The SRA's Attempts to Justify Its Failures Are Both Hollow and Disappointing

The Solicitors Regulation Authority has issued a response to the damning findings of the Legal Services Board's independent review into its handling of Axiom Ince Limited. Despite the gravity of the failures identified, the SRA has opted for a classic playbook approach: sidestepping responsibility, deflecting blame, and wrapping themselves in layers of positive spin. The tone-deaf statement they released feels more like a public relations exercise than a genuine acknowledgment of wrongdoing or commitment to real change.

Axiom Ince, a law firm that collapsed under the weight of nearly ￡60 million in missing client funds and left over 1,400 people jobless, represents one of the most significant failures in the legal sector in recent years. The independent review by Carson McDowell laid bare serious procedural failings and missed opportunities by the SRA, which failed to act on early warning signs that could have mitigated the disastrous fallout. The Legal Services Board , acting within its powers under Section 32 of the Legal Services Act 2007, has now begun enforcement action to address these failures. But the SRA's response falls woefully short of demonstrating the kind of accountability and responsibility the public deserves.

The SRA's Defence: A Masterclass in Deflection

Instead of issuing a full and frank acknowledgment of their failures, the SRA's statement chooses to emphasise the complexity of the alleged fraud and point out that other bodies, including accountants and auditors, were also involved in overseeing Axiom Ince. This tactic of spreading the blame aims to dilute their own accountability. While there is no doubt that complex frauds are difficult to uncover, the review's findings make it clear that the SRA's own actions were inadequate and fell below what is expected from a regulator tasked with protecting the public.

The SRA proudly proclaims that it was their diligence that ultimately led to the discovery of the fraud. While it is true that they eventually intervened, the intervention came too late. The financial damage had already been done, and the livelihoods of clients and employees were already in jeopardy. The statement's focus on "excellent work in uncovering the alleged fraud" reads more like an attempt to pat themselves on the back for doing the bare minimum rather than a recognition of the lives impacted by their delayed response.

Challenging the Review Instead of Learning From It

Perhaps the most disappointing aspect of the SRA's statement is its outright challenge to the validity of the independent review's conclusions. They openly state that there is "a lot in the report that we do not agree with," including its headline conclusions. Such a dismissive approach towards an independent review—one conducted to uncover the root of the regulatory failure—reflects a profound unwillingness to accept constructive criticism. If the SRA cannot accept the findings of an independent review in good faith, how can the public trust that it will implement the necessary changes?

The SRA further leans heavily on the defence of hindsight, implying that the recommendations in the review are unfairly critical of their actions because they benefit from retrospective clarity. This kind of hindsight defence is nothing more than a weak attempt to minimise their failings, particularly given that the warning signs were visible and actionable far earlier. The fact that the SRA could have intervened sooner but did not is a core criticism that they have sidestepped entirely.

A Lack of Real Accountability

What is glaringly absent from the SRA's response is any tangible sense of accountability or responsibility for the mess they have presided over. Instead of addressing specific actions they failed to take, the statement veers into vague commitments about "learning lessons" and promises to tighten up procedures. The public and those directly impacted by the Axiom Ince collapse deserve more than just vague platitudes and promises of improvement. They deserve an explicit admission of where things went wrong and clear, actionable steps to rectify those failures.

The SRA also conveniently frames the issue within a broader context, mentioning systemic challenges like the rise of "accumulator firms" and the changing dynamics of the legal market. While there may be systemic issues, using these as a shield to deflect attention from their own incompetence only further diminishes confidence in their ability to regulate effectively.

Shifting Attention to Future Reforms

The statement attempts to turn the focus to future reforms, such as the SRA's "Consumer Protection Review" and potential "radical solutions" to stop law firms holding client money altogether. While such reforms may indeed be necessary, they do not absolve the SRA of responsibility for the failures that have already occurred. It is not enough to simply talk about what will be done differently in the future without acknowledging and making amends for past mistakes. Moreover, presenting reforms as the silver lining feels like an effort to distract from the core issue: the SRA's own procedural shortcomings.

A Regulatory System in Need of Regulation

The most concerning takeaway from both the independent review and the SRA's subsequent response is the clear message that even the regulator needs regulating. The collapse of Axiom Ince has exposed significant vulnerabilities not only in the firms they were supposed to oversee but within the SRA itself. Public trust in the regulatory system has been badly shaken, and the SRA's tepid response does little to rebuild that trust.

The LSB's enforcement action against the SRA is a stark reminder that regulators must be held accountable just as much as the law firms they regulate. If the SRA wishes to rebuild public confidence, it must do more than issue defensive statements; it must demonstrate a willingness to change, starting with accepting responsibility for its mistakes.

The Public Deserves Better

The SRA has been entrusted with a critical responsibility: to protect consumers of legal services and uphold the integrity of the legal profession. The Axiom Ince case is a glaring example of how they have failed to meet those responsibilities. The statement they have issued sidesteps genuine accountability, downplays the scale of their failure, and offers little in the way of reassurance that they will do better in the future. For the public, the legal community, and for those whose lives have been directly impacted by the SRA's failures, this simply isn’t good enough.

Real accountability requires more than words. It requires meaningful action, a willingness to admit when things have gone wrong, and a genuine commitment to reform. Until the SRA can demonstrate these qualities, it will continue to struggle to gain the trust of those it serves.

Below is the full statement from the SRA in response to the LSB's enforcement action:

Statement

Response to Legal Services Board's (LSB) review of events leading up to our intervention into Axiom Ince

29 October 2024

At the heart of this issue is a suspected complex and well-hidden fraud by a solicitor, which we uncovered, with an ongoing criminal investigation by the Serious Fraud Office.

The suspected fraud was not spotted until we picked it up, even though a number of other bodies, including external accountants and auditors were involved with the firm. The report acknowledges 'the excellent work by the SRA in uncovering and investigating the alleged fraud'. Tackling dishonesty is a challenge for everyone involved in the legal sector.

Of course, we acknowledge the impacts that this case has had on the public and the profession, which is why we moved quickly last year to identify lessons learned from this case. We have already tightened-up our investigation and intervention processes. We also agree more will be needed in future to check firms are complying with our Accounts Rules. We are taking forward these changes.

However, there is a lot in the report that we do not agree with, including the headline conclusions. In particular, it is by no means clear that a different approach would have uncovered the issue sooner.?With hindsight, the report has highlighted things that we could - rather than just should - have done. But in our view, it is unrealistic to expect regulation to prevent all harms.

We have collaborated fully with the LSB's process, and are keen to continue to work with them, but we do not understand the basis for its decision to move to enforcement action.

Tackling future challenges and protecting client's money

While we accept there are things we might, in retrospect, have done differently, in our view they don't go to the heart of the matter. More important in this respect are the wider issues the report raises, including how we better protect clients' money. We launched the 'Consumer Protection Review' at the start of this year, asking fundamental questions about how we should do this going forward.

We agree it is time to explore reforms, including more radical solutions such as considering stopping law firms holding clients' money. No solution will be risk-free, but there are alternative options that could mean clients' money is safer. We will be exploring this issue and will be consulting shortly on these and other proposals to protect the public.

We think it is important to focus on those future changes, working with the LSB and others to tackle the emerging challenges in the legal sector.

Identifying risks in the legal sector more effectively

Whether it's an increase in large firms failing, the emerging risks around bulk litigation work, or the rise of online legal services, the legal market has changed and is changing.

In order to respond to this, we need to develop the way we identify new risks in the sector, so we can step-in sooner to manage them. We are committed to that work. In particular, we want to improve how we use our data about law firms and complaints to spot patterns – for instance, where certain types of firm or areas of work present higher risks to the public. This work will take time, but we are increasing investment in technology and resource so we can move as quickly as possible to improve how we do this.

Getting the balance right

The report seems to equate more regulation with more effective regulation. Protecting consumers is absolutely key. We must make sure the right checks and balances are in place, but also consider how our approach affects access to services for all consumers. For instance, one of our regulatory objectives is to promote a competitive market, which can improve services for all and help people to access expert legal help more easily.

We will continue to focus on delivering the best overall outcomes in the public interest, which means delivering?proportionate, targeted and effective regulation.

The statement issued by the Solicitors Regulation Authority (SRA) can be found at: https://www.sra.org.uk/axiom-october

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This article is intended for informational purposes only. The views expressed are those of the author based on the findings of independent reviews and available public statements. Readers should not construe this content as legal advice and are encouraged to seek professional guidance for specific concerns.