The Legal Services Board (LSB) is planning an unprecedented independent review of how the Solicitors Regulation Authority (SRA) has handled the Axiom Ince scandal, MPs were told yesterday.
Meanwhile, the oversight regulator hit back at calls led by the Bar Council that the Ministry of Justice conduct a review of the LSB if their real purpose was to curtail its “proper work”.
Giving evidence to the House of Commons’ justice select committee – which is probing the state of regulation of the legal profession – LSB chief executive Matthew Hill said that one of the reasons for its planned 14% budget increase for 2024/25 was that it anticipated “some significant additional work in the forthcoming financial year”.
He said: “We’ve talked about Axiom Ince today, and one of the things that I think we are able to say today is that we’re exploring options for an independent, objective review of the events leading up to the SRA’s intervention into Axiom Ince.”
Critics have questioned whether failures at the Solicitors Regulation Authority (SRA) meant that the disappearance of £66m from Axiom Ince’s client account was spotted too late.
The LSB has never before held a review in relation to a specific event of this nature.
The likely impact of the Axiom Ince collapse on the SRA Compensation Fund was raised earlier in the session with SRA chair Anna Bradley and chief executive Paul Philip.
Conservative MP James Daly, a solicitor, said to them: “I think solicitors may well take the view – and this may well not be the case – [that] if one of the contributory factors to what happened at Axiom is a lack of effective regulation, it would seem rather than unfair that individual solicitors are paying a price.”
Ms Bradley responded: “I would just say ‘allegedly’. We will see whether that turns out to be the conclusion that is reached by all the parties.”
On the LSB’s budget, Mr Hill added that the likely application by CILEX to change regulator to the SRA would also “consume significant resource” if it happened.
LSB chair Alan Kershaw told the committee that when last year CILEX asked the LSB whether it had the right to change the body to which it delegated its regulatory work, this meant “taking staff off other positive areas of our work simply because we didn’t have the spare capacity”.
He said: “The board have taken a firm view that we don’t want to be in that position again.”
Mr Hill said the work last year involved “seven or eight experienced staff, including a significant amount of my time, the time of my general counsel, the time of other directors in the organisation”. The LSB has 35 staff in total.
The pair also addressed the issue of a review of the LSB, which was supported in last week’s evidence session by the Bar Council, CILEX and CILEx Regulation, with Bar Council chair Nick Vineall KC saying the LSB had rejected his suggestion that it undergo one.
Mr Kershaw said the board had “no problem” with a review. “We are aware that every arm’s length body (ALB) is subject to review from time to time, not necessarily to a set timetable anymore, but when their sponsoring department thinks it’s worth the resources and the effort, and should the Ministry of Justice decide that was appropriate, we’ll be very happy to collaborate.”
He added: “We have a good story to tell. We’re happy to tell it at any time.”
Mr Hill continued: “It is government policy to review all ALBs from time to time. The Ministry of Justice has a risk-based schedule for reviewing all of its many ALBs. It is indicated to us that we are a low-risk ALB and there are others in the queue in front of us.
“What we object to is the prospect of a review being used in some ways to curtail our proper work in support of the objectives that Parliament is set for us.
“So yes to a review when the time is right, no to a review simply because a single stakeholder doesn’t like what we’re doing.
“That would have a chilling effect on the independence of regulation from government in our view.”