Axiom Ince Report- Howden View

At 9:30am on 29 October, the Legal Services Board (“LSB”) finally published its long-awaited independent review^[1] (“Report”) of the Solicitors Regulation Authority’s (“SRA”) actions leading up to its intervention of Axiom Ince Ltd (“Axiom”).

This Report, first promised by this Spring^[2], was initially delayed apparently in order not to interfere with the July General Election^[3]. Then, after a further four months of radio silence and, despite ever-increasing demands for its publication from the legal profession, it was finally released during the October half-term holiday and the day before Labour’s first budget in 14 years (a good day to bury bad news, some might say).

It’s fair to say that it was worth waiting for. The report sets out a catalogue of errors and missed opportunities by the SRA in the months leading up to its full intervention into Axiom. It also suggests that a delay by the SRA in intervening into the firm resulted in almost £36 million being depleted from the firm’s client account which might otherwise have been preserved^[4], a sum which the legal profession has effectively had to replace, with contributions to the SRA Compensation Fund having increased by 270% for this year’s annual practising certificate renewal exercise.

At the same time as publishing the report, the LSB issued a press release confirming it had taken the unprecedented step of initiating enforcement action against the SRA. This has been done with the aim of requiring the SRA to make changes to better achieve its regulatory objectives, which it concluded the SRA had failed to do so in this case, with the effect that “…the SRA’s actions and omissions have in [the LSB’s] view adversely impacted on confidence and trust in the regulation of legal services…”^[5]

As soon as the Report was released, the SRA issued its response to it^[6], essentially rejecting its conclusions. It pointed out that other bodies, including external accountants and auditors who were involved with Axiom, also failed to pick up the suspected fraud (it is being deemed “suspected fraud” at this stage as no criminal convictions have yet taken place). It also states: “…In particular, it is by no means clear that a different approach would have uncovered the issue sooner. With hindsight, the report has highlighted things that we could – rather than just should – have done. But in our view, it is unrealistic to expect regulation to prevent all harms…” It would appear that hindsight is, indeed, a wonderful thing.

We review the Report below in more detail, setting out its conclusions and recommendations. We also set out below what we consider its potential implications may be for Howden’s clients and the legal profession in general.

Read the full Howden analysis here: