Sophisticated suspected fraud leads to £39.5 million losses at PM Law, with SRA taking action and compensating clients
The Solicitors Regulation Authority (SRA) has confirmed that up to £39.5m in client funds was improperly removed and misused following the collapse of PM Law. The SRA is currently investigating what it describes as a “sophisticated suspected fraud,” which has raised serious concerns within the legal profession.
The SRA described its intervention into PM Law as one of the largest and most complex it has ever undertaken, involving 11 companies, 25 offices, and more than 30 trading names spread across Yorkshire, Cumbria, Berkshire, Derbyshire, and London.
As of the end of last week, the SRA has paid £9.31 million in 92 claims from former clients of PM Law and its associated firms. Hundreds of additional claims are expected, with the compensation fund’s total burden predicted to reach around £21.5 million.
The SRA has also paid out £6.8m from money held in PM Law’s client accounts at the time it intervened.
In total, 25,000 emails and letters have been sent to individuals identified from seized files with ongoing matters, and 17,000 client enquiries have been addressed. The SRA has returned 9,300 live files to clients, with a further 20,000 files transferred in bulk to insurer clients.
The SRA has moved extra staff into the compensation fund team to help manage the growing volume of claims, with intervention agents working evenings and weekends to address client enquiries.
The Solicitors Regulation Authority (SRA) has introduced a prioritisation schedule for processing applications to the Compensation Fund, applying to claims linked to both PM Law and other law firms. Claims will be dealt with based on the risk of harm to applicants, but this will not affect the likelihood of individual claims being successful.
The SRA Compensation Fund is a crucial safeguard for the public, ensuring that those who lose money due to the closure of a law firm are protected. It helps maintain confidence in legal services by offering financial security in such circumstances.
Paul Hastings, SRA director of client protection said: ‘We are continuing to do all we can to support former clients of PM Law, including by reuniting them with their money or files. Some of those affected were in the process of buying or selling a home, facing the risk of collapsed moves, or losing their deposits. Others were dealing with delayed probate matters, often while managing bereavement and outstanding estate administration.
‘Many of the former clients faced significant upheaval at a stressful time, so we have been determined to provide as much support as possible.’
Responding to the SRA’s statement, Law Society of England and Wales chief executive officer Ian Jeffery said: “The latest update by the SRA reaffirms the serious situation facing clients. The SRA has moved quickly in its investigation and has already paid out 92 claims to former clients. We continue to be encouraged that the SRA has acted with openness and transparency.
“However, a case this large coming so soon after Axiom Ince and SSB Group, reinforces the need for the SRA to focus on their core regulatory role and deliver the changes needed to reduce the risk of future large-scale collapses and re-build consumer confidence. The Compensation Fund provides crucial protection and reassurance to consumers. It is unfortunate the SRA has had to use the Fund in this case and we hope any increase to the Fund will be kept to a minimum.
“We are continuing to monitor developments, especially on the likely financial impact on the Compensation Fund and are in regular contact with the SRA.”
The Legal Services Board (LSB) has acknowledged the ongoing efforts by the Solicitors Regulation Authority (SRA) to support former clients of PM Law following the firm’s collapse. The LSB expressed concern about the scale of the financial shortfall and emphasised the importance of the SRA’s swift intervention.
In a statement, the LSB highlighted the need for continued regulatory oversight and transparency as investigations into the suspected fraud continue. It stressed that the situation underscores the critical role regulators play in protecting both the public and the integrity of the legal profession.
The LSB also commended the SRA for its work in prioritising claims through the Compensation Fund, ensuring that those most at risk receive timely support. This effort is seen as vital in maintaining public confidence in the legal services sector.
The LSB stated that it would continue to monitor the situation closely and work with the SRA to ensure that effective safeguards are in place to prevent similar incidents in the future.
The collapse of PM Law has raised questions about financial oversight in the legal profession, with the LSB urging that the incident serves as a reminder of the need for rigorous regulatory processes. The regulator has committed to working alongside the SRA to ensure that lessons are learned and that protections for clients are strengthened going forward.