The SRA has reportedly been ordered to explain how up to £40m of client money went missing from the PM Law group.
The order, reported on 7 May, lands in a profession already questioning whether the regulator spots danger early enough. Client money is the most sensitive asset a solicitor can hold. It may belong to homebuyers, estates, injured claimants, businesses or ordinary people with one major transaction in their lives. If it disappears, the damage spreads far beyond a failed firm.
The PM Law collapse has become a test of supervision rather than only misconduct. Regulators are not expected to prevent every fraud or failure but they are expected to respond to warning signs, use their powers intelligently and protect the public before the hole becomes vast and when tens of millions may be missing, the obvious question is whether earlier intervention could have reduced the loss.
The SRA’s public position has often relied on broad assurances about risk-based regulation. Risk-based regulation means the watchdog targets attention where harm is most likely or most serious.
For law firms, the case is another reminder that client account control is not back-office housekeeping. Reconciliations, residual balances, unusual transfers, reporting lines and accountant’s reports all exist because trust alone is not a control. The public does not care how charming the managing partner was if the money has gone!
For clients, the compensation fund may offer some protection although claims take time and limits and eligibility can get in the way of putting things fully right.
The SRA is in a difficult position. If it intervenes aggressively, firms complain about overreach and reputational destruction. If it waits, clients in any similar situations of risk may suffer. That tension is real, but it does not answer whether the regulator acted properly in the case of PM Law.
The explanation now sought may show a defensible sequence of decisions but equally, it may also show missed chances.
The order also comes at a difficult moment for the regulator’s credibility. Recent firm failures have put client protection under political, professional and public scrutiny. The SRA does not need to prove perfection but it does need to prove its risk system noticed what mattered when it mattered.
The SRA now has to show its supervision was more than a file note arriving late.
Author: TOF
Leave a Reply