The Solicitors Regulation Authority (SRA) faces scrutiny for its handling of the Axiom Ince case, with its chair referring to the failures as “history for us.”
- An independent report criticises the SRA for not taking adequate steps before Axiom Ince’s collapse, prompting potential rule changes.
- The SRA plans to consult on consumer protection reforms, including rules about client money and fines for law firms.
- Chair Anna Bradley acknowledges issues in SRA processes but highlights ongoing reforms as a response.
- SRA Chief Executive Paul Philip expresses concerns over proposed controls on mergers, indicating a need for balanced regulation.
In recent developments, the Solicitors Regulation Authority (SRA) has come under scrutiny for its supervision of Axiom Ince, a case that has been described by the SRA’s chair as ‘history for us.’ An independent report has criticised the SRA for its lack of action prior to the law firm’s collapse, stating that it did not take all the necessary steps it could have to prevent the situation. This has led to significant discussions and potential upcoming changes in regulatory approaches.
At the SRA’s annual compliance conference, chair Anna Bradley addressed these criticisms, noting that the collapse of Axiom Ince was largely due to a ‘really complex fraud’ orchestrated by a single individual. She pointed out that, although the independent report highlighted failures in following processes and procedures, the SRA had already reviewed and amended its actions close to the original intervention. The regulator is focusing on tightening procedures and oversight to prevent future issues.
The SRA’s response includes a planned consultation on consumer protection reforms, set to begin next week. These reforms aim to address problematic issues highlighted by the Axiom Ince case, including tighter controls on holding client money and proposals for law firm fines. Moreover, the regulator is considering adjustments to its fining guidance following critical feedback from its recent consultation.
Chief Executive Paul Philip has expressed caution over proposed reforms that would give the SRA greater control over mergers and acquisitions. He argued that increasing due diligence requirements might delay the rescue of struggling firms, potentially causing them to fail before deals can be completed. While acknowledging the need for discussion, Philip emphasised that any regulatory changes must balance intervention with practical considerations.
Alongside these discussions, the upcoming consultation will explore maintaining the SRA Compensation Fund, essential for maintaining trust in the legal profession. It will consider whether the current financial contributions towards the fund are equitable, suggesting that larger firms might bear a greater burden under a ‘polluter pays’ model.
The consultation aims to address digital banking’s impact on client money management and explore whether firms should retain interest earned on client accounts. It proposes revisiting the requirement for all firms to submit annual accountant’s reports, regardless of qualification, in light of findings from the Axiom Ince review.
While acknowledging that the Axiom Ince affair has highlighted systemic issues, the SRA is taking steps to address these through reform and consultation, aiming to mitigate similar risks in the future.
The SRA’s handling of Axiom Ince has prompted a comprehensive review of its regulatory procedures, focusing on reforms that aim to prevent future lapses.
