Shah: Consumers need reassurance
The Legal Services Board (LSB) is to bear down on the Solicitors Regulation Authority (SRA) amid concern that more collapses could follow the likes of Axiom Ince and PM Law.
A statement released yesterday said the oversight regulator “will require closer scrutiny and oversight of the SRA’s handling of known higher-risk firms”.
To this end, it is invoking a statutory power to obtain further information from the SRA on how it will handle and manage such firms, how it will mitigate the risks, and how it will protect consumers “at known risk of harm”.
The LSB said it was “deeply concerned” about the failure of PM Law, with the loss of client money associated with Axiom Ince and PM Law standing at around £100m.
The SRA has commissioned an independent review into its handling of PM Law, while the LSB said it was “closely scrutinising” the SRA’s response to the collapse, “including what the SRA knew, when it knew it, and what action it took”.
The statement said the LSB board was also “concerned about the likelihood of further significant failures in this class of case, and the pressing need for urgent action to protect consumers”.
It has asked the SRA board to “provide assurance”, during an in-person meeting before the end of May, “that it has the necessary expertise and oversight approach to deliver the urgent reform needed to address the challenges and complexities in the sector”.
The SRA has faced an unprecedented three statutory enforcement measures imposed by the LSB concerning its oversight of Axiom Ince and SSB Law.
Almost a year ago, the LSB imposed statutory directions to address the failures in supervising Axiom Ince.
These included improved board-level oversight of regulatory risk and intelligence activity, a stronger risk function, stronger regulation of client money, and better oversight of mergers and acquisitions.
Then this March, the LSB announced both a public censure and performance targets on the SRA to address failures identified in its supervision of SSB Law.
The SRA had a year to comply with the Axiom Ince directions and the LSB said it has this week also asked the SRA to commission an independent external audit to assess and evaluate its compliance. The report is to be made available to the LSB by the end of June.
LSB chair Monisha Shah said: “The LSB’s primary concern is consumers: those who have already suffered harm and those who remain at risk.
“People must be able to use legal services with confidence that effective regulation is in place to protect them, particularly from loss arising from alleged criminal activity.”
The outcome of this flurry of activity will be discussed at the LSB’s July board meeting.
In a statement, the SRA said: “We have worked closely with the LSB to make sure we deliver on the directions as outlined. As has been widely discussed, during that time the legal sector has continued to evolve rapidly, and so have the risks to consumers.
“We share the LSB’s concerns around the business model of high-growth, highly acquisitive firms that are increasingly linked to that risk, and are particularly concerned about the level of consumer harm that failures of these firms can cause.”
The regulator said it had made “significant progress” in areas such as its risk and data capability, “but it is not sufficient on its own. PM Law has emphasised this”.
This required both immediate action – such as fast-tracking tighter controls on client money, and launching a supervision pilot on firms with complex business structures – and a longer-term strategy “to transform the way we regulate more fundamentally, shifting to an intelligence-led, proactive supervisory model to support firms into compliance and reduce instances of significant harm and costs further down the line”.
The impact of this on the profession will become clearer at the end of this week, when the SRA is set to publish its proposed budget for 2026-27.
Law Society chief executive Ian Jeffery said: “The new CEO of the SRA, Sarah Rapson, has inherited a problematic legacy and we welcome her openness and commitment to address those problems.
“The SRA must show it has a credible plan to deliver meaningful and long-lasting improvements. This plan, of course, must address the regulatory measures imposed on it by the LSB.”
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