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Howard Kennedy faces £35,000 fine for lax client account handling but watchdog U-turn draws flak

Howard Kennedy and one of its former partners have been sanctioned for providing a client with a prohibited banking facility, with the top 100 UK law firm facing a £35,000 fine after a Solicitors Regulation Authority (SRA) investigation.

The ruling from the Solicitors Disciplinary Tribunal (SDT), which was published on Thursday (1 March), saw Howard Kennedy ordered to pay £46,950 in costs. Christopher Langford, a former partner and then consultant at Howard Kennedy, also admitted to facilitating payments in and out of the firm’s client account that were not related to any underlying legal transaction.

Between October 2010 and April 2012, on one ledger the client account was credited with €4.7m while €4m was debited. The transactions continued despite Langford being warned in 2012 by a colleague that ‘Howard Kennedy is not a bank and there is no good reason for continuing to act as one for this particular client’.

Langford received a £15,000 fine and was ordered to pay £24,300 in costs. No orders were made against three other members of the firm: Eric Gummers, Paul Amandini and Mark Johnstone. Howard Kennedy also admitted to failing to have adequate measures in place to regulate its client accounts.

In a statement, the firm said: ‘It is important to stress that we self-reported, and the judgment highlighted that we provided our full co-operation to the SRA. We would like to emphasise that the tribunal noted that there had been no loss to the client, that the client had made no complaint, and that all of the payments made were legitimate. There was no suggestion of any misappropriation or misapplication of client money.’

Despite the successful action, the SRA received critical words from the tribunal over ‘lack of transparency’ regarding a proposed regulatory settlement agreement (RSA) with Howard Kennedy. The regulator ultimately opted for a full action before the SDT. The tribunal noted that during a May 2016 telephone conference the SRA gave ‘a clear indication that… it was willing to conclude matters by way of an [agreed settlement].’

The watchdog argued it had a right to change its mind. Fountain Court silk Richard Coleman for the SRA, submitted that ‘to prevent the regulator from having open and frank discussions about the direction of its thinking, but not allowing it to change its mind on further considerations of any matter, would not assist the candid relationship between the regulator and the regulated’.

The tribunal ruled that the U-turn did not amount to an ‘affront to justice’, but said it was ‘sympathetic to the disappointment that was suffered by the respondents as a result of the SRA’s lack of transparency, and its failure to clearly advise of its change of position at the first opportunity’.

This is not the first time the agency has come in for criticism from the SDT, as the tribunal chastised the regulator for its handling of the action against Clifford Chance (CC) and its disputes partner Alex Panayides last year. The SDT was critical of the scope of the investigation, and noted the ‘striking’ similarity between the SRA’s charge sheet and the agreed outcome with CC .

The SRA did not respond by the time of publication.

For more on the regulator’s crackdown on large law firms, read: ‘Off the Leash’ (£)