It would be wrong to draw too many similarities between the reports into the Solicitors Regulation Authority’s handling of Axiom Ince a year ago and SSB Law this week.
In short, the latest assessment is so much worse.
With Axiom Ince, the SRA had some justification in saying it was dealing with a suspected complex and well-hidden fraud.
But in the case of SSB Law, not only were the red flags in plain sight, but dozens of people were pointing at them. There is no excuse here, which is presumably why the SRA has apologised rather than challenging the report, as it did in the wake of Axiom Ince. The failure to protect thousands of clients from predatory claims farmers and adverse costs demands was a self-inflicted catalogue of mistakes adding up to a complete fiasco.
It is almost laughable that the SRA commissioned its own working group, dubbed Operation Grouse, to monitor firms running cavity wall claims and placed SSB Law on the watch list, then failed to join the dots when complaints flooded in about what was happening. During this period, the SRA even issued a warning notice to the profession about potential misconduct in the handling of these claims – yet failed to actually heed the warning itself. It is worth pointing out how it is treated as an aggravating factor when a solicitor breaches the rules in spite of a warning notice.
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Even when forensic investigators – and it is sorely tempting to put this phrase in inverted commas given their performance – went into the firm, they were blind to the disaster unfolding inside SSB. Hundreds of millions of pounds in debt, solely reliant on claims known to be unwinnable and cases being run with barely any supervision from a solicitor (goodness knows how SSB would fare in the post-Mazur world). The investigator’s verdict? Close the case. The unsustainable level of debt and the business model built on sand should have been obvious to anyone with just a quick glimpse of the accounts. The fact that it required a whistleblower to do the SRA’s job months later should be acutely embarrassing to the regulator.
Too often we have been told in recent years that the SRA’s remit does not extend to monitoring firms’ financial risk. This hands-off approach was a fatal flaw and should be rectified. At the very least, the SRA should be asking questions of the several firms who are overdue filing their annual accounts.
Yes, resources are scarce at the SRA, but the priorities have clearly been wrong. The irony is that the regulator expends considerable time and resource investigating and punishing firms for technical breaches of AML rules – where there is no harm to clients – and yet was blind to the very tangible threat to clients unfolding right in front of its eyes.
Over five years, the SRA repeatedly received reports that SSB Law was putting clients at risk and racking up unsustainable debts by pursing useless cavity wall claims. These reports were either batted off (wrongly) as issues about service levels, or were ignored altogether - especially when members of the public complained.
When the firm went out of business, the SRA stood by and did nothing while thousands of clients were shunted, like a game of pass the parcel, to another wholly unsuitable firm. They were commodities and many have had their lives ruined.
The SRA, and for that matter the oversight regulator the Legal Services Board, failed in its duty to protect the public.
Why? Take yourselves back to the Axiom Ince response, when the SRA leaders adopted a ‘nothing to see here’ approach and simply refused to accept what it was being told. When those at the top demonstrate such arrogance and complacency, it is hardly a surprise when that culture starts to run through the wider organisation.
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