SRA: Lack of joined-up approach
The aim of the Carson McDowell review for the Legal Services Board was to assess reports (complaints) made to the Solicitors Regulation Authority (SRA) in relation to SSB Law from January 2019 to March 2024 and the SRA’s handling of, and response to, those reports.
This is a summary of the 64-page report. See our main story on it here as well as a timeline of (in)action.
The SRA received more than 100 reports in that time from a wide range of sources – around 40 had been made by the time of the first forensic investigation in April 2023 and a further 10 by the second six months later.
The rest came after the SRA had finally grasped the seriousness of what was going on at the Sheffield-based law firm and was working to shut it down.
Our timeline details the nature of the reports and Carson McDowell said: “In our view, these reports demonstrated a concerning pattern of conduct by SSB which constituted a regulatory issue and went beyond complaints about the service provided by the firm.”
It made three key findings:
- The SRA did not act effectively and efficiently in response to the reports made to it regarding SSB;
- The SRA did not take all of the steps it could have taken in response to the reports made to it regarding SSB; and
- The SRA’s conduct, specifically its handling of reports, necessitates changes in its procedure to mitigate the possibility of a similar situation arising again.
What happened
The SRA applied a three-stage assessment threshold test (ATT) to determine whether to investigate reports about authorised solicitors and firms.
The test was: (i) Has there been a potential breach of the SRA’s standards or requirements based on the allegations made? (ii) Is that breach sufficiently serious that, if proved, is capable of resulting in regulatory action? (iii) Is that breach capable of proof?
The review said: “In our view, the way that the ATT was applied by the SRA to reports about SSB was ineffective. This resulted in reports not being investigated when, in our view, an effective assessment ought to have led to more investigations being carried out at an earlier stage.”
Many reports from SSB clients were not investigated because they failed the second stage – the SRA’s view was that the reports related to a complaint about the standard of service, “rather than identifying that there was a pattern of behaviour by SSB which was sufficiently serious that it may result in regulatory action”. Complainants were told to go to the Legal Ombudsman instead.
“It appears that the SRA either did not have an effective process in place to ensure that the staff assessing reports had access to information about other reports that had been made about the firm, and/or did not provide adequate training and guidance to ensure that they took this information into account when assessing reports.”
Staff also did not know about other information the SRA held about SSB, “in particular, its unusual staff structure and rapid expansion in terms of size and turnover”. By 2023, the firm had nearly 200 members of staff but fewer than 10 were qualified solicitors.
Carson McDowell said: “The lack of a ‘joined-up’ approach in assessing the reports about SSB’s handling of CWI claims is particularly surprising in light of the SRA’s general awareness of the potential risks to consumers arising from the bulk litigation of CWI claims.”
Even when staff members sought input from staff involved in Operation Grouse – overseeing issues around CWI claims – “this generally did not result in further regulatory action being taken”.
This working group, Carson McDowell said, “did not deliver the expected higher level of understanding and scrutiny of SSB’s handling of CWI claims”.
Despite the SRA’s written commitment to considering the vulnerability of the client when assessing the seriousness of a report, “we saw little evidence that this was taken into account in practice”. Many clients were elderly, disabled or did not speak English as a first language.
In November 2021, SSB was added to a watchlist of firms that warranted additional attention. This happened if the SRA received three or more reports in close succession.
A specific investigation officer (IO) was allocated to SBB with the intention that they would gain an overarching knowledge of complaints raised about the firm.
The review said: “Whilst, on occasions, this did result in some linkage of the complaints being made, it also led to matters being closed on the basis that similar complaints were already under consideration, or advice was given that the report was to be considered in isolation.
“It appears that many reports about SSB were assessed without any involvement from the IO.”
Carson McDowell identified a number of reports received from clients of SSB during 2022 and 2023 to which the SRA did not apply the ATT. They related to claims which had initially been handled by Pure Legal and raised issues relating to both Pure and SSB.
But the SRA only completed an ATT in respect of Pure. “As a result, no assessment was carried out as to whether SSB should be investigated in relation to these reports.”
The review said: “These various reports, if considered together on a cumulative basis, ought to have raised alarm bells for the SRA at a much earlier stage.”
If a report passed the ATT, it was referred for investigation, leading either to a desk-based investigation or a forensic investigation, also known as an inspection. There was “limited evidence” that the SRA considered the factors which, according to its guidance, it must take into account in deciding which type to carry out.
The desk-based investigations were “ineffective”. Among other things, the SRA “missed opportunities to follow up on relevant lines of enquiry which arose”, was reliant on SSB to provide information and did not engage properly with complainants or third parties.
In all, it “failed to assess, in a cohesive way, all the information it had obtained about SSB from the multiple reports it had received and investigations it had carried out”.
Even if information provided by SSB raised an issue of concern – for example, it told the SRA that a claims management company was responsible for issuing and explaining contractual documentation to clients, including SSB’s conditional fee agreement – the SRA did not identify the risk this created for clients, namely that SSB did not have a process to check that its clients properly understood what they were signing up to.
During the April 2023 inspection, the SRA ascertained that SSB owed £128m to litigation funders at high interest rates (one at 32% per annum over LIBOR) and it had defaulted on previous funding loans. Much of its debt was secured against the CWI cases rather than the risk sitting with clients and SSB indicated to the SRA that the claims were unlikely to be successful.
In addition, email correspondence demonstrated that SSB owed significant amounts to barristers which it had instructed in CWI claims and was reliant on obtaining further funding to pay its debts.
SSB advised the SRA, however, that it had no concerns about being able to discharge its short-term liabilities.
“It appears that the SRA accepted this at face value, despite the contradictory evidence which showed that the firm was in dire financial straits. The SRA concluded that there were no concerns about SSB’s financial stability. The file was closed despite the SRA knowing that the firm owed debts which it was unable to pay.”
In February 2024, the SRA carried out a managerial review of this inspection and gave it a score of 3 out of 5, which was described as ‘Exactly what we’re looking for’. Carson McDowell said this review was not carried out by a sufficiently independent staff member and took a “tick box” approach.
On the second inspection in October 2023, SSB accepted that it was in financial difficulties but the review has not seen all of all documentation relating to this because that investigation led to ongoing disciplinary action against individuals in SSB.
“However, based on the documents we have reviewed, the SRA’s response to the collapse of SSB raises concerns with the way that SSB’s clients were dealt with. Staff in the SRA expressed concerns about SSB’s CWI clients being transferred to JMR Solicitors, another firm regulated by the SRA, yet the transfer of the files proceeded despite those reservations.”
JMR was a small firm comprising of two partners who predominantly specialised in conveyancing. The SRA issued a notice recommending intervention in May 2024, although this was not actually done; the firm closed in November after the files were passed on to another firm. This aspect was beyond the scope of the review.
A client told Carson McDowell of how they received a very different response from SRA staff when they called to make a report under the pretence that they were a solicitor, rather than a member of the public.
“They told us that staff took greater time and provided significantly more information to them when they presented as a solicitor rather than a lay person.
“Whilst this is one isolated incident that was reported to us, this alleged ‘two tier approach’ is reflected in some of the internal SRA correspondence. For example, in response to a report from an individual, one SRA staff member asked a colleague: ‘Do you have any interest in some busy body talking about Novitas losses?’
“In addition, the majority of reports from individual clients of SSB were closed without any investigation being carried out, whereas most reports from other sources, such as law firms or a barrister, resulted in at least a desk-based investigation and, in two cases, a forensic investigation.”
What has to change
Carson McDowell has made recommendations around four key areas of change to mitigate the possibility of a situation similar to the failure of SSB arising again.
1 The SRA’s assessment of reports
- Staff should be able to access all relevant information about an authorised firm and/or individual when carrying out an assessment as to whether a report should be investigated;
- Staff should be directed more clearly to consider the vulnerability of the complainant when assessing the seriousness of a report;
- The wording of the ATT (as to whether the breach is capable of proof), as well as the relevant training/guidance provided to SRA staff, should ensure that the onus is on the SRA to consider whether it should investigate, not on the complainant to provide evidence to support their report.
2 The process for submitting a report to the SRA
The process should be as “user-friendly and as inclusive as is reasonably possible”, with a particular focus on how it deals with vulnerable people.
“The SRA must ensure that it does not place the onus solely on consumers to provide evidence of their reports without considering what additional evidence the SRA would be capable of gathering if it proceeded with an investigation,” the review said.
3 The SRA’s investigations of reports
The SRA should review its training of staff and procedures to ensure it makes greater use of its investigatory powers and follows up on additional lines of enquiry when reasonable and proportionate to do so.
It should improve its ability to assess the financial stability of firms by providing additional training to staff and/or obtaining external financial or accounting advice when required.
4 The SRA’s handling of the closure of authorised firms
“The SRA should consider what measures can be taken in respect of the transfer of files upon closure of a firm in order to protect and promote the public interest and the interests of consumers.”
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