An independent review of the Solicitors Regulation Authority’s (SRA) actions before it closed law firm Axiom Ince Limited has led the Legal Services Board (LSB) to take enforcement action against the SRA. The LSB has issued binding directions to avoid a repeat of the regulatory failures identified. These directions are designed to ensure that the SRA identifies and responds to risks in the legal services market more effectively.
Axiom Ince grew rapidly through a series of mergers and acquisitions. When it stopped trading in October 2023, approximately £60 million in client money was missing, and approximately 1,400 people lost their jobs. The firm’s owner held multiple key compliance roles, including being the compliance officer for legal practice, for finance and administration, and for money laundering.
The LSB has acted using its statutory powers under the Legal Services Act. To comply, the actions the SRA must now take include:
- 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 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.
The LSB’s directions are informed by a statutory consultation in which advice was sought and given by:
- The Lord Chancellor
- Competition and Markets Authority (CMA)
- Legal Services Consumer Panel
- The Lady Chief Justice
Catherine Brown, Interim Chair of the Legal Services Board, said:
“The severity of what happened at Axiom Ince—with £60 million in client money missing and 1,400 people losing their jobs—demanded decisive action, and we welcome the SRA’s constructive engagement with us during this statutory process. The directions we’ve issued are designed to protect the public and better ensure client funds are properly safeguarded.
“Over the last few months, the SRA has already started making the necessary changes to rebuild public trust and confidence in the regulatory framework that protects people who need legal services.
“We are grateful to the Lord Chancellor, the CMA, the Legal Services Consumers Panel and the Lady Chief Justice who provided us with valuable advice during this process. We carefully took all their advice into account in reaching our final decision.
‘We will continue to engage closely with the SRA in our role as its oversight regulator and will now monitor its compliance with these directions.”
The SRA must comply with the LSB’s directions within 12 months and provide a written report to the LSB on progress every three months.