The chair of the Solicitors Regulation Authority (SRA), Anna Bradley, addressed the fallout from the Axiom Ince oversight failures, stating that the regulator has learned from past mistakes. Bradley’s comments come amid plans to survey new consumer protection reforms.
The Solicitors Regulation Authority (SRA) faces scrutiny following the collapse of Axiom Ince, a situation attributed to missing ‘steps it could or should have taken.’ An independent report criticised the SRA for its handling, leading to enforcement action from the Legal Services Board. Anna Bradley, chair of the SRA, acknowledged certain process failures but emphasised that these events are now in the past as measures have already been taken to rectify them.
At a compliance conference in Birmingham, Bradley highlighted a complex fraud at the firm involving a single individual, undetected by directors and auditors. Despite some disagreement with the report’s findings, the SRA is addressing broader issues identified, focusing on consumer protection reforms. These reforms include potential changes in client money handling and interest retention rules.
Chief Executive Paul Philip expressed reservations about increased SRA control over mergers and acquisitions. He argued that such control could slow down critical operations, potentially leading to failure to rescue struggling firms. However, he acknowledged the need for a balanced approach to regulation, considering both intervention costs and benefits.
The upcoming consultation on consumer protection will address contributions to the SRA Compensation Fund. It will explore whether large firms should pay more than smaller ones and consider a ‘polluter pays’ approach, where costs correlate with risks. Another focus will be on reducing risks associated with holding client money in light of digital banking advancements, although Philip noted that such changes would take time due to current market limitations.
The consultation might also revisit the requirement for annual accountant’s reports from all firms, as recommended after Axiom Ince’s review. The suitability of allowing firms to keep interest on client accounts and the handling of residual balances will be examined. Feedback on proposed fining guidance has been predominantly critical, prompting the SRA to consider adjustments.
Philip remarked that despite some firms not submitting qualified accountant’s reports, Axiom Ince had no qualifications for years, a discrepancy the SRA is keen to understand. He reiterated that maintaining trust and confidence in the profession is paramount and that feedback will shape future proposals.
The SRA is poised to take lessons from the Axiom Ince oversight debacle to bolster its regulatory framework. With upcoming consultations aimed at refining consumer protection and balancing firm contributions, the SRA underscores its commitment to evolving and safeguarding the legal profession’s integrity.
