Law Society welcomes LSB’s “strong action” in addressing SRA failings

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The Legal Services Board’s (LSB) binding directions against the Solicitors Regulation Authority (SRA), following claims of regulatory failings in its intervention into the collapse of Axiom Ince, has been welcomed by the Law Society of England and Wales.

A report, produced by Northern Ireland law firm Carson McDowell and published by the LSB, alleged that the SRA “did not act adequately, effectively and efficiently” and that it didn’t “take all the steps it could or should have taken”, among other shortcomings. Axiom Ince stopped trading in October 2023 after it was alleged that “more than £60 million of client funds may have been misappropriated”. Law Society President Richard Atkinson said: “The decision by the LSB strikes the right balance between ensuring strong consumer protection while avoiding unnecessary regulatory burdens.”

Interim chair of the LSB, Catherine Brown, 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.”

The SRA must comply with the directions within the next 12 months, including 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. The SRA must also submit progress reports every three months.

Meanwhile, in light of the directions, SRA Chief Executive Paul Philip said: “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 direction.”

However, the City of London Law Society (CLLS), the professional representative body for solicitors and law firms in London, has raised concerns about the impact overregulation may have on the profession.

Partner at Kingsley Napley LLP and chair of the professional rules and regulation committee, Iain Miller, said these rules risked “the overregulation of the legal services market by imposing additional and disproportionate burdens on the SRA that will undermine the overall competitiveness of the legal services market, which is such a key engine of the UK economy”.