An independent review of the Solicitors Regulation Authority’s (SRA) actions before it closed law firm Axiom Ince Limited (PDF) has led to the Legal Services Board (LSB) initiating enforcement action against the SRA. When Axiom Ince stopped trading in October 2023, approximately £60 million in client money was missing and approximately 1,400 people lost their jobs.
The LSB commissioned Carson McDowell LLP, a Northern Ireland firm of solicitors not regulated by the SRA, to carry out an independent review into the SRA’s handling of Axiom Ince. The aim of the review was to provide assurance to the LSB in the interests of public and professional confidence and to identify any learning based on an independent assessment of the facts.
The review found that, in the lead-up to the SRA closing Axiom Ince in October 2023:
- The SRA did not act adequately, effectively and efficiently,
- The SRA did not take all the steps it could or should have taken, and
- The SRA’s actions and omissions in this matter necessitate change in its procedures to mitigate the possibility of a similar situation arising again.
The LSB Board has considered the independent report and its findings. In the light of the impact on the achievement of the regulatory objectives set out in the Legal Services Act, which include promoting the public interest and protecting the interests of consumers, the Board decided to initiate action in accordance with its enforcement policy. Having considered all the options available to it, the Board agreed to initiate the process to set directions under section 32 of the Act. The directions, if imposed, would be aimed at requiring the SRA to make changes to better achieve the regulatory objectives.
Under the Act, the LSB must consult the Lord Chancellor, the Competition and Markets Authority, the Legal Services Consumer Panel and the Lady Chief Justice before imposing directions. The SRA and the Law Society will have opportunities to make representations before any final decision is taken as to whether directions should be imposed, and if so, in what terms.
Alan Kershaw, Chair of the Legal Services Board, 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. 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.
‘This review shines a light on issues that may have a bearing across the wider regulated sector. We will continue working closely with the SRA and the other regulators we oversee in the public interest to protect consumers and to uphold confidence in the way in which legal services in England and Wales are regulated.’
The LSB will now act in accordance with the statutory process applicable under the Act and will not comment further until the conclusion of that process. The LSB will also consider what learnings can be applied to its own approach to assessing regulators’ performance in future.
Read the report (PDF)
Notes
- The Solicitors Regulation Authority regulates solicitors in England and Wales.
- The Solicitors Regulation Authority in discharging its functions has an obligation to act in a manner, so far as is reasonably practicable, which is compatible with the regulatory objectives in Section 1 of the Legal Services Act 2007.
- The Solicitors Regulation Authority intervened into Axiom Ince Limited on 3 October 2023.
- The LSB’s Statement of policy for enforcement sets out the LSB’s approach to enforcement.
- In November 2023, the Serious Fraud Office (SFO) launched an investigation into suspected fraud at Axiom Ince.