SRA sanctioned over failures in £200m collapse of 'no-win no-fee' firm

The Legal Services Board has announced enforcement action against the SRA after an independent review found the regulator failed to act on repeated warnings about Sheffield-based firm SSB, which collapsed last year with debts exceeding £200 million.

The review, commissioned by the LSB and carried out by Northern Ireland firm Carson McDowell (which is not SRA-regulated), found that the SRA "did not act effectively or efficiently" in its oversight of SSB between 2019 and 2024 - despite receiving more than 100 reports about the firm’s conduct and finances during that time.

Background

SSB, formed in 2018, specialised in high-volume civil litigation, particularly cavity wall insulation (CWI) claims, and represented many thousands of clients on "no-win no-fee" terms - who were often later pursued for substantial legal costs.

The firm was added to an SRA "watch list" after taking on thousands of cases from collapsed firm Pure Legal in November 2021, and the regulator had set up its own "Operation Grouse" in 2019 to keep an eye on firms running CWI claims. However, despite that and the volume of reports it had received about SSB, the SRA failed to take meaningful action until it was too late.

Repeated failures

The report found the SRA missed multiple red flags about SSB’s structure, finances and management. By 2023, the firm employed nearly 200 staff but fewer than 10 were qualified solicitors, while turnover was expected to more than triple year-on-year - from £3.9 million in FY22 to £12.4 million in FY23. Yet, the regulator failed to identify the firm’s unusual structure and rapid expansion in the context of mounting complaints as a cause for concern.

Additionally, a forensic investigation in April 2023 revealed that SSB owed £128 million to litigation funders - one charging 32% interest over LIBOR - and was relying on new borrowing to pay its debts, despite it having defaulted on previous loans and much of the funding being secured against the firm’s CWI cases, which it was told were "unlikely to succeed".

Nevertheless, the SRA accepted the firm’s reassurances "at face value" and closed the file, concluding that "no issues of concern had been identified" and determining that "SSB had no financial stability issues." Only after a second investigation several months later, in October, did the SRA take action - by which time the firm’s financial situation had spiralled further out of control.

Outcome

The report concluded that the SRA's repeated failures meant it did not adequately protect consumers, the public interest, or professional standards, and recommended procedural reform to prevent similar situations arising in future.

The LSB has endorsed the report and its findings, and will issue a public censure of the SRA under section 35 of the Legal Services Act 2007 and impose performance targets on the regulator under section 31 to monitor improvement.

What they said

Chair of the LSB, Catherine Brown, said: "The former clients of SSB have suffered profound emotional and financial harm. There were several early warning signs about the firm, but this review reveals that the SRA failed to act on these. In the Board’s view, these shortcomings allowed SSB to cause further harm to its clients and weakened trust and confidence in the regulation of legal services."

SRA chair Anna Bardley accepted the SRA’s failings in a widely reported statement, saying: "We are sorry that we did not act more quickly in relation to SSB, and that issues in our handling contributed to the harm and distress suffered by the many vulnerable consumers affected.

"We fully accept the recommendations of this review and are committed to doing all we can to learn from this event."

Bigger picture

The SSB review marks the second major rebuke of the SRA in twelve months, following last year’s report into the handling of Axiom Ince - which collapsed in 2023 after the regulator discovered around £60 million in missing client money, resulting in the loss of some 1,400 jobs.