'One of the most complex ever': SRA confirms £40m fraud probe at collapsed firm PM Law

The SRA has confirmed it is investigating a suspected £39.5 million fraud at collapsed law firm PM Law, in what it has described as one of the largest and most complex interventions in its history.

The Sheffield-based group, which employed more than 600 staff and operated a network of high street brands, shut down abruptly in February, triggering a scramble to recover client money and files.

Sophisticated and complex

In an update on Tuesday, the regulator said its ongoing probe involves a “sophisticated suspected fraud” centred on the improper removal and misuse of client funds.

PM Law’s scale has added to the challenge. The group comprised 11 companies, 25 offices and more than 30 trading names across the UK, leaving thousands of clients affected when it collapsed without warning.

The SRA has been working through the fallout since, handling 17,000 enquiries and contacting clients identified from seized files.

Mounting compensation bill

The financial impact is still unfolding. The SRA said it has so far paid out £9.31 million from its compensation fund, alongside a further £6.8 million distributed from money held by the firm at the point of intervention.

In total, potential claims linked to the collapse have reached an estimated £21.5 million to date, a figure it said could rise further as more applications are submitted.

The compensation fund, financed by annual contributions from solicitors and law firms, is designed as a backstop for clients who lose money when regulated firms fail.

Paul Hastings, the SRA’s director of client protection, said many affected clients were caught in particularly stressful situations, including stalled property transactions and delayed probate matters.

The regulator has redeployed staff to deal with the volume of claims and introduced a prioritisation system based on the risk of harm faced by applicants.

Pressure builds

The Law Society said the situation underlined wider concerns about regulatory oversight following a string of high-profile firm failures. Chief executive Ian Jeffery said the case “reaffirms the serious situation facing clients” and called on the SRA to focus on reforms to “reduce the risk of future large-scale collapses and re-build consumer confidence”.

Jeffery added that while the compensation fund provides “crucial protection”, the profession would be watching closely for any financial impact on the fund and potential knock-on effects for firms that finance it.

The collapse has echoes of the Axiom Ince scandal in 2023, which saw more than £40 million paid out to former clients and led to fraud charges against the firm’s former leaders.