British legal regulator criticised over collapse of law firm Axiom Ince

Axtec

29/10/2024 15:25

By Sam Tobin
       LONDON, Oct 29 (Reuters) - A British legal regulator on
Tuesday was strongly criticised for its handling of the collapse
of law firm Axiom Ince, which has seen millions of pounds go
missing, hundreds of people lose their jobs and triggered an
ongoing criminal investigation.
    The Solicitors Regulation Authority (SRA), which regulates
solicitors in England and Wales, "did not act adequately,
effectively and efficiently" before the collapse of Axiom in
October 2023, the Legal Services Board found.
    The Legal Services Board, which regulates the SRA, said on
Tuesday that it was taking enforcement action against the SRA,
which could entail monitoring or performance targets being set.
    Its chair Alan Kershaw said in a statement that the SRA's
"actions and omissions have in our view adversely impacted on
confidence and trust in the regulation of legal services".
    SRA chief executive Paul Philip said in a statement: "There
is a lot in the report that we don't agree with and we don't
understand the basis for enforcement action."
    Axiom – which has no connection to U.S. legal services
provider Axiom Law – had gone on an acquisition spree, including
buying troubled listed firm Ince Group in 2023 after Ince became
insolvent and collapsed into administration.
    But Axiom itself began to unravel after its former managing
director Pragnesh Modhwadia was suspended for suspected
dishonesty in August 2023, followed by allegations that around
60 million pounds ($77.9 million) of client money was missing.
    Axiom is suing Modhwadia at London's High Court and obtained
a 64.5 million-pound freezing order over his assets last year.
    Britain's Serious Fraud Office is investigating alleged
fraud before the demise of the firm, which the agency says cost
around 1,400 staff their jobs.
    Modhwadia, who is accused by Axiom of using client money to
fund Axiom's acquisitions and also purchase property, has not
been charged with any criminal offence. 
    Modhwadia could not immediately be reached for comment. His
lawyer has previously said Modhwadia is cooperating with
investigations.
    The Legal Services Board on Tuesday commended the "excellent
work by the SRA in uncovering and investigating the alleged
fraud".
    But it was also highly critical of the SRA's failure to
detect the alleged misappropriation of money in October 2022,
when it investigated Axiom for an unrelated matter.
    The SRA later found money may have been misappropriated from
as early as 2019, meaning its 2022 probe was "a missed
opportunity to identify the alleged wrongdoing", the Legal
Services Board found.
    The report also said the SRA failed to carry out a proper
risk assessment when Axiom acquired Ince, a much larger firm,
and that the SRA's policy to not assess firm acquisitions "does
not properly take account of the risks to clients of their files
and money being transferred between firms".
    The Legal Services Board's report said the SRA had since
changed its policy, so investigators must now seek confirmation
from law firms' banks about balances in client accounts.
    The SRA's Philip said: "With hindsight, the report has
highlighted things that we could – rather than just should –
have done. 
    "But in our view, it is unrealistic to expect regulation to
prevent all harms."