Brown: SSB clients have paid a heavy price
The Legal Services Board (LSB) has today finally issued the formal public censure [1] of the Solicitors Regulation Authority (SRA) for its failure to protect consumers affected by the collapse of the SSB Group.
The oversight regulator first announced its intention [2] to censure the SRA last October following publication of the Carson McDowell review, but had to go through a statutory process to do so, which is why it has taken more than four months to deliver.
It is only the second time the LSB has issued a censure; the first was given to the Law Society in 2018 [3] over governance arrangements that could have interfered with the SRA’s independence.
“In deciding to impose a censure under section 35 of the [Legal Services Act 2007], the LSB has taken into account the seriousness and scale of the SRA’s failings and the extent of the consumer harm that resulted, including harm experienced by vulnerable individuals,” the statement of censure said.
“The LSB also considered the prolonged delays in identifying and responding to clear warning signs, as well as the systemic nature of the operational, cultural and governance issues highlighted in the review.
“The LSB therefore considers a public censure both necessary and proportionate to ensure accountability, promote transparency and reinforce the importance of learning and improvement across the regulatory framework.”
The LSB said it expected the SRA to treat the censure “as a significant regulatory intervention and to demonstrate, through their future actions, that the failings identified will be addressed promptly, comprehensively and in a way that restores confidence in their regulatory responsibilities”.
As part of its enforcement action, the LSB has also directed the SRA [4] to set and publish mandatory performance targets to address the identified failures – the LSB said it had urged the SRA to be “more ambitious” with some of the targets it initially proposed.
These targets will be monitored by the LSB, which warned that it would take further action if sufficient progress was not made.
The targets have to remedy the SRA’s:
- Failure to act in a timely and effective manner, resulting in prolonged periods during which consumer harm escalated;
- Failure to recognise and respond to emerging patterns of risk, due to siloed working and inadequate information-sharing across teams;
- Inconsistent and incorrect application of assessment and triage processes, leading to missed opportunities to identify significant regulatory concerns;
- Inadequate scrutiny of financial risks, including over-reliance on the firm’s assurances and insufficient verification of contradictory financial information;
- Underuse of statutory investigatory powers, with undue reliance on voluntary information supplied by SSB and insufficient evidence-gathering from independent sources;
- Failure to identify and respond appropriately to the needs of vulnerable consumers, despite clear indicators that many were at heightened risk; and
- Weaknesses in decision-making, governance and oversight, including poor documentation of reasons, inadequate escalation routes, and failures to act on staff concerns.
Catherine Brown, the LSB’s interim chair, said: “SSB’s former clients have paid a heavy price – many threatened with losing life-changing sums of money and facing serious personal distress. The SRA had repeated opportunities to act, and it did not. That failure allowed harm to grow, and it undermined public confidence in legal regulation.
“This censure is a clear public statement that the standard of regulation we saw was not acceptable. The SRA has accepted the findings of the review and committed to implementing its recommendations.
“Now it must demonstrate, through its actions, that it has fundamentally changed its approach and that it is committed to, and capable of, effectively protecting consumers.”
The SRA did not dispute the censure or need for directions. Chief executive Sarah Rapson said: “As the new chief executive, it is incumbent upon me to recognise and address the failings brought to light by the collapse of SSB.
“Since I arrived, I have been listening to views from a variety of stakeholders about where the SRA can improve. I have also had the opportunity to stand back and consider what needs to change.
“There is much to do to make sure we are a trusted, proportionate and effective regulator. We must get the basics right and be less reactive.”
The performance targets, she explained, focused on “proactively identifying and responding to risks to consumers within the legal sector, targeting resources more effectively to better address and prevent harm to consumers, and taking action more quickly to deal with potential causes of consumer harm”.
Ms Rapson added: “I am grateful for the open and collaborative approach taken by the LSB, and we will continue to work together to make sure these targets are met. I want to reassure both the public and the profession that delivering these changes at pace is a priority for the SRA.”
The LSB has also produced a guide for the public [5] on the censure.
We reported earliert this week that around 130 former clients of SSB have settled their negligence claims [6] against the collapsed law firm’s insurer.