Vale & West Chartered Accountants Blog

Solicitors and investors losing “unbelievable” sums of money through dubious investment schemes, SRA warns

Dubious investment schemes are resulting in a “huge number of claims” to the Solicitors Compensation Fund, it has been warned.

The report, published by the Solicitors Regulation Authority (SRA), suggests that fraudulent schemes are becoming “far more sophisticated” and harder to spot, even by trained solicitors.

The regulator also warns that dubious investment claims which promise investors high returns are costing the sector “unbelievable” sums of money.

According to the SRA, the shape and scope of dubious investment schemes are rapidly shifting, with fraudsters moving on from “carbon credit schemes, diamonds or Ponzi schemes” and increasingly targeting “vulnerable people” living abroad.

As a result, dubious investment schemes are looking “more and more like conveyancing transactions or routine legal work”, the SRA said, adding that the compensation fund would only pay out if the service provided by the solicitor could be described as “usual business” and more than just “providing credibility” or checking terms and conditions.

Speaking at a seminar on the accounts rules at the SRA’s virtual COLP and COFA conference, Jatinder Loyal, policy associate at the SRA, said: “We’re seeing huge numbers of claims coming into the Compensation Fund. The fact that they’re coming in doesn’t mean we’ll be able to pay them.

“The amount of money being lost through these schemes is quite unbelievable and really sad.”

Sean Hankin, head of forensic investigation and intelligence at the SRA, added: “These schemes have become far more sophisticated over the years. They used to be fairly easy to spot because of the level of returns, but now the returns are high, but not outlandish.

“They’re usually linked to property, because everyone loves property and it’s perceived to be safe. Because it’s packaged as a property transaction, law firms are less concerned about providing a banking facility. The damage these schemes can cause and the amounts of money involved are quite frightening.”

For help and advice on related matters, please get in touch with our expert legal finance team today.

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