In its response, the Solicitors Regulation Authority seizes on one sentence of praise in an 11-page summary. The rest details a catalogue of failures.

  • The alleged misappropriation of funds from the client account may have begun in 2019, the report says. But the SRA failed to spot it during an October 2022 investigation into Axiom over an unrelated matter, because it did not conduct an effective accounts check. The forensic investigation officer did not follow standard procedure 'because they did not check off each account balance against the relevant bank statements and did not obtain a confirmatory bank letter'. Those omissions 'were not picked up' in the internal managerial review process. 
  • So-called 'accumulator' firms, which acquire other firms to expand quickly, can pose sui generis risks to clients, the report notes. Staff had pointed to the need to identify them for years, but investigators found 'no evidence' the SRA considered this until January 2023, when it prepared a briefing note. This was despite there having been three significant and high-profile interventions into accumulator firms by that time - Kingly in 2020, Pure Legal in 2021 and Metamorph in 2022. From January 2023, the SRA identified eight accumulator firms which had acquired two or more law firms in the previous year. Axiom was one of the eight - but the SRA did nothing further in terms of additional monitoring or investigation.
  • In March 2023 the SRA assessed Axiom as 'medium-risk'. This was an 'inadequate' rating that 'failed to consider the risk of such a large firm having only one owner [Pragnesh Modhwadia] who also held all of the compliance roles'. The SRA took no further steps following this risk assessment. The SRA first met Modwhadia in July 2023 when, the report says later, it became clear that 'he was a very engaging and charismatic individual'. 
  • In April 2023 Axiom Ince purchased the much larger firm Ince Gordon Dadds, which had been forced into administration. The SRA 'did not consider the wider risks' of this deal, ensuring only that client files and monies were successfully transferred. There was 'no real consideration' of how client interests and funds would be safeguarded. Had the SRA conducted an effective assessment of the proposed deal, that could have helped reveal the alleged fraud.
  • In July 2023 Axiom purchased the much larger firm Plexus Legal, also in administration. The SRA gave 'no consIderation' to the suitability of the purchase.
  • The SRA uncovered the alleged fraud in July 2023 and intervened into the practice of three directors in August. It did not intervene into the firm until October. No formal record exists of the August meeting which decided on a partial intervention, but prior emails between SRA staff expressed resourcing concerns about a full-scale shutdown. Senior managers interviewed for the report insisted scale was not a factor. Whether scale was a factor or not remains 'unclear'. 
  • The decision to partially intervene was taken despite knowledge of alleged dishonesty at Axiom and that significant payments appeared to have been made to fund the firm’s business from the client account. The partial intervention - subsequent to which more millions were drained from the client account - 'did not adequately protect client money'. As a result, some clients of the firm have been prejudiced because they would have received money from Axiom’s client account but will now have to seek to recover their loss from another source, 'such as the SRA Compensation Fund or Axiom’s professional indemnity insurers'.

Needless to say, solicitors across England and Wales are feeling the latter omission keenly in their pockets.

 

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