‘Law firms are being subjected to increasing bureaucracy, costs and paperwork, while the regulator appears to miss the elephant in the room time and time again.’
The above, from Tony Williams – former global managing partner of Clifford Chance and one-time non-exec director of the Solicitors Regulation Authority – sums up the sense of frustration with the SRA that is prevalent in some quarters of the UK legal sector.
Earlier this month, the Legal Services Board (LSB), which oversees the SRA, announced ‘further enforcement action’ against the regulator, following a review by US firm Jenner & Block into its handling of the collapse of Sheffield-based firm PM Law.
The review found that the regulator had missed ‘a number of red flags’ dating back to 2024 and had failed to bring together complaints and regulatory concerns across different parts of the group to form a ‘single, coherent risk picture.’
As Zulon Begum, a partnership law specialist at CM Murray, puts it: ‘The SRA appears to have struggled to join the dots.’
‘A failure to protect consumers’
The latest intervention comes after the LSB’s formal public censure of the SRA in March over what it called a ‘failure to protect consumers’ affected by the collapse of Sheffield personal injury firm SSB Law, which went into administration in January 2024.
Last year, the LSB also issued directions to the SRA after an independent review into its handling of Axiom Ince, which was shut down in 2023.
This February, PM Law, which was also based in Sheffield, suddenly closed.
The LSB says the collapses of Axiom Ince and PM Law alone resulted in around £100m in lost client money, leaving the profession to meet compensation claims through the SRA’s arrangements.
In its announcement last week, the LSB said it would set additional performance targets for the SRA, retain the directions and targets already imposed, require the SRA to produce an implementation plan, and ‘require more frequent independent assurance’ that the required reforms are both being implemented and ‘delivering the outcomes required.’
‘When things go badly, you need an oversight body with real authority’
The scrutiny comes as the SRA is set to increase its overall funding requirement for 2026-27 to £111.5m – up 29% on the previous year.
Williams says the failings demonstrated the need for effective oversight. However, he questions whether the LSB has sufficient powers, particularly after it said it could not make changes to the SRA board under current legislation.
‘When things are going well, the LSB can look like a regulator in search of a role. When things go badly, however, you need an oversight body with real authority.’
Williams also expressed surprise that SRA chair Anna Bradley, who took up the role in 2019 and is due to step down at the end of this year, had remained in post despite the repeated failings identified in relation to Axiom Ince, SSB Law and PM Law.
‘If anything like this had happened on my watch, I would have expected either the chair or chief executive to go immediately, with the other following within 12 months,’ he says.
Turning a corner?
There is, however, cautious optimism about the SRA’s direction under new chief exec Sarah Rapson, who succeeded Paul Philip last November. Begum believes the appointment was timely, saying: ‘There probably did need to be a change at the top.’
Michelle Allison, a disputes partner at Simmons & Simmons who frequently acts for top 50 law firms in SRA investigations, describes herself as ‘quietly optimistic’ about the regulator’s direction under Rapson.
She singles out Jonathan Peddie, the SRA’s investigations, enforcement and litigation director and a former Baker McKenzie partner who joined last September, for particular praise.
Of Rapson, Peddie and the wider executive team, she says: ‘They are gathering ideas and listening to people. It will take time to implement them, but I think they will eventually deliver positive change.’
For Allison, Rapson’s response to the critical PM Law report already offered evidence of a change in approach. The chief executive apologised and acknowledged that the SRA ‘should have done better,’ something she sees as a positive sign. ‘A year ago, we might have expected a more defensive response from the SRA,’ she says.
Williams pointed to the regulator’s response to Axiom Ince as an example of how defensiveness had previously damaged its relationship with the profession.
‘What really annoyed the profession after Axiom was that, at a regulators’ conference a few days later, the message was effectively: “Nothing to see here.” That upset people enormously.’
Anticipating tomorrow’s challenges
But a change in tone is not enough on its own. The more fundamental question is what must change within the SRA if it is to prevent similar regulatory failures.
For Begum (pictured), one requirement stands out: the ability to understand a legal market that is moving ever further from the relatively simple structure of the traditional LLP.
‘Modern law firms are incredibly complex,’ she says. ‘You can have multiple entities, dozens of trading names and interconnected businesses, yet regulation can still be focused on reviewing individual entities rather than understanding the wider group.’
That complexity is also reflected in how firms are financing their growth. UK legal sector private equity and strategy specialist Adil Taha, founder of Taha & Co, points to the rapid expansion of law firms’ use of debt in recent years.
‘Banks have extended more revolving credit facilities and debt facilities to law firms in the last five years than the 20 years before it.’
For Begum, that means regulators need to look beyond the risks facing individual entities.
‘They need a genuinely deep understanding of the market they regulate, because that market is changing rapidly. The challenge is not simply reacting to today’s risks, but anticipating tomorrow’s.’
Williams believes the regulator needs to be more disciplined in prioritising the risks that matter most.
‘What is clear is that the SRA needs to return to first principles: protect the consumer,’ he said. ‘Anything connected to client assets, client confidence and trust in the profession should rank above almost everything else.’
Allison makes a similar point: ‘A few years ago there was a lot of focus on issues such as drink-driving cases. Personally, I would prioritise matters more seriously affecting clients and the profession.’
Institutional change required?
Yet, Allison warns, better prioritisation alone may not be enough. The SRA has confirmed that the Post Office scandal has generated 20 live investigations. ‘That is effectively an entire team working on one issue,’ she says.
Issues like these show the need for a rethink, Allison believes: ‘I think it will require institutional change. If every weak or speculative complaint requires a full investigation, the system becomes overwhelmed.’
Meanwhile, Begum points to dark clouds on the economic horizon as a reason for more rigorous regulatory oversight.
‘The economy is not looking particularly healthy with rising borrowing costs,’ she says. ‘Highly leveraged firms should already be on the SRA’s radar.’
‘The SRA has unlimited taxing power. They’ve already emptied the cookie jar twice’
This is a point Taha echoes, noting that in the current economic environment, ‘there are many firms who are on the brink of significant distress.’
For Williams, the concern is not only the potential for more failures, but who ultimately bears the cost. While losses can be spread across the profession through the compensation fund, he notes that repeated calls on the fund still come at a price.
‘The SRA has unlimited taxing power over the profession. They’ve already emptied the cookie jar twice.’
And on the roughly £100m in client money lost through the collapses of Axiom Ince and PM Law, Williams is equally blunt:
‘Call me old-fashioned, but I still think that is an extraordinary amount of money.’
