LSB triggers unprecedented enforcement action against solicitors’ regulator
The legal profession’s super-regulator has released a damning report on the actions of the Solicitors Regulation Authority (SRA) leading up to the collapse of Axiom Ince.
The SRA has come under fire since the collapse of outfit in 2023, with the firm being shut down after £64 million went missing from the firm’s client account, with 1,400 people losing their jobs.
The Legal Services Board (LSB) has now released its long-awaited report on the SRA’s intervention into the firm and has initiated unprecedented enforcement action as a result.
The report, produced independently by Carson McDowell — a Northern Irish firm not regulated by the SRA — highlights several key failings leading up to the regulator’s closure of Axiom Ince.
The LSB says that the SRA “did not act adequately, effectively and efficiently” and failed to “take all the steps it could or should have taken”. Consequently, the report concludes that “the SRA’s actions and omissions in this matter necessitate change in its procedures to mitigate the possibility of a similar situation arising again”.
Under its statutory powers, the LSB can issue directions to the SRA, requiring it to make changes. These directions, the LSB has said in a public statement, would “be aimed at requiring the SRA to make changes to better achieve the regulatory objectives”.
Before taking any action the super-regulator must consult the Lord Chancellor, the Competition and Markets Authority, the Legal Services Consumer Panel and the Lady Chief Justice. Both the SRA and the Law Society will be able to make representations before any decision is made.
Commenting on the report and enforcement action, Alan Kershaw, chair of the LSB, said:
“The Axiom Ince case has caused significant consumer detriment. Our decision to commission a thorough independent review reflected the importance of understanding the SRA’s actions leading up to its intervention in the firm. It was essential to uncover what went wrong to reduce the risk of it happening again.”
He continued: “The review found that the SRA did not act efficiently and effectively or take all the steps it could and should have, to lessen the impact of what had occurred. The SRA’s actions and omissions have in our view adversely impacted on confidence and trust in the regulation of legal services.”
In response to the report and news of the enforcement action, Paul Philip, SRA chief executive, said:
“At the heart of this issue is a suspected complex and well-hidden fraud carried out by a solicitor, with an ongoing criminal investigation by the Serious Fraud Office. The report recognises our ‘excellent work’ in uncovering the suspected fraud. But there are things we could have done better. We moved quickly last year to tighten up some of our processes.”
“There is a lot in the report that we don’t agree with, and we don’t understand the basis for enforcement action,” Philip continued. “However, we think it is important to focus on working with the LSB and others to tackle future challenges in the legal sector.”
Earlier this year the SRA announced that it was increasing the contributions of solicitors and law firms to the compensation fund by 300% to make up for a shortfall caused by “an unprecedented level and cost of claims and interventions in the last year”.