For the first time in its history, the Legal Services Board (LSB) has issued binding directions to the Solicitors Regulation Authority (SRA), requiring the regulator to improve how it identifies and addresses risks to the public and the legal profession. The unprecedented move comes in response to the SRA’s regulatory failings connected to the 2023 collapse of Axiom Ince, which led to the loss of £60 million in client money.

According to the LSB, the SRA must now act to:

• Enhance its identification of risks to consumers, particularly those arising from law firm corporate structures, sales, mergers, and acquisitions.

• Strengthen its regulation of client funds, ensuring effective protective measures are in place across firms.

• Improve safeguards where ownership, compliance, and management responsibilities are concentrated in one individual.

The oversight body stated that 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 severity of what happened at Axiom Ince—with £60 million in client money missing and 1,400 people losing their jobs — demanded decisive action,” said Catherine Brown, interim chair of the LSB. “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.”

She continued: “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 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 is required to meet the LSB’s directives within 12 months and provide written progress reports every three months. Law Society president Richard Atkinson endorsed the LSB’s action, noting: “The directions reflect the unanimous feedback from those consulted that the next steps must be clear, measurable and proportionate. Many also agreed there were failings identified in the independent report into the handling of Axiom Ince and supported the firm action taken against the SRA.”

He added: “The clear timelines and oversight framework will help ensure good progress is made towards restoring consumer trust and confidence in the regulator.” 

Source: Michael Cross, The Law Society Gazette