Written by The SRA is no stranger to controversy, but its handling of the Axiom Ince scandal reveals a deeply troubling pattern of systemic failure, delay, and hypocrisy. The regulator’s attempt to hold a non-solicitor employee, Rupesh Karawadra, accountable for failing to report tampered bank statements only underscores the glaring inadequacies in its own actions. This episode raises serious questions about the SRA’s capacity to regulate effectively and uphold public trust.
A Timeline of Regulatory Lapses
The Axiom saga is a cautionary tale of how regulatory failures can compound client harm. Despite identifying Axiom as an “accumulator” firm—a high-risk model that rapidly acquires other firms—the SRA took no meaningful steps to monitor or mitigate the risks. As early as October 2022, the regulator had an opportunity to uncover the misappropriation of client funds during an unrelated investigation. Instead, its forensic investigator failed to follow basic protocols, such as verifying client account balances directly with banks. These omissions allowed fraudulent activity to continue unchecked.
By July 2023, the SRA’s investigation finally revealed a staggering shortfall of over £60 million in Axiom’s client account. Yet even then, the regulator opted for a “partial intervention”, targeting only three directors—including owner Pragnesh Modhwadia—rather than shutting down the firm entirely. This decision, made despite clear evidence of dishonesty, permitted an additional £36 million to be drained from the client account before the firm was fully intervened into in October 2023.
Visualising the Axiom Ince Timeline
To provide a clearer perspective on the sequence of events and the regulatory missteps, the timeline below illustrates key milestones in the Axiom Ince saga, from the October 2022 investigation to the eventual full intervention in October 2023:
The Treatment of Karawadra: A Convenient Scapegoat?
Against this backdrop of systemic negligence, the SRA’s treatment of Rupesh Karawadra smacks of hypocrisy. A non-solicitor employee of Axiom, Karawadra was issued with a Section 43 notice and barred from working for any regulated law firm for failing to report tampered bank statements. His misconduct, which occurred in early August 2023, coincided with the SRA’s own partial intervention—a time when the regulator had already identified significant client account irregularities.
While Karawadra’s actions were undoubtedly wrong, the SRA’s decision to penalise him for failing to act raises uncomfortable questions. How can the regulator demand accountability from an individual while excusing its own delays and omissions, which allowed client losses to escalate?
Hypocrisy in Accountability
The Legal Services Board (LSB)’s independent review of the SRA’s handling of Axiom Ince paints a damning picture. The report highlighted the regulator’s failure to:
- Conduct effective account checks during its October 2022 investigation.
- Act on its January 2023 identification of Axiom as a high-risk accumulator firm.
- Assess the risks of Axiom’s acquisitions of Ince Gordon Dadds and Plexus Legal, both of which were facilitated using misappropriated client funds.
Despite these systemic failures, the SRA has chosen to focus its enforcement efforts on individuals like Karawadra. This selective accountability risks undermining the profession’s trust in its regulator and distracts from the structural reforms urgently needed to prevent similar scandals.
The Cost to Clients and the Profession
The fallout from Axiom’s collapse has been devastating. Former clients face significant financial losses, with many forced to seek compensation from the SRA Compensation Fund or Axiom’s professional indemnity insurers. The profession as a whole has borne the financial burden, with contributions to the Compensation Fund surging by 270%.
Yet, even as the costs mount, the SRA remains unrepentant. Its recent responses to criticism, including a lack of transparency at board meetings and a refusal to apologise, suggest a regulator more interested in deflecting blame than learning lessons.
Lessons Unlearned
The Axiom Ince scandal should have been a wake-up call for the SRA to overhaul its regulatory approach. Instead, it has doubled down on a “light-touch” strategy that prioritises process over outcomes. As the LSB’s report makes clear, the SRA’s failure to act “adequately, efficiently, and effectively” was not an isolated incident but a symptom of deeper systemic issues.
Conclusion
The SRA’s handling of Axiom Ince is a masterclass in regulatory failure. Its decision to punish Karawadra while excusing its own lapses reveals a troubling double standard that undermines confidence in the profession and its regulator. Until the SRA embraces meaningful reform and accepts accountability for its own shortcomings, scandals like Axiom Ince will remain an ever-present risk to the public and the profession.
Acknowledgement
This article incorporates insights from The Law Gazette and the Legal Services Board’s independent review, which provided valuable analysis of the Solicitors Regulation Authority’s handling of the Axiom Ince case.
Disclaimer
The information and opinions expressed in this article are for informational purposes only and do not constitute legal advice. The views are those of the author and do not necessarily reflect those of The Law Gazette, the Legal Services Board, or other referenced entities. All efforts have been made to ensure accuracy at the time of publication, but no liability is accepted for errors or omissions.