The Solicitors Regulation Authority has been given the go-ahead to significantly increase compensation fund contributions to cover the cost of the Axiom Ince intervention.
The Legal Services Board had given itself until November to make a final decision, but confirmed in a notice today that the revised contributions have been approved for the financial year.
The Law Gazette reported that the total contribution level sought for the next year is £31.6 million – up from £10m in 2023/24. This will mean a new individual contribution of £90 (2023/24: £30) and a firm contribution of £2,220 (2023/24: £660). The SRA has sought higher contributions due to a ‘hole in the fund’ created by the costs of the 65 interventions in the previous year, including the national firm Axiom Ince, which was embroiled in a scandal that has left members of the public seeking financial retribution.
The SRA estimates that it paid £41.1m in grants from the fund for the financial year 2022–2023, an increase from £15m the year before.
In addition to contributions, the LSB also agreed that the SRA can have access to a £10m banking facility to support the compensation fund, which exists to compensate clients who have lost money through the misconduct of solicitors.
The LSB is currently investigating the SRA’s handling of the Axiom Ince collapse and is set to report imminently following a review earlier this year.
The notice added: ‘The SRA justifies the increase as being necessary and proportionate, given the overarching aim of the compensation fund is to maintain protections for the public, and to maintain trust and confidence in legal services.’
The LSB said in its decision notice it was ‘mindful’ of the impact of this approach on smaller firms and has asked the SRA to assess whether the system is fair.
The decision notice also reported that the SRA has employed extra staff at senior executive level to manage its finances, including an additional chartered accountant with experience of managing cash flows in large organisations.
The Law Society described the contribution fee rise as ‘deeply concerning’ and said it has only increased the need for the LSB to publish its report into Axiom Ince.
Law Society chief executive officer Ian Jeffery said: ‘The SRA’s request for additional funds is largely the result of the collapse of Axiom Ince and the cost of compensating its victims.
‘We expect the independent review of the SRA’s performance on this matter commissioned by the LSB to be published as soon as possible, so that the lessons can be learned.’
