The regulatory body for the legal sector has said today it will probably need to increase the annual levy solicitors pay to the authority in order to cover the collapse of law firm Axiom Ince.
The Solicitors Regulation Authority (SRA) has a Compensation Fund, which provides compensation to people who are owed money by a regulated law firm in the event of a collapse, and it is funded by an annual levy paid by all solicitors in England and Wales.
The regulator said today that it is still too early to say how many claims there will be resulting from the collapse of Axiom Ince, but said a fee hike was almost certainly on the way.
“Although we have not made any decision about what this means for a collection of funds from the profession, it looks likely that, after years of keeping them stable, we will need to increase levies,” the SRA said in a statement today.
The news is likely to anger many solicitors, who have previously said they would disapprove if the regulator decided to hike its fees to cover the fallout from the case.
The SRA made the announcement as part of a detailed statement released today after the Serious Fraud Office (SFO) confirmed it was investigating Axiom Ince over allegations of fraud. The SFO also explained that it has arrested seven individuals and carried out multiple raids today.
The Ince Group went into administration in April and was bought by Axiom DWFM in early May.
The SRA outlined in its statement that the suspected dishonesty and missing client money was uncovered in late July by its forensic investigation team.
It admitted that it was “unusual” that Axiom was taking over a larger firm, Ince, which specialised in shipping law, an area that Axiom was not experienced in.
It said it visited the firm following the takeover to check all was in order. After inspecting the firm’s accounts it uncovered what it believed to be “falsified bank statements and letters”.
The SRA said it first intervened on grounds of suspected dishonesty and breaches of its rules in August, and did so by suspended the legal licenses of Pragnesh Modhwadia, Axiom Ince’s founding partner, and two other directors at the firm.
The SRA said that Modhwadia was “suspected of misusing significant amounts of client money, resulting in an account shortage estimated to be more than £60m.”
The regulatory body said this “missing money meant that it was not going to be possible for the whole firm to carry on operating in the long term.”
Axiom Ince went into administration in October, and the SRA later stepped in to shut all 14 of its branches in England.
“This case is the biggest intervention ever in England and Wales,” during the regulator’s 16-year history, the SRA said.
A legal representative for Modhwadia and Leonard Curtis, Axiom Ince’s administrators, were contacted for comment.