Jeffery: Profession’s reputation at stake
The Law Society has warned the Solicitors Regulation Authority (SRA) not to ask the profession to stump up millions to boost its compensation fund without consulting first.
It emerged earlier this month that the interventions into Axiom Ince, Metamorph and Kingly, the largest the SRA has ever undertaken, meant the fund was under severe pressure and a “radical” rise in the size of the fund – which is paid for by solicitors – was needed.
The likely demand from former clients of Axiom Ince alone is likely to exceed the £18m the fund currently holds in reserves.
The compensation fund is a discretionary fund of last resort that can pay out up to £2m where a solicitor has stolen or not accounted for client money – and it is not covered by the firm’s professional indemnity insurance – or did not have insurance in place. Law firms currently pay £660 a year towards the fund, plus £30 per solicitor.
The SRA has not yet decided how it will fill the hole but a one-off in-year levy is one of the options.
Finally issuing a statement on the issue today, Law Society chief executive Ian Jeffery said: “As the representative body for the solicitor profession, we are of course greatly concerned that our members could be asked to plug a gap of many millions of pounds in the Compensation Fund arising from the collapse of just three law firms, which were set up under atypical business models and with their own clear and inherent risks.
“We would expect the solicitor profession to be consulted before any decision is made by the SRA on its approach to these exceptional compensation questions, given that our members would be required to pay for it and it is their collective reputation at stake.”
Mr Jeffery acknowledged that regulatory decisions were by law a matter for the SRA, “but we have a role to be assured that the SRA complies with its statutory duty and the regulatory principles guiding any regulatory action which must be transparent, accountable, proportionate, consistent and targeted”.
He added: “We will work with the SRA and, as appropriate, the Legal Services Board, to ensure that events are fully investigated and that all proper assurance is provided.”
Meanwhile, Neil Bennett, Alex Cadwallader and Andrew Poxon of Leonard Curtis have been appointed as joint administrators of Axiom Ince. They will operate independently from the work being carried out by the law firms appointed by the SRA as intervention agents.
