The Solicitors Regulation Authority (SRA) is reviewing its overall approach to consumer protection, following the collapse of Axiom Ince
It will cover how firms are monitored, how risks are identified, and the rules and controls around client money, as well as the compensation fund model.
The compensation fund pays out to consumers where money has been stolen or is unaccounted for, or a regulated person did not have insurance in place.
The review aims to ask ‘fundamental questions’, including ‘whether the whole model of law firms directly holding client money is the best approach’. On the compensation fund, it will look into whether compensation should be capped and whether the maximum payout should be reduced (the current maximum for a single claim is £2m). It will also ask whether levies should be based on a specific firm’s risk, whether the correct balance has been struck between insurance and the fund, and whether the fund should provide such wide-ranging cover for the public?
The SRA states in its discussion paper, published last week: ‘We are taking action now because the legal landscape is going through significant changes.
‘Last October, we carried out our largest ever intervention—this is where we step in and close down a firm to protect clients. More than £60m of clients’ money had gone missing from the law firm Axiom Ince due to suspected dishonesty.
‘More generally we have seen a large increase in the number and size of interventions—last year we carried out more than twice as many interventions as the year before.’
Law Society chief executive Ian Jeffery said: ‘The potentially far-reaching changes under review require careful consideration and full and meaningful consultation with the profession.’
Respond to the paper, Protecting the public: our consumer protection review, by 1 July.
