Contents

• EDITOR’S RAMBLE 🗣

• FEATURED REPORT 📰

• IN OTHER NEWS 🗞

• OPEN TABS 🌐

• STUFF THAT MIGHT HELP YOU 👌

EDITOR’S RAMBLE 🗣

A personal update: I got married last week! 💍

(aaaand the newsletter still went out on time)

Honestly though – some of you have been following LittleLaw since the start. When it was just a side project I wrote from my university house in final year.

Knowing that you have been supporting since then is a lovely feeling. So, thank you.

Now, let’s get to the law.

– Idin

FEATURED REPORT 📰

​​💷 How Axiom Ince lost £64 million of its clients' money (and why every solicitor is repaying it)

What’s going on here?

Axiom Ince, a London law firm, collapsed in 2023 with £64 million of client money going missing. Last week, the people winding the law firm up sued the firm's old accountants for failing to spot it.

Why do law firms hold their clients' money at all?

Advising is only part of what solicitors do. In a lot of legal work – buying a house, selling a company, lending money – the job is making a deal actually happen. That means sitting in the middle between two sides who might have never met, and who can't just take each other's word for it when huge sums of money are at stake.

Let's use the example of someone buying a house. Money reaches the law firm in two ways (and each has a different job).

1. 💷 Money for the firm (eventually). Before the work starts, you send the firm money to cover its fees and the costs it pays on your behalf – things like search fees and Land Registry fees. It's still your money at this point, so it sits in a separate account (called a “client account”). The firm’s own money – the fees it has earned, plus salaries and rent – sits somewhere else entirely, in its “business account”. Your money only crosses from one account to the other once the work is done by the lawyers and you’ve been sent a bill.

2. 🏠 Money that’s on its way to someone else. Buying something like a house has a timing problem. The buyer doesn't want to hand over hundreds of thousands of pounds and trust that the seller will transfer the house. The seller doesn't want to give up the house without knowing the money is there. Solicitors solve this problem by acting as a secure “checkpoint”. The buyer sends the purchase money to the solicitor’s client account. The solicitor confirms that the money’s there but can’t release it to the seller too early. That protects both sides – the seller knows they’ll be paid, and the buyer gets the money back if the sale falls through.

At the heart of this system is a special promise called an undertaking.

The same issue arises in larger transactions. In a company sale, the buyer will not pay until they receive the shares, while the seller will not transfer the shares until they receive the money. The buyer therefore sends the money to the seller’s solicitor, who holds it in a client account and agrees not to release it until the sale completes.

What happened to Axiom’s clients?

When Axiom Ince collapsed, homebuyers were hit hardest. Some had already signed contracts to buy their new homes, and given notice to leave their rented homes. But their house deposits, held by the firm, had disappeared. Axiom Ince's owner had spent them – on buying other law firms and on property. He admitted as much in a sworn statement to the High Court in the civil claim against him.

He denies the criminal charges he now faces. But those buyers were still contractually required to buy the new homes – with no money and nowhere else to live.

Who was supposed to stop this?

The Solicitors Regulation Authority (SRA) is the body that polices solicitors. It was created in 2007, when the Legal Services Act split apart two jobs that had always sat together: the Law Society (that speaks up for solicitors), and the SRA (that regulates them).

The SRA:

1. decides who's allowed to practise,

2. writes the rules they have to follow (including the rules on holding client money), and

3. steps in when a firm looks like it's going wrong. Axiom Ince was its responsibility on all three counts.

The SRA has another job too. It also runs the SRA Compensation Fund.

However, payment from the fund is not guaranteed. The SRA's own rules call it a “discretionary fund of last resort.”

🚪 Last resort means that an applicant is normally expected to try other possible ways of recovering the money first. At Axiom Ince there was nowhere else for clients to go, so the fund paid those clients directly – £37.5 million by October 2025. Once the fund pays, the SRA takes over the clients' legal claims and does the chasing itself, which is why it's now suing Axiom's insurer.

✋ Discretionary means that the SRA decides whether to approve each application. At Axiom Ince it could have capped the whole set of connected claims at £5 million and split that between everyone. It hasn’t applied that cap, and the final bill to the fund is expected to reach about £39 million.

So, is the SRA up to the task?

The SRA has faced serious criticism for failing to spot when law firms put clients’ money at risk.

🔍 It failed badly at Axiom Ince. One man owned the firm and held all its senior compliance roles. That meant he was responsible for checking his own conduct – including how the firm protected money held for clients. The SRA says client money was used to buy two, much larger law firms. The SRA investigated Axiom in October 2022, a year before it collapsed, but did not ask the banks to confirm how much money was actually in its client account. When it finally acted, it shut down the directors but allowed the firm to keep operating. Another £36 million left the client account before the SRA closed the whole firm, and more than 1,400 people lost their jobs. The Legal Services Board, which oversees the SRA, later took formal action and ordered it to improve.

🔁 Axiom was not an isolated case. SSB Law collapsed in 2024 owing more than £200 million. The SRA received over 100 reports about the firm during the previous five years but didn’t step in. The problem also appears to be growing: in the eight months leading up to June this year, the SRA closed 45 firms – more than in the whole of the previous year.

💷 Solicitors are now paying for these failures twice. First, through the Compensation Fund we saw above. Each solicitor's contribution has risen from £70 to £170, and the total being collected has jumped 78% to £46.3 million. Second, through the practising certificate fee – the yearly fee every solicitor pays for the licence to practise. The SRA is raising the amount it takes through that fee by 29% (an extra £25 million) to rebuild the supervision system that failed. Together, the two charges will lift a solicitor's yearly bill from £396 to £552. Both are collected each October, when solicitors renew their practising certificate. At big commercial firms, your law firm will usually cover these renewal costs for you.

Should solicitors hold client money at all?

The obvious answer to stolen client money is better supervision.

But that’s not easy. The SRA regulates around 9,000 law firms. And a firm can move money in seconds, while most checks happen later.

So in a consultation published in November 2024, the SRA asked a more basic question: why let law firms hold client money at all?

One alternative is a third-party managed account (TPMA). Instead of the law firm holding the money, it’s held by an outside payment company regulated by the Financial Conduct Authority. The law firm can then ask that company to make any payment that’s needed.

The biggest problem is speed. On the day a house sale completes, solicitors often need to send money as soon as it arrives. One sale may depend on another, because there could be a chain involving several buyers and sellers. If every payment must first be approved by the TPMA provider, one delay could hold up the entire chain.

The Law Society opposed taking client accounts away completely. It argued that only a small number of solicitors steal client money, while the change would make legal services slower and more expensive for everyone.

For now, the SRA has decided not to remove client accounts. Instead, in June it sent two rule changes to the Legal Services Board for approval. The first stops anyone who runs a larger firm from also serving as its compliance officer (so nobody ends up checking their own work). The second makes every firm that holds client money file an annual accountant's report, with fixed fines for filing late.

For now, law firms still hold their clients' money. And if a firm loses it, other solicitors have to pay to replace it.

How can you use this in your applications?

Here are some ways you can use this story in your law firm applications.

IN OTHER NEWS 🗞

• 📈 Equity partners at the Magic Circle are earning £1 million a year more than they did a decade ago. That's the rise in profit per equity partner (the firm's profit shared between its owners) at Linklaters, Clifford Chance and A&O Shearman since 2015/16. Freshfields and Slaughter and May don't publish their numbers, so nobody knows theirs for sure. Double-digit profit rises are normal across the City again, which has revived talk of a “windfall tax” on law firm profits.

• ⚖️ TikTok has lost its appeal against a £12.7 million fine for mishandling children's data. The Information Commissioner's Office fined the app in 2023 after finding it tracked and profiled more than 1.4 million under-13s without parental consent. TikTok argued the videos its users make count as artistic expression, which would exempt it from parts of data protection law. The Upper Tribunal rejected that, saying TikTok chose not to check how old its users were.

• 🚗 Transport for London has approved a fleet of self-driving cars to pick up Uber passengers. The cars are Wayve's electric Ford Mustangs, and TfL inspected them before granting private hire licences. That completes the triple lock rule, which says the operator, the driver and the vehicle must all be licensed by the same authority. Over 100,000 Londoners have joined the waiting list for a ride (you can do this in the Uber app).

• 🥤 Latham & Watkins has moved into a new London office (with a juice bar on site). The US firm has taken 300,000 square feet across 20 floors of One Leadenhall, and every floor has its own fitness suite and refreshment hub. It ends more than two decades at 99 Bishopsgate, where Latham's London office grew to over 1,000 staff.

OPEN TABS 🌐

• 🤫 Shhh: This live map reads seismometers to show the quietest place on Earth right now

• 🔤 Alphabet: Type any word into this site and it spells it out letter by letter using real photos of ice, bugs and trees

• 🔭 Zoom: Scroll (or pinch on mobile) from the whole observable universe all the way down to a single atom

STUFF THAT MIGHT HELP YOU 👌

• 💻️ Free application advice: Check out my YouTube channel for actionable tips and an insight into the lifestyle of a commercial lawyer in London.

• 📁 Law firm application bank: A growing library of real, verified successful applications for training contracts and vacation schemes. Helpful if you want to learn from others who answered the same questions you’re stuck on.

• 📝 Write winning law firm applications: A practical course to help you write clearer applications, faster. Avoid common mistakes, learn how to structure answers properly, and get lifetime access to future updates. Try it for 14 days, risk free.