Legal Services Board report into the regulation of SSB Group Limited

Back in October 2024, the Legal Services Board (LSB) published the results of the independent review, conducted by Carson McDowell LLP as commissioned by LSB, into the regulatory events leading up to the Solicitors Regulation Authority's (SRA) intervention into Axiom Ince Ltd. Fast forward twelve months and the  LSB has now published the results of the independent review into the SRA’s regulation of the now collapsed SSB Group.

This review has also been conducted by Carson McDowell LLP, but, whereas the SRA were somewhat resistant to admitting the failures levied in the Axiom Ince report, this time the findings and recommendations have been accepted in full, and the SRA has apologised for the failings.

SSB was a law firm specializing in high-volume litigation, including cavity wall insulation (CWI) claims, often acquired through claims management companies (CMCs), and typically on a ‘no-win no-fee basis.’ Many of its claims failed, leaving clients with unexpected costs and unresolved issues. SSB entered administration in January 2024, owing over £200 million, mainly on litigation funding loans.

The scope of the review was to focus on the effectiveness with which the SRA discharged its regulatory functions in respect of SSB, in accordance with its duty under Section 28 of the Legal Services Act 2007.

The review assessed how reports made to the SRA, in relation to SSB from January 2019 to March 2024, were handled and responded to. These reports related to SSB’s handling of CWI claims and SSB’s financial management.

• SRA ineffectiveness: the SRA failed to act effectively and efficiently in response to over 100 reports about SSB, which included allegations of poor client communication, inadequate due diligence, failure to properly advise, financial mismanagement, and regulatory breaches
• Missed opportunities: despite early awareness of risks in the CWI claims market and SSB's financial instability, the SRA did not take timely regulatory action to protect consumers and the public
• Inadequate investigations: the SRA failed to use its investigatory powers effectively and did not adequately assess the vulnerability of clients or the harm caused
• Lack of a ‘joined up’ approach: the SRA lacked a cohesive approach to assessing reports, resulting in inconsistent decision-making and missed patterns of concerning behaviour by SSB
• Failures in firm closures: SSB inherited many CWI claims from a failed firm; following its collapse, SSB claims were then passed onto another firm, which also subsequently failed. The SRA oversaw the transfer of files without addressing systemic issues, leading to further harm to clients.

The report makes various recommendations, including:

• Improved report assessment: enhance training, procedures, and knowledge management systems to ensure effective assessment of reports, with better access to firm-specific and market-wide information
• User-friendly reporting process: make the process for submitting reports more accessible, especially for vulnerable individuals, and improve communication with complainants
• Stronger investigations: use investigatory powers more effectively, follow up on all material issues, and improve financial assessments of firms with external expertise
• Better handling of firm closures: mitigate risks associated with transferring client files between firms during closures to prevent repeated harm to clients

As highlighted above, a fundamental issue was the poor assessment by the SRA of the financial stability of SSB after concerns had been reported. In brief:

• April 2023: a forensic investigation (FI) was carried out following a report from a barrister alleging over £260,000 of unpaid fees for work across nearly 300 CWI claims. A key aim was to assess the financial stability of the firm. The FI ascertained that SSB owed more than £128 million to litigation funders. SSB admitted there were issues with its CWI cases generally, but disputed the amount owed to the barrister. SSB’s view was c£60,000 was due and made payment for that amount. The SRA closed the investigation. The barrister disputed that SSB had paid the full amount truly owed. The SRA concluded there were no issues of concern and determined that SSB had no financial stability issues.
• September 2023: a whistleblower reported that SSB was financially unstable, and large dividends had been paid to directors based on anticipated profits from claims which SSB knew would not be successful. Also, adverse costs orders had been made against clients due to unsuccessful CWI claims. Those clients were not being covered by ATE insurance.
• October 2023: in response, the SRA commenced a second FI into SSB. SSB conceded that it was in severe financial difficulties. It cited the failure of the CWI cases, and SSB’s significant debts to funders, as key causes of its financial difficulties.

The failure by the SRA to recognise and understand the financial problems of the firm at an earlier date is a crucial theme in the report, with the following recommendation at paragraph 219: ‘The SRA must improve its ability to assess the financial stability of firms. This is vitally important because, when a firm is financially unstable, this can be a catalyst for poor practise by that firm. In addition, financial instability can also be a strong indicator of other issues within a firm. We recommend that the SRA improves its financial assessment of firms by providing additional training to its forensic investigation staff, as well as by obtaining appropriate external financial and/or accounting advice and support when required.’

Monitoring financial stability (and reporting problems to the SRA) is one of the regulatory obligations imposed on firms and their COLPs and COFAs. With the SRA’s current consultation around these roles and potential ‘expansion’ of these obligations, the importance of this cannot be overstated. 

Regulatory requirements notwithstanding, the financial stability and ongoing success of any legal practice is only possible with high quality, timely financial information that is well understood and acted upon in the context of the firm, the sector, and the wider economy. However, there are still many situations where a firm has not spotted the signs of ‘trouble brewing’ early enough to enable it to take advice and action to avoid more serious financial difficulties – which even when survived can prove very costly.

The next edition of the newsletter will include a more detailed discussion of key financial stability measures.

• Read the full report

^{*the views expressed are the author's and not ICAEW's}