SRA told to reveal what it knew in build-up to PM Law collapse

The oversight regulator has already begun the inquest into how a national law firm network came to be closed down overnight with seemingly no notice.

According to minutes from last week’s board meeting, the Legal Services Board has written to the Solicitors Regulation Authority asking when it first identified PM Law Group as a risk. The letter also requests further information and a chronology of events about risk assessments up to the point when the firm and its various network of practices was shut down last month by the SRA.

This is the first time the LSB has publicly commented on the PM Law Group closure, which the SRA has said is now being treated as a potential fraud.

As a legal practice that grew quickly following acquisitions, the firm has been compared to Axiom Ince, whose collapse cost the SRA’s compensation fund millions and was subject to an independent review – commissioned by the LSB – into how the SRA handled the matter.

That report concluded that on Axiom Ince, the SRA did not act adequately, effectively efficiently and did not take all the steps it could or should have done to protect client money.

There is no suggestion at this stage that the SRA has made the same mistakes in relation to PM Law Group, but the almost immediate involvement of the LSB suggests that the same questions will be asked whether the network was properly supervised and the risk it posed properly assessed.

The LSB is clearly keen to act much quicker this time to investigate what if anything has gone wrong. An extraordinary LSB board meeting was held on 11 February – one week after the SRA’s intervention – and a further meeting is scheduled for this month. No minutes have been published yet for the first emergency meeting.

The SRA has been asked by the LSB to set out the steps it is taking to assess the wider risks to consumers in light of the PM Law intervention.

PM Law and its 24 offices closed on 2 February as staff were told they were being made redundant immediately and clients given no information about what to do with ongoing matters. As of the middle of February, around 80 applications had been made to the compensation fund, although that figure was expected to rise significantly. Emergency payments had been made to those whose matter was urgent, such as conveyancing clients.

The matter comes as the SRA makes its quarterly performance report to the LSB, which will be assessed and published in due course.

Last March, the LSB categorised the SRA’s operational delivery as ‘insufficient’ for authorisation, supervision and enforcement. Serious concerns were also raised about communication and accountability with regard to the relationship between senior executives and the SRA board. The regulator has since changed its chief executive and the next assessment report will give insight into whether incoming leader Sarah Rapson has started to bring about an improvement.