The Legal Services Board (LSB) has initiated further enforcement action to secure “urgent improvements” at the Solicitors Regulation Authority (SRA).
The oversight body said it is “disappointed” by the standard of leadership and accountability demonstrated by the SRA’s board in response to the “serious regulatory failures that have repeatedly occurred”, which have come “at significant cost” to consumers and to public confidence in the SRA.
It has concluded there is “not sufficient evidence” to demonstrate changes implemented by the SRA following previous enforcement action are consistently delivering improved outcomes for the public and consumers, and “significant performance challenges remain” in areas including pace of regulatory action, organisational focus, specialist capability, systems and governance.
The announcement comes on the same day a damning independent review identified multiple missed opportunities for the regulator to intervene in the failed PM Law Group, which collapsed in February with the loss of over 600 jobs and owing around £40 million in client money.
The LSB issued directions to the SRA in May last year, following an independent review into the failure of Axiom Ince and the loss of £60 million of client money, requiring the regulator to strengthen its approach to identifying and responding to risks, protecting client money, and preventing consumer harm by June this year.
In March, it issued a formal public censure and imposed performance targets on the SRA for its failure to protect consumers affected by the collapse of Sheffield-based law firm SSB Group Limited (SSB), which went into administration in January 2024.
The collapse of PM Law Group reinforced the LSB’s concerns about the effectiveness and timeliness of the SRA’s regulatory intervention where consumers and client funds may be at risk.
Following the release of the independent report into the SRA’s missed opportunities to intervene in PM Law’s failures, along with an independent assessment by Berkeley Partnership of the SRA’s progress in meeting the LSB’s directions following the failure of Axiom Ince, the oversight body has said it will strengthen its oversight of the regulator.
“The Jenner & Block review identifies weaknesses in the SRA’s approach that are similar to those previously identified in relation to Axiom Ince”, the LSB explained.
“These include shortcomings in (a) the effective use of intelligence held across the SRA, (b) the investigation of complex financial risks, and (c) the escalation of serious concerns to senior decision makers. Importantly, some of these issues have been known to the SRA since 2023.
“The Berkeley Partnership review found that the SRA has made progress in strengthening its processes, controls and frameworks. The LSB welcomes this progress and recognises that it reflects a positive direction of travel.
“However, the review also concluded that there is not yet sufficient evidence that these reforms have resulted in better regulatory outcomes or improved protection for consumers, as required under the Directions.
“The scale of the harm shows why this matters. The cumulative loss of client money associated with Axiom Ince and PM Law is approximately £100 million.”
The LSB will step up enforcement in four ways: “urgently” setting additional performance targets to enable more rigorous assessment of the SRA’s progress and to intensify regulatory oversight, subject to statutory approval; keeping in place the directions and performance targets already imposed; requiring the SRA to produce a single, consolidated implementation plan covering the full range of action it is taking to improve its performance and meet the requirements of the directions and performance targets; more frequent independent assurance to provide evidence that reforms are being implemented and delivering the outcomes required.
“Strong, effective regulation is essential to consumer protection and a well-functioning legal services market”, the LSB said.
“Regulatory failures can undermine trust, inhibit innovation and ultimately increase costs for consumers. While no regulatory regime can eliminate the potential for firm failure, regulators have a responsibility to identify warning signs and take proportionate, effective action to mitigate risks, protect consumers, and reduce the likelihood and impact of avoidable harm.”
Acknowledging the SRA will require further investment to strengthen its systems, capabilities and capacity to protect consumers effectively, the LSB has approved the regulator’s 2026/27 practising fee application, which includes proposals for additional investment in regulatory capability.
“However, it is essential that consumers, the profession and the wider public can be confident that this additional funding delivers tangible improvements and represents value for money”, it warned.
“We anticipate requiring the SRA to demonstrate what difference the additional funding is making for consumers and that it is being used efficiently and cost-effectively, as part of any new performance targets.”
The LSB said it will continue to work constructively with the SRA while maintaining robust and independent oversight in the public interest.
“If sufficient progress is not demonstrated, the LSB has further enforcement powers available and will not hesitate to consider whether additional intervention is necessary to protect consumers and the public.”
The Law Society of England and Wales welcomed the LSB’s enforcement action. “It is concerning that more than 12 months on since the LSB set out enforcement action against the SRA, it has not been able to demonstrate that the changes it has introduced have been consistently delivering improved outcomes for the public and consumers”, Law Society president Mark Evans said.
“Solicitors are already dealing with higher costs and heavy regulatory burdens, and they will now have to pay the price of huge increases in the practising certificate fee, because of the SRA’s own failures in carrying out its core regulatory function. The profession needs to be confident that the huge funding increases are justified and will deliver the necessary improvements not just for them, but also for consumers.
“The cumulative financial pressures on the profession, especially smaller firms and those in lower-margin areas including legal aid providers, pose a risk to market sustainability, consumers of legal services, and access to justice.
“The SRA needs to prioritise high-risk issues more rigorously, ensuring resources are focused on areas posing the greatest risk to the public.
“The LSB has also expressed disappointment in the SRA’s Board. To help restore consumer trust and confidence in the regulator, the SRA’s Board must make sure that the changes it is implementing are effective and are happening at pace.”
