The Solicitors Regulation Authority (SRA) has confirmed it is investigating a “sophisticated suspected fraud” at PM Law, following its intervention in February.
In a statement issued on Tuesday, the regulator said it now believes the failure of the firm, headquartered in Sheffield (pictured) was due to the improper removal and misuse of around £39.5 million of client funds.
The SRA said it continues to support thousands of former clients impacted by the closure of PM law in “one of the largest and most complex” interventions ever undertaken. The PM Law group included 11 companies, 25 offices and more than 30 trading names spread across Yorkshire, Cumbria, Berkshire, Derbyshire and London.
In March, the SRA said it had provided £9m of funding for property transactions and litigation: £5.6 million from client money held by the firm at the time the SRA intervened, with a further £3.7 million paid out by the SRA’s compensation fund. According to its latest update, the SRA has now paid out a total of £6.8 million from monies held in the client account at the time of intervention, and a further £9.31 million from the compensation fund.
The total cost to the compensation fund could be as much as £21.52 million, the SRA said, based on the total value of potential claims to date. The figure may increase further if more applicants come forward.
Extra staff have been seconded to the compensation fund team to cope with the volume of correspondence; 25,000 emails or letters have been sent to people identified from the seized files as having live matters, 17,000 enquiries have been dealt with and 9,300 live files have been returned to clients, with a further 20,000 transferred in bulk to insurer clients. Intervention agents are working “round-the-clock, including on weekends” to handle client queries, the SRA said.
Paul Hastings, SRA director of client protection, added: “We are continuing to do all we can to support former clients of PM Law, including by reuniting them with their money or files. Some of those affected were in the process of buying or selling a home, facing the risk of collapsed moves, or losing their deposits. Others were dealing with delayed probate matters, often while managing bereavement and outstanding estate administration.
“Many of the former clients faced significant upheaval at a stressful time, so we have been determined to provide as much support as possible.”
A prioritisation schedule for processing applications to the fund has been introduced relating to claims linked to both PM Law and any wider applications relating to other law firms. Under the schedule, the order in which claims are being dealt with is based on the risk of harm faced by those making them. The ordering will not impact the likelihood of whether any individual claim is successful when considered.
Responding to the SRA’s statement, Law Society of England and Wales chief executive officer Ian Jeffery said: “The latest update by the SRA reaffirms the serious situation facing clients. The SRA has moved quickly in its investigation and has already paid out 92 claims to former clients. We continue to be encouraged that the SRA has acted with openness and transparency.
“However, a case this large coming so soon after Axiom Ince and SSB Group, reinforces the need for the SRA to focus on their core regulatory role and deliver the changes needed to reduce the risk of future large-scale collapses and re-build consumer confidence. The Compensation Fund provides crucial protection and reassurance to consumers. It is unfortunate the SRA has had to use the Fund in this case and we hope any increase to the Fund will be kept to a minimum.
“We are continuing to monitor developments, especially on the likely financial impact on the Compensation Fund and are in regular contact with the SRA.”
2 responses
It’s simply baffling how the SRA have taken so long to get around to realising the scope of potentially fraudulent activity occuring at a high-level in law firms. It’s taken three high-profile cases for them to release a statement acknowleding they’ve failed in their regulatory role – all being too busy prior to Mazur being overturned hoping to keep that gap between “qualified” and “unqualified” persons. A disappointing organisation to say the least.
Who were the auditors?
How did they not detect this was happening?