The oversight regulator is considering an independent review of the causes of the catastrophic collapse of Axiom Ince, it emerged yesterday,

Legal Services Board chair Matthew Hill told MPs that the organisation is exploring options for an ‘independent, objective’ review of the events leading up to the SRA’s intervention into the firm earlier this year. Hill was giving evidence to the House of Commons justice committee’s inquiry into legal services regulation.

Hill did not give details of what scope the review may have – and was not pressed on the issue by committee members – but he added that the review would require ‘significant additional work’ . This is one of the reasons for the proposed 14%  increase in the LSB’s budget next year.

The Axiom Ince intervention is comfortably the biggest in the SRA’s history, with costs alone expected to reach at least £15m.

The SRA has denied being asleep at the wheel during the weeks and months leading up to the intervention, which was prompted by an estimated £66m being found to be missing from the client account. Some of that money appears to have been spent on the purchase of Ince Group in April – a much larger firm than the previous Axiom DWFM – but the SRA has admitted it did not send inspectors into the firm for another three months. 

Earlier in the committee session, SRA chair Anna Bradley and chief executive Paul Philip were questioned about the proposal for a levy on the profession to pay claims on the compensation fund from Axiom clients.

The SRA said last week that claims worth £33m in total had already been made – almost double the fund’s reserves – but that the need for a one-off levy had been parked for now.

The strength of feeling from the legal profession that would have to pay for any shortfall from Axiom was summed up by Law Society president Nick Emmerson, who said ‘not a penny’ extra should be levied until it was known what had caused the issue to reach this point.

Bradley said the costs to the compensation fund from Axiom were ‘frankly unknown at this stage’, and that much depended on an insurance claim in the process of being resolved.

Philip said there had been a 250% annual increase in interventions but pointed out that contributions to the compensation fund have been coming down consistently over the last six years.

‘As a consequence [of the rise in interventions] the fees are likely to go up. Axiom represents an unusually large amount of client funds going missing,’ said Philip.

Asked whether the profession would say the SRA is doing a good job in the light of the Axiom Ince affair, Philip, said it was a ‘mixed picture’.

‘Regulators of all sorts are never particularly well liked by the people they regulate,’ he said. ‘I was at a conference last week with 100 or so lawyers and they were extremely happy and most were extremely small law firms. There will be people who have particular views and they are never slow in coming forward.’

Law Society of England and Wales chief executive officer Ian Jeffery said the representative body welcomed the LSB’s indication of an independent review of the events leading to the collapse of Axiom Ince and the SRA’s intervention to close the firm. 

He added: As the oversight body responsible for assessing and monitoring effective and transparent regulatory performance, the LSB has the necessary investigation and enforcement powers to ensure that the events and actions relating to this very serious incident are fully brought to light. 

'We stand ready to work with the LSB and, as appropriate, the SRA to ensure that all proper assurance is provided to the public and to our members.'