PM Law: Sheffield HQ
The Solicitors Regulation Authority (SRA) has uncovered a “potential fraud” fraud at PM Law – which collapsed suddenly a fortnight ago – and client money is missing, it confirmed today.
Chief executive Sarah Rapson told Legal Futures that she could not yet say how much has gone as PM had a complex group structure. “We’re trying to follow the money,” she explained.
But she was able to confirm that the SRA would not need to make an in-year call to bolster its Compensation Fund, which has so far received 80 applications from PM Law clients for emergency payments.
It was too early to say whether the profession’s contributions to the fund would have to increase for the 2026-27 practising year.
Newly released papers for last month’s meeting of the SRA board, drafted before the firm’s collapse, said: “The Compensation Fund had an expected deficit of £3.3m for the 2024/25 year, leaving it with net assets of £41m.
“We have extended a £10m banking facility to provide risk mitigation to protect the fund’s viability during 2025/26.”
The SRA has also shared information about PM Law with law enforcement – the Serious Fraud Office declined to confirm whether or not it was investigating.
Ms Rapson said PM’s senior management team reported its closure on the day it happened. She acknowledged that this raised questions of why they did not report the firm being in distress before then – and why the SRA had not been aware of it anyway.
The Legal Services Board (LSB) has been asking this too, she said.
Ms Rapson said the priority has been the intervention and beginning the investigation into what happened, and so it was “too early to tell” if there had been internal failures at the SRA. But she promised that “we will definitely get into that. I will want to know”.
Though the SRA would not provide “a running commentary” on the PM investigation, she said it was in the public interest to provide the information given today.
This greater transparency at an early stage marks a change in approach by the regulator under Ms Rapson’s nascent leadership.
PM Law was a so-called accumulator firm and the SRA is planning a consultation on its approach to sales, mergers and acquisitions – as part of complying with the directions imposed by the LSB [1] following its report on Axiom Ince – while it has also created the first iteration of a new ‘law firm profiler’, which will provide a single page view of key data for every law firms it regulates.
This reflects a central failure in the case of SSB Group, where it received multiple reports about problems at the firm over several years but failed to join the dots.
Ms Rapson said she hoped to add external data to the profiles as well, such as from Companies House and the Legal Ombudsman, so the SRA could have the most complete overview of every firm possible.
The long-term aim is to use this to focus on bringing firms back into compliance rather than having to use its enforcement powers.
This would be a better use of the SRA’s resources, she explained: “It would only be in exception, if we really can’t get the firm over the line [into compliance], that we then move to investigation and then potential enforcement, rather than the default being let’s open an investigation, as often as we do.”
Jonathan Peddie, the SRA’s executive director of legal and enforcement, said in an accompanying statement about PM Law: “We are investigating a potential fraud, including the misappropriation of client money.
“We recognise that there is a strong public interest in this case, given the significant impact on clients. Alongside doing everything we can to protect and support clients, we are moving as quickly as we can with our investigation. It is a complex picture, and we are still establishing the core facts.
“We are focused on establishing what occurred, how it happened, and who was responsible. We will take appropriate action to protect the public, including enforcement action against anyone who has been involved in misconduct.”
Law Society chief executive Ian Jeffery said: “The SRA’s latest update shows the seriousness of the situation facing clients.
“The SRA must move quickly with its investigation to give consumers and the profession confidence that swift action is being taken. We are encouraged that the SRA in this case is at least acting with greater openness and transparency
“It is important that the SRA applies the lessons it learned from the Axiom Ince and SSB Group cases, in understanding and managing key risks effectively, as well as ensuring that clients are not left in legal limbo and out of pocket.”