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Solicitors Regulation Authority Compliance Conference 2023 Key Takeaways

This years’ conference programme was packed with lots of sessions that were of clear concern for many practitioners, but the main topic on conversation seemed to be the fallout following the Axiom Ince collapse; the main areas covered by the conference were:

Compliance

Posted 23/10/2023

SRA’s Key Priorities for the next 5 years

The initial session was a conversation with the SRA Chair and Chief Executive, with its key priorities for the next five years covering areas like:

  • Enhancing the utilization of data in its work
  • The provision of legal services around the UK
  • Continuing competence
  • The use of technology/AI
  • Being an authoritative voice
  • Improving enforcement; the CEO made mention of the likely introduction of unlimited fines for economic crime offences and his intention to use these where appropriate.

The fallout from the Axiom Ince scandal

The Q&A session with the SRA Chair and CEO was a good opportunity to try and get answers to key areas of concern, including the impact the Axiom Ince scandal would have on practitioners in relation to potentially having to pay more into the Compensation Fund to cover the missing £64,000,000 (no, I have not added too many noughts!); I did pose a question in relation to this but it was ‘watered down’ by the conference Chair. My question was in fact, “Some are accusing the SRA of being ‘asleep at the wheel’ over the missing £64m from Axiom Ince; do you have any comments?”

Due to the watering down of the question I didn’t get a specific answer to my question, however, the CEO did warn firms to brace themselves for a 'radical' increase in their contributions to the SRA Compensation Fund to pay for the potential losses; during breakout sessions it was clear that this had not been received at all well with many practitioners saying the SRA should answer for its role in how the situation was able to occur in the first place!

Legal sector reaction to the Axiom Ince scandal

Since the conference, many practitioners have taken to social media to express their anger and frustration as to why they, as innocent parties, should have to pay for the crimes of others; they are also calling for the SRA to say whether it had been carrying out its role as regulator effectively.

In a worst-case scenario, which the SRA seems to be anticipating, the profession will need to pick up the bill, but what could this mean to firms?

  • If all firms (9,500) had to pay an equal contribution this would amount to just over £6,700 each.

  • If the current sums held by the Compensation Fund were used (£18m) and each firm then had to pay an equal share of the rest it would be just over £4,800 each.

There are many variables and 'what ifs' but firms, as the SRA CEO has said, need to brace themselves for calls on their precious profits; budgets should certainly be reviewed and adjusted accordingly to take account of a worst-case scenario, and this is where some small firms may decide to just close up shop.

SRA’s role in the Axiom Ince scandal

Some of the questions that the SRA needs to answer around the scandal are:

  • Did it learn appropriate lessons from previous scandals (Kingly and Metamorph)?

  • Was its authorisation process robust enough?

  • Should it have looked more closely at how a smaller firm could afford to buy bigger ones out of administration with all the debts that came with them?

  • When did the SRA first become aware of the scandal and could it have stopped a further £7m going missing if it had intervened sooner?

Clearly, this is a topic that is not going to go away for the SRA, and there are already calls for Freedom of Information requests to be made so relevant information around its role can be obtained, the problem is that the SRA is likely to refuse such requests on the basis that there is an ongoing investigation in play; there are also calls for a Judicial Review of the decision to make the profession pay for others’ crimes, but this is also likely to fail until the investigation has been completed.

What was intended to be a spotlight on the work of the SRA and the support available to practitioners, turned out to be more of a spotlight on whether in fact it was fulfilling its role as an effective regulator, and until it ‘comes clean’ over what it knew, when it knew it, and what it then did with what it knew, it is likely to remain under extreme scrutiny by those who pay regulatory fees for its operation!