LSB finds systemic failures by SRA in its handling of concerns over SSB Group Limited.
The Legal Services Board has formally censured the Solicitors Regulation Authority over failures in its regulation of SSB Group Limited.
The censure was issued under section 35 of the Legal Services Act 2007, following the publication of an independent review into the SRA’s handling of concerns about the firm.
The review, conducted by Carson McDowell LLP, was commissioned by the Legal Services Board under section 28 of the Act. It examined how effectively the SRA had discharged the regulatory functions delegated to it by the Law Society of England and Wales.
Under the legal framework governing solicitors in England and Wales, the Law Society acts as the approved regulator but has delegated its regulatory functions to the SRA through governance rules established under section 30 of the Act. Enforcement action taken by the Legal Services Board is therefore directed at the approved regulator, even where regulatory functions are delegated.
According to the review, the SRA failed over an extended period to respond effectively to serious and escalating concerns about SSB’s conduct and business model. The Legal Services Board concluded that these shortcomings amounted to significant acts and omissions in the exercise of the SRA’s regulatory responsibilities.
The findings identified several areas in which the regulator’s actions were considered inadequate. These included a failure to act promptly and effectively in response to concerns, allowing consumer harm to continue and increase over time.
The review also found that the SRA did not recognise or respond adequately to patterns of risk emerging within the firm. The report attributed this in part to siloed working practices and insufficient information sharing across teams within the organisation.
Further shortcomings were identified in the application of assessment and triage procedures. The review found that processes were applied inconsistently and incorrectly, which led to missed opportunities to detect significant regulatory risks.
Financial oversight was another area highlighted in the findings. The report concluded that scrutiny of financial risks was insufficient, with the SRA placing excessive reliance on assurances provided by the firm and failing to adequately verify conflicting financial information.
The review also identified limited use of statutory investigatory powers. According to the findings, the regulator relied heavily on information voluntarily supplied by SSB and did not sufficiently gather evidence from independent sources.
Concerns were also raised about the regulator’s response to vulnerable consumers. The report stated that the SRA failed to identify and respond appropriately to the needs of individuals who were at heightened risk, despite indicators that many consumers involved in the firm’s cases were vulnerable.
In addition, the review pointed to weaknesses in governance, oversight and decision-making within the regulator. It cited poor documentation of decisions, inadequate escalation procedures and instances in which concerns raised by staff were not acted upon.
The Legal Services Board concluded that these failures adversely affected several regulatory objectives established under section 1 of the Legal Services Act 2007. These objectives include protecting and promoting the public interest, safeguarding the interests of consumers and maintaining adherence to professional principles within the legal profession.
According to the oversight regulator, the failures undermined public confidence in the regulatory framework and allowed consumer detriment to develop on a substantial scale.
The Legal Services Board acknowledged that the SRA has accepted the findings of the review and has committed to implementing its recommendations in full. The board also recognised the regulator’s cooperation during the review process, including facilitating access to relevant information and acknowledging the failings publicly.
Despite this cooperation, the board determined that the seriousness of the failings and the extent of harm experienced by consumers required a formal public censure.
Alongside the censure, the Legal Services Board is pursuing enforcement action under section 31 of the Legal Services Act 2007. This action is intended to direct the SRA to establish performance targets aimed at addressing the systemic issues identified in the review and preventing similar failures in the future.
The board stated that it will monitor the steps taken by the SRA to implement the review’s recommendations and comply with any performance targets that are set.
It added that demonstrable and sustainable improvements are expected in the regulator’s systems, processes, regulatory capability and organisational culture. Further action may be taken if necessary to ensure the protection of the public and the effective operation of the regulatory framework.