A report examining the Solicitors Regulation Authority’s (SRA) handling of Axiom Ince has triggered widespread criticism and raised concerns over potential new rules regarding mergers and acquisitions.
The criticism stems from the SRA’s perceived inadequate management of the Axiom case. The Law Society president, Richard Atkinson, highlighted the SRA’s insufficient intervention, which allowed Axiom to operate unchecked, resulting in missing funds and significant distress for clients. Atkinson pointed out that the profession, specifically solicitors and law firms, had to bear the financial burden through increased contributions to the Compensation Fund.
Richard Atkinson criticised the SRA for prioritising the expansion of its fining powers and regulatory scope—particularly its proposal to regulate CILEX members—over addressing known risks from accumulator-style firms. He emphasised that the Legal Services Board (LSB) must ensure the SRA refocuses on its primary duties.
The Legal Services Consumer Panel also expressed deep concerns. Chair Tom Hayhoe identified systemic flaws requiring urgent action from both the SRA and the LSB. Hayhoe stressed the importance of regulatory bodies acting quickly, transparently, and with a dedication to consumer protection. The current failings demand immediate and bold reforms to safeguard consumer interests.
Andrew Donovan, managing director of the Compliance Officer, remarked on the irony that the SRA does not regulate itself. He noted that if any law firm had demonstrated such ineffective governance, it would likely face more severe regulatory repercussions. Donovan found the SRA’s inability to comprehend the need for enforcement action disappointing, especially given its usual assertive approach to minor infractions.
Despite the critical report, Donovan acknowledged the diligent work of some SRA staff, calling for greater internal acknowledgment of mistakes. Meanwhile, regulatory solicitor Jayne Willetts criticised the SRA’s response to the report as lacking in accountability and humility. She advocated for the SRA to return to its core functions of regulation and enforcement to regain trust.
David Gilmore, founder of DG Legal, stated that the SRA’s light-touch regulation allowed solicitors to potentially avoid regulatory visits throughout their careers, which could lead to issues. Gilmore suggested the need for a more proactive stance from the SRA, albeit within resource constraints. Conversely, legal expert Iain Miller warned against overly stringent measures on mergers and acquisitions, which could stifle necessary consolidation trends.
Miller underlined the need for targeted actions towards firms with clear risks, cautioning against a broad approach that could hinder market dynamics. He pointed out that existing intervention powers are outdated, limiting the SRA’s effectiveness in handling large firm cases like Axiom.
Legal regulation specialist Paul Bennett identified a significant oversight in the report—the LSB’s conflicted role in approving the SRA’s rulebook. Bennett called for an investigation into the LSB’s responsibilities and warned that stringent controls on law firm acquisitions might lead to more failures and interventions.
In defence of the remaining Axiom directors, Philip Barden, a partner at London firm Devonshires, assured that these directors were uninvolved in any misconduct or fraud, dedicating significant efforts to mitigate its effects. He noted ongoing actions to recover lost funds, though the complexity of the process might prolong resolution.
The findings of the Axiom report have ignited calls for the Solicitors Regulation Authority to reconsider its regulatory approach and rectify identified issues. The legal profession demands transparency, accountability, and a return to the core responsibilities of the SRA to restore trust. Meanwhile, the broader implications on mergers and acquisitions cannot be overlooked, requiring a balanced strategy to support necessary market evolutions without compromising oversight.
