty.

Regulatory compliance specialist, Rob Cooper, of Scott Robert, commented: “The Regulator’s new fining powers signify the start of a new era in the regulation of claims management firms. With new powers set to be implemented preventing the automatic surrenders of authorisations, and with the Legal Ombudsman set to take responsibility for complaints against claims firms, there is an ever increasing need to ensure compliance“

Solicitor Andrew Swan, Partner and Head of the Regulation and Financial Crime Unit at Newcastle law firm Short Richardson & Forth LLP stated: “This is a significant development in the Regulator’s powers and one of which all CMC businesses should be aware. It places even more emphasis on the need to ensure full compliance with the rules and how authorised persons deal with their regulatory body. Those organisations affected should take early advice.“

The guidance can be found at:

This was posted in Bdaily's Members' News section by Andrew Swan .

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