Legal industry regulators under the scope at justice select committee
The regulator of the legal sector was under the microscope Tuesday at a House of Commons justice select committee, over potential industry payouts over Axiom Ince.
Solicitors Regulation Authority (SRA) chair Anna Bradley and chief executive Paul Philip were amongst those called to give evidence on the regulation of the legal profession and whether existing structures have been exposed by high-profile failures in the sector, notably of Axiom Ince, which rocked London’s legal profession earlier this year.
The pair were subjected to questions over its Compensation Fund. The fund provides compensation to people who are owed money by a regulated law firm in the event of a collapse. It is funded by an annual levy paid by all solicitors in England and Wales.
James Daly MP asked the SRA if the sector will see an increased levy for the fund due to the “disaster that Axiom Ince caused” earlier this year.
Law firm Axiom Ince went into administration after it was alleged that its owner and managing partner had removed as much as £64m from the firm’s client accounts.
Bradley said the levy was “quite likely to increase” however she explained that the part Axion Ince plays in this is “unknown as this point” as the SRA seeks to try and recover cost from other parties including insurers.
Daly MP stated that solicitors may take the view that there was a lack of a regulator and now they are paying the price. Bradley interjected to say “I would say allegedly” adding that there is an ongoing review.
Philip also noted to the MPs that the SRA had oversaw around 110 acquisitions last year that “went very well”.
Another point that MPs quizzed the pair on was over the proposal of the SRA to regulate the Chartered Institute of Legal Executives (CILEX).
The SRA launched a consultation in August on potential changes to its regulatory arrangements to include authorised members CILEX, which concluded on 22 November.
Daly MP accused the SRA of wanting to be the “big regulator”, highlighting that the CILEX is already regulated by another body.
Philip explained that CILEX approached the SRA about this potential change back in 2022 and the SRA had conversations with the Law Society board about this.
When asked by Sir Bob Neill, chair of the justice select committee was the Legal Services Act 2007 still fit for purpose, Bradley said “absolutely”.
She did note that there has been a number of things that have changed which have added to their responsibilities. She pointed out the use of tech and AI. She also pointed out that anti-money laundering (AML) has become very significant in their work.
The SRA did call for unlimited fining powers, as Philip argued that when it rose its fining powers recently, it “appears to be working well”. The Ministry of Justice brought legislation into effect in July 2022 which saw limits raised from £2,000 to £25,000.