Accounting breaches behind more than a quarter of SRA firm closures

Ellie Nicholl (she/her) is a senior content and engagement coordinator at LawCareers.Net.

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The Solicitors Regulation Authority (SRA) has stepped up its scrutiny of how law firms manage client money, with new figures highlighting accounting breaches as a leading cause of firm closures. Data from chartered accountants Lubbock Fine shows that breaches of accounting rules were responsible for 26.2% of SRA firm closures in the year to September 30 2025.

Findings showed that 11 of the 42 firms subject to closure were shut down for accounting‑rule breaches, up from 11 of 59 firms (18.6%) the previous year. Suspected dishonesty accounted for an even greater share of closures, rising slightly year on year to 28.6% (12 of 42), compared with 27.1% last year (16 of 59 firms).

The SRA uses a process known as an ‘intervention’ to close law firms on either a temporary or permanent basis where it believes client money is at risk. Interventions allow the regulator to seize documents and funds, suspend solicitors’ practising rights and begin full investigations.

According to Lubbock Fine partner Mark Turner, the regulator’s focus on client‑money compliance has intensified since the collapse of Axiom Ince in 2023, after the SRA found that around £66 million of client funds had been misappropriated. Turner said the regulator is keen to demonstrate that it’s closely monitoring firms, adding that this was “not a surprise, given the scale of the Axiom fraud and the thousands of job losses that followed”.

One of the most frequent accounting breaches identified involves the improper mixing of client and office money. While client funds must be kept separate, some firms have been found to use money held in client accounts as working capital. Other common issues include firms retaining client funds for longer than necessary, residual balances being left unresolved, inaccurate ledgers, improper withdrawals and the incorrect handling of interest earned on client accounts.

Turner advises that law firms embed robust policies into their day‑to‑day operations to reduce the risk of breaching the rules, stressing the importance of regular training and clearly defined responsibilities for monitoring balances, interest and transactions.

He said: “With the right policies, processes and being vigilant for things like missed details like incomplete documentation, law firms will greatly improve their chances of having a problem-free audit, when the SRA scrutinises their accounts.

“However, if they get it wrong and the SRA believes that client money is at risk, then the regulator has shown that it will cut firms down to prevent a client loss.”