A regulator in denial

‘There is a lot we do not agree with, including the headline conclusions. It is by no means clear that a different approach would have uncovered the issue sooner.’

That was the SRA’s bellicose response to last week’s lacerating report on its actions in the runup to last year’s spectacular collapse of Axiom Ince.

The regulator is in denial. In reality, Carson McDowell’s admirably forensic investigation provides compelling evidence that the alleged fraud should have been uncovered earlier. For one thing, the top brass might have listened to their own subordinates, who had been warning of the sui generis risks of so-called ‘accumulator’ firms for years.

The SRA gave no consideration of the risks posed by accumulators till January 2023, despite the fact that three had already crashed – to the extent of being intervened in. At that stage, the regulator roused itself to identify eight of the species, but still did nothing.

Red flags were waving madly, some of them within the Cube itself.

Tuesday’s report should have at least two immediate consequences. First, it is time for the umbrella regulator to call a halt to the SRA’s inveterate empire-building. LSB approval is currently awaited for its land grab of legal executives via the transfer of oversight responsibilities to the SRA from CILEx Regulation. When urgent questions are being asked about the watchdog’s ability to regulate solicitors, never mind anyone else, it is surely untenable to extend its ambit further.

As for its barely concealed desire to evolve into the single regulator for all lawyers – that must be a dead duck.

Second, the SRA wants to sideline the Solicitors Disciplinary Tribunal via the arrogation of effectively unlimited fining powers for all types of misconduct. That was a hugely controversial proposal even before Tuesday’s report. It is even more controversial now. As I wrote on lawgazette.co.uk earlier this week, to what extent does the Axiom Ince report demonstrate that the SRA is fit to act as judge, jury and executioner in its own cause?

Last week, before the Axiom Ince report broke, the Law Society advised the watchdog to concentrate on the day job. Carson McDowell’s report will certainly fuel concerns that the regulator’s territorial ambitions are warping its priorities.