Avoid repeat regulatory failures, says LSB
The legal super-regulator has issued the Solicitors Regulation Authority (SRA) with binding directions over its handling of the Axiom Ince scandal, which saw a staggering £60 million vanish from the firm’s client account.
The Legal Services Board (LSB) today announced it had taken action to prevent a “repeat of the regulatory failures” and to ensure the SRA more effectively identifies and responds to risks in the legal services market.
Legal Cheek previously reported that the Axiom Ince was shut down in October 2023 by the regulator, not long after it emerged that over £60 million had gone missing from the firm’s client account. It has been widely reported that the client money had been used to acquire law firms Ince and Plexus as well as a number of properties.
An independent report into the SRA’s handling of the matter later found that it had not acted “adequately, effectively and efficiently” and had failed to “take all the steps it could or should have taken.” The report concluded that the SRA’s actions and omissions necessitate changes to its procedures to reduce the risk of a similar situation occurring in future.
The LSB has used its statutory powers under the Legal Services Act. As a result, the SRA is now required to take the following actions:
➡️ Improving how it identifies risks to consumers and being more proactive in responding to them. This includes risks arising from the corporate structure of law firms and from sales, mergers and acquisitions.
➡️ Strengthening the regulation of client money and ensuring firms have effective safeguards in place.
➡️ Strengthening controls to protect the public interest and consumer interest where there is a concentration of ownership, compliance and management roles in one person.
The super regulator notes that the SRA has already developed a “robust plan” in response to the issues identified in the independent Axiom Ince report and has taken steps to begin addressing the issues identified.
Responding the directions, Paul Philip, chief executive of the SRA, said:
“Legal services help people live and thrive, as well as supporting business investment and economic growth. Suspected fraud and other failures around Axiom Ince prevent that and damage essential public trust and confidence. It is essential that we learn from the Axiom Ince case in order to address the rapidly changing sector landscape. We have been working over the past months with the LSB on our plan to address and implement its Directions.”
Philip continued: “We have already taken action, including consulting on safeguarding client money and addressing the risks that can emerge from concentrations of ownership, management and compliance in a single person. We are also starting to improve our data and market intelligence.”
The SRA will report regularly to the LSB on its plan and actions to implement the Directions.
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