SRA ‘knew’ SSB was failing nearly a year before it collapsed as it faces enforcement action

The Solicitors Regulation Authority (SRA) faces enforcement action in the wake of its failure to properly regulate failed Sheffield law firm SSB Group; missing the opportunity to respond ‘effectively or efficiently’ despite more than 100 reports relating to SSB’s activity from January 2019 to March 2024. A report published by the Legal Services Board (LSB) suggests the SRA was aware of the extent of the failing at the Sheffield firm nearly a year before it collapsed. 

SSB Group collapsed in January 2024 reportedly owing £200 million owed to litigation funders following work on cavity wall insulation claims, amongst other work. It was the second high profile collapse, following Axiom Ince, leading to the SRA coming under intense scrutiny from the LSB for failing to properly regulate the firms.

The LSB instructed an independent review of the SSB collapse, which left many claimants with personal liability for claim costs, in April 2024. In June of this year the SRA was directed to ‘take action’ in the wake of the Axiom Ince failure which saw the firm collapse in 2023 with a £60m hole in its client account. Many legal professionals saw the client money consultation as a knee-jerk reaction to the failure of Axiom Ince. That consultation has since closed and the SRA have said it will not be taking any immediate decision on the future of client account.

The LSB commissioned Carson McDowell LLP, a Northern Ireland firm of solicitors not regulated by the SRA, to review whether the SRA acted effectively and efficiently on reports it received about SSB’s conduct of cavity wall insulation claims and its financial management. The SSB Victims’ Support Group gave testimony of the impact of regulatory failures on clients which saw clients pursued for substantial legal costs, despite the “no-win no-fee” assurances they had been given.

The review considered the reports submitted to the SRA from clients, installers of cavity wall insulation, other law firm and insurers which alleged SSB had acted without adequate instruction, issued meritless claims, inflating damages, and failure to properly advise clients on liabilities and costs. In view of the sizeable sum of money owed at the point of collapse, financial mismanagement played its part in the failure of the firm, which had nearly 43,000 cases on its books at the time, and which the review concluded the SRA had sufficient evidence of the firm’s financial difficulties to justify taking regulatory action by April 2023 at the very latest.

The review also found that:

• the SRA did not act effectively or efficiently in its handling of more than 100 reports relating to SSB over the period under review (January 2019 to March 2024)
• the SRA did not take all the steps it could have taken in response to the reports
• the SRA’s failures meant it did not adequately protect consumers, the public interest, or professional standards. Changes to its procedures are needed to mitigate the possibility of a similar situation arising again.

The LSB Board has endorsed the report and its findings. In light of the impact on the achievement of the regulatory objectives set out in the Legal Services Act, the Board decided to initiate action in accordance with its enforcement policy. Having considered all the options available to it, the Board agreed to combine and initiate the statutory processes under the Act for two sanctions: a public censure under section 35 of the Act and performance targets and monitoring under section 31 of the Act.

Catherine Brown, interim Chair of the Legal Services Board, said:

“The former clients of SSB have suffered profound emotional and financial harm. There were several early warning signs about the firm, but this review reveals that the SRA failed to act on these. In the Board’s view, these shortcomings allowed SSB to cause further harm to its clients and weakened trust and confidence in the regulation of legal services.

“The action we are initiating reflects the scale of the human impact and the importance of holding regulators to account.

“I would like to thank the SSB Victim’s Group for sharing their experiences with us and Carson McDowell.

“Regulation plays a vital role in protecting consumers and building public confidence in a strong legal services sector. The SRA must sharpen its approach to assessing the reports it receives about solicitors or firms. It must then take quick and decisive action when it is clear – as it was in the case of SSB – that action is needed.

“The SRA has accepted the recommendations of this report. We welcome its engagement during the review and the steps it begun to take to address these issues. The action we have now initiated is intended to complement the action we took following the Axiom report last year, which led to the issuing of Directions.”

The LSB will now act in accordance with the statutory processes applicable under the Act and will not comment further until their conclusion.

Responding to the LSB’s action, Law Society of England and Wales President Mark Evans said it shows the regulator is ‘once again… lacking grip on managing key risks and responding adequately to protect consumers.’

“The report lays bare a lack of leadership and oversight of regulatory procedures and processes at the SRA. This is despite knowing the risks posed by bulk cavity wall insulation cases, the previous failure of Pure Legal from which the SRA transferred clients to SSB, and multiple reports from MPs, other lawyers, industry and the victims themselves. A key concern must be the treatment of vulnerable victims by the SRA.

“We know that the SRA will imminently have new leadership and that change comes at a crucial time for the organisation, which has been severely dented by the outcome of both the Axiom Ince and SSB reviews. In the space of 12 months both independent reviews separately concluded that the SRA failed to act adequately, effectively and efficiently and failed to take all the steps it should and could have taken. This cannot just be about improving systems and processes but requires culture change and focused leadership.

“The sanctions by the LSB are a necessary step but strong and continuing oversight of the SRA is needed to ensure it acts on the report’s recommendations swiftly and comprehensively. The SRA must get back to basics and ensure its operations are joined up and focused on protecting consumers. The profession and consumers have been badly let down by the actions of SSB and the failings of the SRA.”