The Solicitors Regulation Authority took almost three months to send investigators into Axiom Ince after the first of its eye-catching acquisitions using client money, it has emerged. The time-lag, revealed in an answer to a freedom of information request by the Gazette, contrasts sharply with the speed of the SRA's response to the Daily Mail's immigration lawyer 'sting' earlier this year.  

The regulator confirmed last week it had made two visits to Axiom in its various guises before suspending managing partner Pragnesh Modhwadia and ultimately shutting the firm.

This explanation was made in the midst of an ongoing FoI request from the Gazette about when visits were made and what they consisted of. The subsequent response on Friday revealed that the SRA visited Axiom Ince on 25 July this year, sending in one forensic investigation officer and one forensic investigation manager.

This inspection was almost three months after it had been announced that Axiom DWFM had bought the much larger Ince Group. In the meantime the newly-named Axiom Ince also bought Plexus Legal – again taking on a much larger firm with completely different practice areas. A further two weeks passed from the inspection until Modhwadia's suspension on 10 August.

The SRA also confirmed that one forensic investigation officer attended Axiom on 27 October but that no issues were found that related to the client account. There were no other visits in the last five years.

Earlier this year in court, lawyers for Modhwadia appeared to state that more than £60m from the client account had been spent on the Ince and Plexus deals. This inevitably raised questions about why the SRA took so long to respond when there appeared to be red flags from this spate of acquisitions.

Speaking to the Gazette, the SRA said its July visit was ‘not an urgent inspection to address evidence of immediate risks or concerns’.

‘It was to look at how the firm had adapted to taking on legal services that it had no prior experience in, to make sure it had appropriate checks and balances in place, and whether we needed to take further steps to manage any risks,’ added the regulator. ‘This meant allowing time for the transfer of the business to have been fully implemented.’

The SRA explained it was a normal process for two officers to cover an assessment of a firm’s systems, rather than an investigation into a report of misconduct. It is also understood that solicitors managers handling the Ince administration did not flag up any areas of concern about the funding of the deal.

‘This [July] visit uncovered the issue that had not be identified previously by partners in the firm, accountants, banks or auditors, or raised in any of the firms’ accountants reports,' added the regulator.

Addressing the gap between the inspection and suspending Modhwadia, the SRA said it needed ‘robust, factual evidence’ and to follow due legal process, with any intervention requiring a review and final decision by an operationally independent panel of adjudicators.

‘Once we had clear evidence of risks in this case, which included the issuing of legal notices through a court order, we moved as quickly as possible to protect the public.’

Coincidentally, 25 July was also the date when the SRA received reports from the Daily Mail sting into the conduct of immigration lawyers. Three firms and four individuals were shut down by the regulator six days later.

As outlined last week, the SRA visited Axiom last October but said this was a self-report by the firm involving an immigration matter which was not linked to issues uncovered with the client account or suspected dishonesty.

The intervention into Axiom Ince had already cost £15m as of last month and is expected to be comfortably the most expensive in the SRA’s history. The regulator continues to contemplate how to compensate any Axiom clients who have lost money and has previously said it may ask the profession to pay a one-off levy to increase compensation fund reserves.