The SRA and the Legal Ombudsman are no longer fit for purpose

After Axiom Ince and the LSB's findings, year-long Ombudsman queues, a £50,000 service-complaint ceiling and a Compensation Fund under strain: are solicitor regulation and redress fit for purpose?

Charles Pycraft · November 2026 · London

Cover card: The SRA and the Legal Ombudsman are no longer fit for purpose. Navy ground with gold funnel motif and a small CP mark; title rendered by the site. An investigation by Charles Pycraft

In October 2023 the Solicitors Regulation Authority intervened in Axiom Ince Limited. Approximately £60 million of client money was reported missing. About 1,400 jobs were lost. An independent review commissioned by the Legal Services Board found that the SRA's inspection of the firm in October 2022 had not been effective. On 29 May 2025 the LSB issued binding directions to the SRA under the Legal Services Act. On 3 September 2026 the LSB announced further enforcement action to secure improvements in the SRA's handling of risks to consumers, acknowledging progress while maintaining that stronger safeguards were needed.

Separate criminal proceedings concerning the firm's collapse remain pending. The defendants have pleaded not guilty. This article addresses published regulatory findings and the legal framework, not the criminal allegations. No individual connected with Axiom Ince is named here.

Axiom Ince is a major recent regulatory failure. The question it raises is structural. When money held by a solicitor goes missing, who can act, how long does a client have, and how much can they get back?

The SRA, the Solicitors Disciplinary Tribunal and the Legal Ombudsman do real work and pay out real money. On the public record of remits, caps, backlogs and budgets, the argued opinion of this piece is that together they are no longer fit for the protective purpose clients think they are buying when they instruct a solicitor. Money keeps flowing through reserved and unreserved work while enforcement capacity and redress ceilings lag behind the harm.

Three bodies. Three incomplete jobs.

The Solicitors Regulation Authority regulates solicitors and firms. It investigates, issues its own warnings, rebukes and fines, can intervene to close a firm, and runs the Compensation Fund.

The Solicitors Disciplinary Tribunal is an independent statutory tribunal. Striking off, suspension and the highest fines generally sit with it. The SRA brings a case only where it considers there is a realistic prospect of success.

The Legal Ombudsman handles service complaints from consumers. It is not a misconduct regulator. It can order remedies, including compensation, within a cap.

A client with a complex trust or estate loss may need all three and still not be made whole.

What the law lets them see. What it leaves dark.

The Legal Services Act 2007 reserves six activities to authorised persons: rights of audience, conduct of litigation, reserved instrument activities, probate activities, notarial activities and the administration of oaths. Everything else is unreserved. Most tax planning, trust structuring and offshore company work sits in that unreserved space. Where the provider itself falls outside the relevant regulatory regimes, a client may lack SRA supervision, access to the Legal Ombudsman and eligibility for the SRA Compensation Fund, even though a regulated professional performing comparable work may be subject to those protections.

Will writing shows how long the gap has been open. The Legal Services Board recommended making it a reserved activity. In May 2013 the Lord Chancellor declined.

A solicitor can also act outside a firm as a trustee, director or nominee. The individual code still applies to the person. Firm-tied protections may not. Guidance to the SRA Accounts Rules 2011 said the rules did "not cover trusteeships carried on in a purely personal capacity outside any legal practice." Those rules were replaced in 2019. The question remains live: is the money held by a regulated firm, or by an individual in a personal capacity?

Cross-border work adds another layer. Under the SRA Overseas and Cross-border Practice Rules, local law can prevail in a conflict. A trust company or nominee in a Crown Dependency answers, if at all, to that jurisdiction's regulator. Skilled counsel already know how to place substance where the English reserved-activity perimeter does not reach.

The clock and the ceiling

The Legal Ombudsman's Scheme Rules from 1 April 2023 require a complaint to the firm first (eight weeks to respond), then usually within six months of the firm's final response (where the firm gave the required information about that limit) and within one year of the act or of reasonable knowledge of cause for complaint. The Ombudsman may extend in exceptional circumstances. Loss inside a trust is often discovered late. By then the cheaper route may be closed.

Compensation from the Ombudsman is capped at £50,000. Fee refunds, interest and complaint costs sit outside that cap. For a family trust loss measured in hundreds of thousands or millions, £50,000 is not redress. It is a gesture.

The SRA Compensation Fund is a discretionary fund of last resort, not insurance. The usual maximum for a single application is £2 million including costs and interest, unless exceptional public-interest circumstances apply. The rules permit a discretionary £5 million cap on connected claims. The SRA said it had chosen not to apply the cap to Axiom Ince because the scale of potential consumer loss made doing so unacceptable. Whether the rule offers sufficient consistency and predictability remains open to debate. From July 2022 the fund made 171 payments over £100,000, 12 over £500,000 and four over £1 million, with an average payment about £40,000. The Compensation Fund paid grants totalling £46.4 million in 2024/25, compared with £27.9 million in 2023/24. The fund can refuse claims linked to speculative or high-return investment arrangements. That exclusion bites hardest on clients sold "planning" with promised returns.

The enforcement funnel. The funding question.

The SRA's 2024/25 figures show the scale of its work: 15,914 reports of concern, 10,382 reports closed at first assessment without further action, 2,673 referrals for investigation, 1,202 cases involving regulatory action and 105 cases concluded at the Tribunal. These annual measures do not all follow the same cases from receipt to outcome. Strike-offs fell from 71 in 2018/19 to 38 in 2024/25. The Tribunal's calendar-year 2024 report records 43 respondents struck off. SRA years and Tribunal calendar years do not reconcile exactly. At end-September 2026 there were 181,481 practising solicitors. Most never appear in enforcement figures. The question is whether serious harm is caught in time.

The SRA's 2024/25 budget was about £157.3 million, including SQE income and costs that dominate the year-on-year jump. Staff costs for the core regulator were budgeted at about £47.1 million. The Compensation Fund line and client-protection spend sit beside that.

The Legal Ombudsman's own reports describe a different squeeze. In 2024/25 core demand rose 11.8 per cent and in-depth investigations almost a fifth; average waits for allocation to an in-depth investigator were about 11 months (338 days). Budget uplifts have not matched accelerating demand. OLC papers for later years record demand rising again by nearly 30 per cent in places, with recruitment slowed by delayed Ministry of Justice budget approval, and with even proposed double-digit uplifts admitted to be insufficient to cut backlogs as hoped.

Is that deliberate underfunding? This piece does not claim to know ministers' private intent. It notes the public pattern. Complaint volumes and client-money risk rise. Ombudsman waits stick near a year for the hardest cases. Redress caps stay at £50,000 for service complaints. The SRA exercised its discretion not to apply the connected-claims cap to Axiom Ince, potentially allowing greater payments to eligible applicants. The policy question is how that discretion should operate in future. The oversight regulator finds that the front-line regulator did not act adequately, effectively and efficiently before Axiom Ince.

A fair question follows: do the current powers, funding and supervisory arrangements allow these bodies to prevent serious client-money harm and clear complaints quickly enough, or do their resources and remedies lag behind the scale of the risks?

Money keeps flowing through the system while those questions remain unanswered.

Follow the money: who benefits from cheap enforcement

Client-money regulation is paid for twice when it fails: first by the profession's Compensation Fund levy, then by public prosecution costs when a collapse becomes a crime scene. The people who benefit while the gap lasts sit at category level in the private-client and referrals economy.

Solicitors' firms that grow by rapid acquisition, concentrate compliance roles in a few hands, or treat the client account as convenient plumbing for third-party money face, on the published Axiom Ince oversight findings, inspection that arrived too late. Referral networks, introducers and unregulated will-writers and estate planners who sit beside reserved activities collect fees without carrying the same supervisory load. Defence counsel price SRA and SDT risk as a cost of doing business. Whether professional indemnity insurers gain or lose from late enforcement is a fair question, not a finding here: they pay claims when cover responds. The Legal Ombudsman's £50,000 service-complaint ceiling and year-long queues for the hardest cases leave ordinary clients under-compensated relative to trust and estate losses that routinely exceed that figure.

None of that names any individual connected with Axiom Ince. Criminal proceedings there remain pending. It describes incentives visible in the LSB's published findings and the Ombudsman's own scheme rules. The Compensation Fund paid out £46.4 million in grants in the year to 31 October 2025. That money comes from contributions by solicitors and firms, so the cost falls on the profession and, through fees, on its clients. The taxpayer's share is the cost of police, prosecutors and courts. Enforcement that is slow, capped and discretionary is cheap for the offender relative to the harm.

One concluded case: Mark Andrew Fallon, from a £25,000 fine to four years six months

Mark Andrew Fallon (Mr Finch Limited) shows the timeline the fitness test has to beat. In 2019 the Solicitors Disciplinary Tribunal fined Mark Andrew Fallon £25,000 on an agreed outcome, with £15,000 costs and a three-year ban on being sole signatory, after he admitted involvement in a funding arrangement with the hallmarks of a dubious investment scheme (Law Gazette, 15 Aug 2019). That was statutory professional discipline: a fine, practice restrictions and a published finding.

In July 2025, in separate criminal proceedings at Southwark Crown Court, he was sentenced to four years and six months after a jury convicted him of conspiracy to defraud and money laundering (Law Gazette, 25 Jul 2025). The 2019 disciplinary outcome and the 2025 criminal conviction arose from distinct proceedings and must be understood on their respective findings. In July 2025 the SRA said it would consider whether further regulatory action was appropriate. No pending appeal is reported here.

Six years from a tribunal fine to a substantial custodial sentence is not "no enforcement". It is late enforcement. Victims of investment fraud do not get those years back. Public money funded the criminal investigation and trial. The earlier disciplinary sanction and later criminal conviction illustrate different enforcement processes, but their sequence does not establish that a different sanction in 2019 would have prevented the conduct addressed in the criminal proceedings. The system can act. The question this piece asks is whether it acts early enough, and hard enough, to protect clients before the loss crystallises.

Two other concluded Tribunal matters show the same delay pattern with different tools. William Osmond (Osmond Solicitors Limited): February 2025 agreed outcome (case 12647) after the client account was used as a banking facility for Person A (£31.9 million in, £28.3 million out, May 2014 to October 2017) without an underlying legal transaction; Mr Osmond's reported mitigation was that no client or third party suffered loss; 12-month suspension, indefinite practice restrictions, £50,000 costs. Shashi Patel (Patel & Co): struck off after September 2023 intervention (case 12837) for dishonesty on professional indemnity insurance applications and Accounts Rules and money-laundering breaches. Fine, suspend, strike off, often years on, while large losses still land on discretionary funds, capped ombudsman awards, or private litigation.

What should change

1. Raise or replace the Legal Ombudsman's £50,000 compensation cap for trust, estate and client-money service complaints, with MoJ funding timed so in-depth waits fall below a year. The cap is published in the Scheme Rules; the waits are in the Ombudsman's own annual reporting.

2. Publish the Compensation Fund consultation outcome and fix the connected-claims rules in advance of the next large collapse. The SRA chose not to apply the discretionary £5 million connected-claims cap to Axiom Ince. Policy by exception is not, on this piece's view, a substitute for clear rules the profession and the public can price.

3. Resource proactive supervision of rapid firm acquisitions and concentrated compliance roles, so the weaknesses the LSB identified before Axiom Ince are caught at inspection. Opinion: revisit the 2013 refusal to reserve will writing where unregulated advice sits beside reserved activities and clients cannot tell which door leads to a Compensation Fund.

Verdict

On the LSB's Axiom Ince findings, the September 2026 further enforcement action, the Ombudsman's year-long queues, the £50,000 service-complaint ceiling, and a Compensation Fund whose connected-claims policy remains under debate after the largest recent collapse, the argued answer is no. About £60 million of client money was reported missing at Axiom Ince. The Compensation Fund paid grants totalling £46.4 million in 2024/25 (year ended 31 October 2025), up from £27.9 million the year before, driven chiefly by Axiom Ince and Metamorph. That Fund is paid for by the profession through practising contributions, not by general taxation; the public still funds the criminal investigation that follows a collapse. Strike-offs, fines and interventions do happen. Redress caps and year-long queues still leave ordinary clients short.

Enforcement is cheap for the offender and expensive for the taxpayer. That is this piece's argued reading of the pattern when harm is large and early supervision is late, sharpened here to include the profession's levy as well as public prosecution costs. It is not an assessment of criminal responsibility in any pending proceedings, and it does not deny that some solicitors are struck off or convicted.

This field note draws on public legislation, regulatory rules and publications, tribunal decisions and oversight-regulator findings. It is provided for general information and is not legal advice. Criminal proceedings connected with Axiom Ince remain pending; nothing here addresses those allegations.

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