A landmark progress report on the Solicitors Regulation Authority’s efforts to put its house in order following the Axiom Ince debacle could sound the death knell for the holding of client money.
Today’s report, commissioned by the SRA for the Legal Services Board, recommends that the regulator establish a ‘defined workstream, plan and timeline to address the question of whether firms should hold client money at all’. This should be complemented by a ‘structured investigation into the wider use of third-party managed accounts - including whether they could be incentivised or required for higher-risk firms’.
When Axiom Ince ceased trading in 2023, some £60 million in client money had gone missing. The collapse is expected to cost the profession an estimated £39m in payouts from the compensation fund.
Chief executive Sarah Rapson disclosed earlier this summer that the SRA will be ‘taking a broader look at whether firms should continue to hold client money in the way they do today’ as part of its latest business plan. What any such reform would mean for the government’s plan to seize the interest on client accounts to help fund justice spending is unclear.
Conducted by management consultancy the Berkeley Partnership, the report presents the findings of an independent assurance review of the SRA’s compliance with the LSB’s directions under Section 32 of the Legal Services Act, issued in May 2025. Section 32 empowers the board, in the event of a regulator’s failure to comply with the act, to take ‘such steps as the board considers will counter the adverse impact, mitigate its effect or prevent its occurrence or recurrence’.
The review evaluates the completion of the SRA’s post-Axiom Ince implementation action plan. It also gauges the extent to which outcomes achieved ‘meet the letter and spirit’ of the LSB’s Directions and Carson McDowell’s damning report into the SRA’s handling of the Axiom Ince affair.
Overall, the review finds that the SRA has delivered ‘substantial and timely progress’, with most implementation steps completed and no areas assessed as not met. Of the 60 implementation steps defined in the Action Plan, 48 (80%) were assessed as fully met, five (8%) as partially met, and seven (12%) as future actions, largely reflecting dependencies on external approvals or planned delivery timelines.
Full assurance against the spirit of the directions will depend on demonstrable outcomes over time, the report adds. ‘This will include evidence that risks are identified earlier and acted upon, intelligence consistently drives regulatory decisions, and interventions are applied more proactively and proportionately.’
The report’s recommendations include prioritising the delivery of rule changes that introduce mandatory notification of firm acquisitions, which the regulator has already consulted upon.
In a statement, the SRA said: ‘The report from the Berkeley Partnership, consisting of findings from an independent assurance review, concludes that the SRA has made meaningful progress against the LSB’s Section 32 directions and the wider programme of reform initiated in response to Axiom Ince, while recognising that further work is needed. However, the report does note that while significant progress has been made, the SRA still needs to undertake further work to follow up on the various policy changes proposed and achieve the outcomes of the directions. This is a fundamental part of the organisation’s wider transformation programme.’
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