The SRA Failed PM Law's Clients. Time to stand up and complain

With up to £39.5 million in client money missing and the Compensation Fund taking yet another catastrophic hit, it is time to ask the question that nobody in regulation wants answered: does the SRA bear legal liability for the consequences of its supervisory failures and should the law-abiding profession continue to foot the bill?

 

The numbers around the collapse of PM Law are extraordinary in their scale and, by now, grimly familiar in their pattern. Up to £39.5 million of client money is missing from a Sheffield-based group of 11 companies, 25 offices, and more than 30 trading names. The Solicitors Regulation Authority intervened two days after the group's sudden closure in February 2026. As of the end of last week, the SRA has paid out £9.3 million in 92 claims, with hundreds of further claims anticipated. The burden on the Compensation Fund is predicted to reach £21.5 million. Extra staff have been seconded in. Intervention agents are working evenings and weekends.

This is the third major collapse of its kind in short succession. Axiom Ince saw approximately £64 million in client money go missing. SSB Group prompted a formal censure of the SRA by the Legal Services Board for supervisory failures. Now PM Law. The profession is entitled to ask not merely what happened, but why the SRA's supervision continues to fail to prevent it and whether that failure creates legal consequences for the regulator itself.

 

Three major collapses in three years. Axiom Ince. SSB Group. Now PM Law. Each time, the law-abiding profession pays. Each time, the regulator explains. None of that is good enough.

 

The Scale of the Problem

PM Law's collapse is the second largest loss of client money in the history of the Compensation Fund, exceeded only by Axiom Ince. That is not a coincidence to be filed under bad luck. It is a pattern that demands structural explanation.

Collapse	Approximate Client Funds Missing	SRA Response	Regulatory Consequence
Axiom Ince	£64 million	Intervention	Ongoing investigation
SSB Group	Significant losses	Intervention	LSB formally censured the SRA for supervisory failures
PM Law	Up to £39.5 million	Intervention	Compensation Fund burden predicted at £21.5 million; hundreds of claims pending

 

In each case, the firm in question operated a complex multi-entity structure. In each case, the scale of the problem was not discovered until after catastrophic harm had been done to clients. In each case, the Compensation Fund funded by the practising solicitors and firms that played by the rules was left to absorb the cost.

 

What the SRA Could Have Done: The Supervisory Failures

The SRA has powers that, properly deployed, should make a fraud of this scale very difficult to sustain undetected over any significant period. The question is whether those powers were deployed with anything approaching the rigour that the size and structural complexity of PM Law warranted.

The Solicitors Accounts Rules require that every firm holding or receiving client money obtains an annual accountant's report. Where a firm's accounts are in order, that report is not required to be delivered to the SRA. Where they are not, the reporting accountant is required to make a qualified report. A firm operating across 11 companies and 25 offices, with more than 30 trading names and £39.5 million of client money missing, was not running clean books. The question of whether the accountant's reports across that group were raising concerns and if so, what the SRA did about them is one that the Legal Services Board has now formally demanded the SRA answer publicly.

Structural complexity is itself a risk indicator. PM Law's architecture: 11 companies, 25 offices, 30-plus trading names  is precisely the kind of structure that ought to attract proactive regulatory scrutiny. A firm operating through a proliferation of connected entities creates exactly the opacity that allows client funds to be moved, obscured, and misappropriated. The SRA's published risk framework explicitly acknowledges that complexity and multi-entity structures raise the level of regulatory risk. Whether that acknowledged risk translated into enhanced monitoring of PM Law is a question the SRA must now answer.

The lessons of Axiom Ince were not applied. After Axiom Ince, the SRA announced a programme of enhanced oversight for firms with similar structural characteristics. PM Law's group structure had all the hallmarks that should have placed it within that programme. If it was subject to enhanced oversight, the oversight failed catastrophically. If it was not, the question is why not.

Early intervention powers were not used sufficiently early. The SRA has broad powers of intervention under Schedule 1 to the Solicitors Act 1974. Those powers can be exercised not only upon a finding of dishonesty or insolvency, but where it appears that a sole practitioner or recognised body has abandoned their practice, that a solicitor has failed to comply with the Solicitors Accounts Rules, or where the SRA considers it necessary for the protection of the interests of clients. The breadth of those powers is significant. That a fraud on this scale ran to its conclusion before those powers were deployed suggests that the triggers for intervention were not being monitored with adequate granularity.

 

What the LSB Has Already Found The Legal Services Board formally censured the SRA over its supervision of SSB Group. That censure is a finding by the oversight regulator that the SRA's supervision was inadequate. The LSB has now demanded that the SRA publicly discloses what it knew, and when it knew it, in the build-up to PM Law's collapse. The SRA itself acknowledged in March 2026, through its incoming Chief Executive Sarah Rapson, that the regulator is 'pretty enforcement-led' and reaches for investigation 'really quite quickly', while simultaneously failing to use preventative tools. The pattern across Axiom Ince, SSB Group, and PM Law is not a series of isolated failures. It is evidence of a systemic supervisory gap.

 

The Legal Case Against the SRA: Is There One?

The SRA enjoys significant statutory protection from civil liability. Paragraph 33 of Schedule 1 to the Solicitors Act 1974 provides that no action shall lie against the Society or any of its officers or servants in respect of any act or omission in the course of exercising or purporting to exercise the powers conferred by that Schedule. The Legal Services Act 2007 provides comparable protections in respect of the SRA's functions under that Act.

That immunity is real and substantial. But it is not absolute, and the legal landscape for regulatory accountability is more nuanced than a bare reading of the statutory text suggests.

Misfeasance in public office. The tort of misfeasance in public office, as restated by the House of Lords in Three Rivers District Council v Bank of England [2003] UKHL 16, requires proof that the public officer either acted with knowledge that there was no power to act in the way complained of, or acted in reckless indifference to the legality of the act. Where a regulator is under a duty to supervise, and exercises that supervisory function in a manner that is not merely negligent but reckless as to the consequences for those affected including the profession that funds the Compensation Fund the case for misfeasance cannot be dismissed as fanciful. The evidentiary threshold is demanding. But the LSB's formal censure of the SRA following SSB Group, and its formal demand that the SRA disclose what it knew before PM Law collapsed, provides a legitimate foundation for investigating whether that threshold could be met.

Article 1, Protocol 1 of the Human Rights Act 1998. Article 1 of Protocol 1 to the European Convention on Human Rights protects the peaceful enjoyment of possessions. The Compensation Fund levy is a mandatory financial imposition on every firm that holds a practising certificate. It is not voluntary. When that levy increases as it inevitably will following a £39.5 million fraud that the regulator failed to prevent it constitutes an interference with the right to peaceful enjoyment of possessions. That interference must be justified as proportionate and in the public interest. Where the interference arises directly from the regulatory body's own supervisory failures, the proportionality argument is considerably weakened. No court has yet applied this analysis to the Compensation Fund in the terms set out here. That does not mean the argument is wrong. It means it has not yet been tested.

Judicial review. The SRA is a public body exercising statutory functions. Its decisions  including the decision as to the intensity of supervision applied to any given firm are susceptible to judicial review on the standard grounds of illegality, irrationality, and procedural unfairness. Where the SRA has published a risk framework that identifies multi-entity structures as high risk, and has failed to apply that framework with any apparent rigour to PM Law, a challenge on irrationality grounds is not obviously unsustainable. The remedy in judicial review is typically declaratory or quashing in nature rather than damages, but a successful challenge would create both reputational and structural consequences for the regulator.

 

The SRA's statutory immunity is real. But it is not the same as saying the SRA bears no accountability for the consequences of supervisory failure. There is a difference between legal immunity and moral and regulatory accountability, and the Legal Services Board has already made clear it does not accept the former as a substitute for the latter.

 

The Compensation Fund: A Structural Injustice

The Compensation Fund exists to protect clients. Nobody disputes that objective or its importance. What is increasingly difficult to defend is the allocation of its costs.

The fund is financed by a mandatory levy on solicitors and firms. The levy is set by the SRA and can be varied at the SRA's discretion. The practising firms that pay it are overwhelmingly firms that have never had a complaint upheld against them, have never been referred to the Solicitors Disciplinary Tribunal, and have never been the subject of a regulatory investigation. They are the firms that run clean client accounts, file accurate accountants' reports, and comply with every obligation the Solicitors Accounts Rules impose.

When a firm commits a fraud of the scale of PM Law, the financial consequence falls on that population of law-abiding practitioners. The fraudsters, by definition, are not paying. Their firms are closed, their practising certificates cancelled, and their assets beyond reach. The bill is paid by those who bear no responsibility for the fraud and who were, in many cases, competing for the same work as the firm whose misconduct they are now underwriting.

This would be a tolerable arrangement if the regulator whose supervision was supposed to prevent the fraud was itself held to any meaningful account for that failure. The current framework does not achieve that. The SRA explains, reviews, and promises reform. The levy increases. The profession pays. The cycle repeats.

The Law Society's Chief Executive Ian Jeffery has stated the obvious: that a case of this scale, following so closely on Axiom Ince and SSB Group, reinforces the need for the SRA to focus on its core regulatory role. That is correct. But it falls well short of what is required. Focusing on the core regulatory role is not the same as being held financially or legally accountable for the consequences of failing to discharge it.

 

What a Genuinely Accountable Regulator Would Do Differently

The supervisory failures that appear to have contributed to PM Law's collapse are not unique to that firm. They reflect systemic weaknesses in the SRA's approach to proactive regulation that have been identified repeatedly and addressed insufficiently.

Mandatory delivery of accountants' reports. The current framework requires delivery to the SRA only where the report is qualified. A qualified report is delivered after the fact, by which point the damage may already be done. A model that requires delivery of all accountants' reports from firms above a defined threshold — measured by client money held, number of offices, or structural complexity — would allow the SRA to identify patterns of concern before they escalate to fraud.

Risk-triggered compliance audits. The SRA has the power to conduct inspections and require the production of information. That power should be deployed as a matter of routine for firms that meet defined risk criteria: multi-entity structures, rapid growth, high volumes of client money, or recent changes in beneficial ownership or management. The Australian model of scheduled compliance audits, without the need for a prior complaint or trigger event, demonstrates that this is operationally feasible and practically effective.

Real-time client account monitoring. Technology now permits transaction monitoring at a level of granularity that was not achievable a decade ago. The anti-money laundering framework already requires conveyancers to maintain ongoing transaction monitoring systems. There is no principled reason why the SRA could not require firms above a defined threshold to provide access to real-time client account data, allowing anomalies to be flagged automatically rather than discovered only when an accountant reviews the previous year's ledgers.

A levy contribution from the SRA itself. This is the most uncomfortable proposal and, for that reason, the one most worth making. If the Compensation Fund is to retain any genuine claim to fairness, the regulator whose supervisory failures contribute to claims on that fund should bear a defined share of the cost. A mechanism by which a proportion of Compensation Fund payouts attributable to supervisory failures is charged to the SRA's own operating budget ultimately met from the SRA's resources rather than solely from the practising levy would create a direct financial incentive for proactive supervision that does not currently exist.

 

What the Profession Should Be Demanding Now The Legal Services Board's investigation into what the SRA knew about PM Law before its collapse should be completed promptly, with full disclosure of findings. The SRA should publish, as a matter of urgency, the criteria it applies when determining which firms are subject to enhanced oversight, and confirm whether PM Law fell within those criteria. Parliament should give the Legal Services Board explicit powers to direct a financial contribution from the SRA's operating budget towards Compensation Fund payouts that arise from identified supervisory failures. The mandatory delivery threshold for accountants' reports should be reviewed. Firms operating above a defined threshold of client money, offices, or structural complexity should be required to deliver reports annually regardless of qualification status. The SRA's risk-based supervision framework should be subject to independent audit and the results published, including the identification of firms reviewed against that framework and the outcomes of those reviews.

 

The Bigger Question

The profession is not asking the SRA to be infallible. Fraud is, by its nature, designed to deceive, and no supervisory framework will eliminate it entirely. That is understood and accepted.

What the profession is asking  and is entitled to ask is whether the SRA deployed the tools available to it with the rigour that the risk profile of PM Law demanded. Whether, after Axiom Ince, it genuinely changed its approach to firms of similar structural complexity. Whether, after the LSB's censure following SSB Group, it accelerated those changes. Whether, when the Legal Services Board now demands to know what the SRA knew and when, the answers will reveal a regulator that was watching closely and was nonetheless deceived, or one that was not watching closely enough.

Those are not rhetorical questions. They have answers, and the profession deserves to hear them.

In the meantime, intervention agents are working evenings and weekends. Extra staff have been seconded in. Former clients are waiting months for their files and the Compensation Fund paid for by solicitors who committed no fraud is absorbing a burden that no responsible regulatory framework should be generating at this frequency or at this scale.

 

The question is not whether fraud can be prevented entirely. It cannot. The question is whether the SRA used the tools it had. If it did not, the profession is entitled to more than an explanation. It is entitled to accountability.

 

 

 

What You Can Do: Lodge a Formal Complaint with the Legal Services Board

Commentary is not enough. If the profession is serious about holding the SRA accountable, the mechanism for doing so is already available. The Legal Services Board is the oversight regulator of the SRA under the Legal Services Act 2007. Under section 31 of that Act, the LSB has the power to investigate whether an approved regulator has failed to comply with its regulatory obligations, and to take formal action including the issue of directions, the imposition of financial penalties, and, in extremis, the transfer of regulatory functions to another body.

The LSB has already used those powers in respect of the SRA once, issuing a formal censure following its review of the SSB Group collapse. It has now formally demanded that the SRA disclose what it knew about PM Law before the group closed. That process is under way. But the LSB’s ability to take further action is strengthened when it receives direct representations from regulated professionals and from firms that have suffered financial harm as a result of the failures in question.

Every firm that has paid, or will pay, an increased Compensation Fund levy as a direct consequence of the SRA’s failure to supervise PM Law adequately has a legitimate basis on which to make a representation to the LSB. Every firm that lost time, money, or client relationships as a consequence of the collapse has an interest in ensuring the LSB has the fullest possible picture of the regulatory failure that preceded it.

The process is straightforward. The LSB accepts written representations directly. A complaint does not need to take the form of a formal legal submission. It should set out clearly: the concern being raised, the regulatory obligation the SRA is alleged to have failed to discharge, and the harm or risk of harm that has resulted. A template letter suitable for use by any practising firm is set out below.

 

The LSB has already censured the SRA once. It has already demanded answers about PM Law. What it needs now is to hear from the profession directly. One letter may be ignored. Hundreds cannot.

 

 

TEMPLATE LETTER — FOR ADAPTATION AND USE BY ANY PRACTISING FIRM Complaint to the Legal Services Board: Failure of SRA Supervisory Oversight  PM Law Group   [Firm Name] [Address Line 1] [Town / City] [Postcode] [Email address] [Date] The Chief Executive Legal Services Board 18 Martin Lane London  EC4R 0AU By email: info@legalservicesboard.org.uk Dear Chief Executive, Formal Complaint: Failure by the Solicitors Regulation Authority to Discharge its Supervisory Obligations — PM Law Group Collapse I write on behalf of [Firm Name], a firm regulated by the Solicitors Regulation Authority, to make a formal complaint to the Legal Services Board concerning the SRA’s supervisory oversight of the PM Law group prior to its collapse in February 2026. Our firm is required to pay the annual practising levy and the Compensation Fund contribution that funds the SRA’s client protection obligations. The SRA has confirmed that the Compensation Fund burden arising from the PM Law collapse is predicted to reach £21.5 million, with up to £39.5 million of client money believed to be missing from a group operating across 11 companies, 25 offices, and more than 30 trading names. This is the second largest single loss of client money in the history of the Compensation Fund, following Axiom Ince. The nature of our complaint is as follows. Failure to apply adequate risk-based supervision. PM Law’s group structure — comprising multiple connected entities, a large number of offices, and a proliferation of trading names — is precisely the profile that the SRA’s own published risk framework identifies as warranting enhanced supervisory attention. It is our concern that this profile did not translate into monitoring commensurate with the risk it represented. Failure to apply lessons from prior collapses. Following the Axiom Ince collapse, the SRA committed to enhanced oversight of firms with comparable structural characteristics. PM Law exhibited many of those characteristics. Whether PM Law was subject to that enhanced oversight, and if so why it failed to detect the alleged fraud at an earlier stage, are questions which we respectfully submit the LSB should formally investigate. The pattern of repeated failure and its cost to the regulated community. The collapses of Axiom Ince, SSB Group, and PM Law have occurred in rapid succession, each resulting in substantial calls on the Compensation Fund paid for by firms such as ours. The LSB has already formally censured the SRA in respect of its supervision of SSB Group. We submit that the PM Law collapse provides further evidence of systemic supervisory inadequacy that warrants formal investigation under section 31 of the Legal Services Act 2007. Financial harm to the regulated community. The anticipated increase in the Compensation Fund levy that will follow PM Law’s collapse represents a direct financial harm to firms that have at no point failed in their own regulatory obligations. We submit that the allocation of that cost to the law-abiding profession, without any corresponding accountability on the part of the regulator whose supervisory failures contributed to it, is structurally unjust and inconsistent with the regulatory objectives set out in the Legal Services Act 2007. We note that the LSB has already formally requested that the SRA disclose what it knew about PM Law’s financial position and risk profile in the period prior to the group’s closure. We support that demand and ask that the LSB’s investigation be pursued with urgency and that its findings be published in full. We request that the Legal Services Board formally investigates whether the SRA has failed to perform its regulatory functions adequately in respect of PM Law, and that it considers whether the exercise of its powers under section 31 of the Legal Services Act 2007 is appropriate in the circumstances. We would welcome the opportunity to provide further information should that assist the LSB’s consideration. We are content for this complaint to be treated as a formal representation for the purposes of the LSB’s oversight functions. Yours faithfully,   [Signatory name and position] [Firm name] [SRA firm number]   Adapt this letter to reflect your firm’s specific circumstances. Where your firm has suffered identifiable loss or disruption arising from the PM Law collapse — including costs associated with file migration, client communication, or delays to transactions — those particulars should be included. Confirm the LSB’s current contact details at www.legalservicesboard.org.uk before sending.

 

 

 

Key Facts: PM Law Collapse Group structure: 11 companies, 25 offices, more than 30 trading names Location: Sheffield-based Client money missing: up to £39.5 million (second largest in Compensation Fund history after Axiom Ince) SRA intervention: two days after closure, February 2026 Claims paid to date: £9.3 million across 92 claims Predicted Compensation Fund burden: £21.5 million 25,000 emails or letters sent to clients with live matters 9,300 live files returned to clients Status: Treated by the SRA as a suspected fraud; investigation ongoing

 

This article is intended as general guidance and commentary and does not constitute legal advice. The views expressed are the author's own. References to the Solicitors Act 1974, Legal Services Act 2007, Human Rights Act 1998, and Three Rivers District Council v Bank of England [2003] UKHL 16 are provided for analytical context. For advice on regulatory compliance or professional indemnity matters, please seek specific legal advice.