ML Covered - November 2025

We are pleased to share our latest instalment of ML Covered, our monthly round-up of key events relevant to those dealing with Management Liability Policies covering D&O, EPL and PTL-type risks.

SRA's AML powers transferred to the FCA

The last few weeks have been eventful for the legal market following the recent judgment in Mazur v Charles Russell Speechlys LLP [2025] EWHC 2341 (KB) in which the High Court considered the question of what constitutes the conduct of litigation and whether certain activities undertaken by non-authorised fee earners, such as trainees or paralegals, was unlawful, even if supervised by an authorised person.

Last month, on 21 October 2025, the Chancellor, Rachel Reeves, also announced that the Solicitors Regulation Authority (SRA) would lose its anti-money laundering responsibilities, which would be passed to the Financial Conduct Authority (FCA). The Government is to designate the FCA as Single Professional Services Supervisor (SPSS) for AML. The Government's aim is to reduce the bureaucracy on business in order to help drive economic growth. The changes to the regulatory powers of the FCA may also impact upon those firms who hold a management liability policy.

The SRA has been responsible for regulating the AML compliance of law firms since it was formed in 2007. Since then, its powers have significantly increased due to the Money Laundering, Terrorist Financing and Transfer of Funds regulations. All firms, including sole practitioners, are required for in-scope work to maintain and keep up to date a firm-wide risk assessment and have compliant AML policies, controls and procedures in place. By October 2023, the SRA was supervising 23,275 beneficial owners, officers and managers spread across more than 6,000 firms in scope.

Bodies such as the Law Society have raised concerns that the FCA currently has limited dealings with the legal profession and that sector-specific expertise could be lost in this consolidation.

The move comes as the UK Government intensifies its focus on combating financial crime, through initiatives such as the Economic Crime and Corporate Transparency Act and the introduction of digital ID cards, amplifying the scrutiny that legal and financial firms will face. Last year, the FCA's Office for Professional Body Anti-Money Laundering Supervision stated that the absence of real oversight of lawyers and accountants was hampering efforts to combat money laundering. The FCA also has the powers to heavily penalise those it believes are not meeting their AML obligations.

Key Takeaways

Although questions remain about the consolidation and its implications in terms of the regulatory burden faced by firms, there is a risk that the scrutiny of law firms' AML compliance will increase. This may result in closer scrutiny of the regulatory cover available from a firm's management liability policy.

Senior management should review their AML policies, controls and procedures they have in place to ensure they are compliant with existing regulations. Particular areas that D&Os should focus on are ensuring AML risks are assessed, either at firm level or client/matter level, as well as ensuring a compliant firm wide AML risk assessment has been performed before submitting a declaration to the regulator. The SRA in recent years has identified these as areas where "a very significant proportion of firms" were not compliant and could therefore be an area of focus for the FCA as it assumes this new responsibility.

To read more, please click here.

High cost of doing business is the biggest challenge facing UK SMEs

Simply Business has surveyed 2,300 UK small-business owners and consumers and published their findings in their 2025 SME Insights Report. There are currently 5.5 million SMEs in the UK, making up over 99% of the UK business population. They account for more than half of the total turnover in the UK private sector, as well as 60% of private sector employment. Many SMEs are currently struggling for a variety of reasons, including high inflation and weakened consumer demand. The survey seeks to establish the challenges faced by UK SMEs.

High running costs is listed as the biggest challenge faced by 22% of SME business leaders, followed by uncertain consumer demand (at 20%), the unpredictability of the economy (at 16%), and rising inflation (at 13%). SMEs have taken various steps in response to these economic challenges, with 42% delaying buying new equipment, 23% reducing spending on marketing and subscriptions, and 22% halting expansion plans or hiring.

Rising business costs are also impacting operations, with 28% struggling to pay the rising utility bills, and 24% being forced to stop hiring. 16% have reduced employees' hours and one in ten are lowering their use of energy or water.

Many SMEs are also raising prices to offset the high costs of doing business. Three quarters of SMEs have confirmed that they are planning price rises of less than 10%. However, 15% will raise their prices by at least 20%. Despite increasing prices, only 17% of small business leaders expect their firm’s profits to increase this year. This is down from 43% in 2023.  Meanwhile, 44% expect profits to fall, compared with just 28% two years ago. One in ten said profits would fall by more than 50%.

If the struggles continue into 2026, it is projected that c.30% could be forced to cease operations, at least temporarily, and one in 10 will have to reduce headcount.

Key Takeaways

The number of corporate insolvencies reached a 30 year high in 2023 and has remained high in 2024 and 2025. With many SMEs facing a precarious financial position, it is expected that the number of insolvencies will continue to remain high. Given the various challenges facing firms, directors should be mindful of their obligations to the company's creditors and should ensure that they are aware of when there is no reasonable prospect of avoiding insolvency.

To read more, please click here.

Employment Tribunal Fees: Government confirms fees will not be reintroduced

The Government has confirmed that employment tribunal fees will not be reintroduced, following speculation prompted by mounting backlogs and delays. This decision reaffirms the principle of open access to justice for all workers, irrespective of income.

Historical Background: The 2013 – 2017 Fee Regime

In July 2013, a two-tier fee structure was introduced in Employment Tribunals, aiming to reduce claim volumes. Type A claims, such as statutory redundancy and unlawful wage deductions, attracted lower fees (£160 issue, £230 hearing), while Type B claims, including unfair dismissal and discrimination, incurred higher fees (£250 issue, £950 hearing). Although fee remission was available, concerns persisted that the regime restricted access to justice.

Annual claims fell dramatically, from around 190,000 to 83,000 at their lowest. However, the extension of the ACAS pre-conciliation process, from one month to six weeks, may have also contributed to this decline.

Legal Challenge and Supreme Court Ruling

The 2013 fee regime faced legal challenge, most notably by Unison. The Supreme Court’s landmark decision in 2017 (R (Unison) v Lord Chancellor [2017] UKSC 51) found the fees unlawful, as they prevented legitimate claims and undermined the right to justice. The Government was required to reimburse claimants, at an estimated cost of £32 million.

The Unison judgment was widely celebrated as a victory for workers’ rights, but it also intensified the challenge of managing tribunal demand within a resource-constrained system.

Recent Developments and the 2024 Proposal

Following the Supreme Court ruling, claim volumes rebounded to over 100,000 annually. By March 2024, a backlog of 45,000 cases had developed owing to resource shortages leading to delays. To avoid the previous challenges around fees disproportionately restricting access to justice, the previous Government proposed a single, modest fee of £55 per claim, with extended remission for those unable to pay. However, with a change in Government in July 2024, the proposal was shelved. Nonetheless, speculation about reintroducing fees persisted, fuelled by concerns over an overburdened tribunal system. By March 2025, cases were routinely taking between two to three years to reach a final hearing, with fears that the tribunals are “on the brink of collapse”.

Despite these pressures and the anticipated rise in claims which will follow the introduction of the Employment Rights Bill, David Lammy MP has confirmed that the Government will not reintroduce tribunal fees emphasising the Government's position that it is a “fundamental principle that everyone, regardless of their income, should have access to justice to challenge unfair workplace behaviour”.

This has reignited the long-standing debate: how do we balance access to justice with the increasing strain on the judicial system?

Implications for Insurers

For insurers, the decision not to reintroduce fees affects risk profiling and policy pricing. While a fee-free system may result in higher claim volumes, the increased predictability of tribunal claims can and should be planned for by insurers.

Future Outlook

The Government’s decision marks a pivotal moment in the debate over access to justice and tribunal sustainability. While pressures on the system remain acute, the commitment to open access underscores the vital role tribunals play in protecting workers’ rights. Further reforms may be necessary to address backlogs and delays.

Conclusion

The confirmation that employment tribunal fees will not be reintroduced is significant for employees, employers, and insurers alike. As the system evolves, stakeholders should monitor developments and engage strategically with ongoing reforms. Engagement is especially important, given the provisions in the Employment Rights Bill (which is covered more broadly in our October edition here).

Trustees warned to strengthen cyber defences as Capita fined £14m for data breach

Pension scheme trustees are being urged to strengthen their cyber-security and fraud defences following a surge in cyber-attacks, most recently exemplified by Capita's major data breach that exposed the personal data of 6.6 million people and led to a £14 million fine.

The Information Commissioner’s Office (ICO) ruled that Capita had failed to ensure the security of personal data, leaving it at significant risk. The breach, which occurred in March 2023, saw financial information, addresses, and even data relating to criminal records leaked online, with some data circulating on the dark web. Capita, which administers more than 600 pension schemes, confirmed that around 325 schemes were affected. Information Commissioner, John Edwards, said the scale of the breach “could have been prevented had sufficient security measures been in place”.

The ICO initially proposed a £45m fine but this was later reduced to £14m following Capita's cooperation with regulators and efforts to strengthen its cyber defences.

Advisory firm, RSM UK, has warned that strengthening cyber-risk frameworks and tightening fraud controls must be a priority for pension scheme trustees. In the UK, significant cyberattacks have more than doubled in the year to September 2025, according to the National Cyber Security Centre (NCSC) and RSM’s report, published on 17 October 2025, calls for schemes to maintain paper copies of their cyber-response plans in case digital systems are compromised.

Erin Sims, Fraud Risk Director at RSM, also released a statement cautioning that cyberattacks targeting pension funds are likely to increase ahead of the Autumn Budget, as speculation over changes to the tax-free treatment of pension lump sums grows (and is anticipated to lead to an increase in savers drawing down their tax-free lump sums as a precautionary measure). The warning follows data from Action Fraud which estimates that an average of £48,000 is lost to pension fraud every day. 

The NCSC's new Code of Practice is a vital tool to help trustee boards bolster cyber resilience. However, with cyberattacks becoming increasingly common, a proactive and combined approach by regulators will be needed to strengthen cyber defences.

Government backs expansion of CDC pension schemes

The Government has confirmed plans to expand Collective Defined Contribution (CDC) schemes, with new regulations laid before Parliament on 23 October, allowing for unconnected multiple-employer CDC schemes. It is anticipated that the move will extend CDC access to more employers and reflect growing demand for secure, lifelong retirement incomes.

Alongside the proposed regulations, the Department for Work and Pensions aims to allow savers in defined contribution schemes to transfer their pots into CDC at retirement and a consultation to this effect has recently been launched. The department anticipates that this measure will boost retirement incomes by up to 60% while improving financial security. The pensions minister, Torsten Bell, said CDC pensions “offer a better deal, one where risks are shared, returns are smoothed and retirement incomes are stronger and paid for life.”

Industry leaders welcomed the announcement as a “major step forward” for UK pension provision. Aon’s Chintan Gandhi said the new framework will open the market to multi-employer and master trust CDC schemes, offering workers an income for life without complex investment decisions. TPT Retirement Solutions confirmed it will be among the first to launch a multi-employer CDC scheme, targeting authorisation by the end of 2026.