Regulatory Pulse - 23 January 2026

Bringing you up to speed with developments in solicitors' regulation over the last few weeks.

The High Court has overturned the high-profile decision to sanction a solicitor for the alleged misuse of the 'without prejudice' label in correspondence. The scathing judgment criticised the Tribunal's judgment as "insufficiently analysed and reasoned, vitiated by misdirection and error of law, and unfair".

We were not fans of the Tribunal's decision and welcome the judgment on appeal. It is worth emphasising how critical the Court was of both the SRA's prosecution and the Tribunal's reasoning – particularly at paragraphs 117 to 122 of the judgment. You don't often see judgments on appeal like this.

The reversal is the latest in a series of blows for the SRA's SLAPPs programme. On 20 January, it was the SDT's turn to criticise the Regulator, in its published reasons for dismissing the regulator's prosecution of a Carter-Ruck partner. The Tribunal concluded that "Even taken at its highest, the SRA’s case did not disclose conduct capable of meeting the threshold required to proceed… Accordingly, it would not have been in the interests of justice or proportionality for the matter to proceed further.". The SRA is reported to be facing a £1m costs claim in relation to the failed prosecution.

This decision also turned on questions of fundamental legal principle. A solicitor does not act improperly merely by representing a client whose case was weak or controversial, provided they do not knowingly assist in an abuse of process. An advocate owed no duty to the opponent and should not be penalised for advancing a case in accordance with instructions. A solicitor was not required to investigate or verify the truth of factual instructions before advancing them, even where doubts existed. "The dividing line was knowledge. A solicitor must not knowingly advance false instructions or assist in an abuse of process, but absent such knowledge, the solicitor was entitled and often obliged to continue to act."

The appeal from the Mazur judgment on the extent to which non-solicitors can assist in the conduct of litigation under supervision has been listed for a hearing to start on 24 February.

The Government's proposal to transfer AML regulation of the profession from the SRA to the FCA (reported in previous issues) has come under renewed scrutiny. The Law Society and the SDT filed consultation responses highlighting significant concerns about the potential for inconsistent decisions, double jeopardy, and client confidentiality. The Tribunal highlighted a clear example of the practical difficulties with the proposals, being what to do where an investigation involves alleged AML breaches coupled with allegations of professional misconduct. The Law Society concluded that the proposals pose "major operational and strategic risks to the profession while offering no proven benefits".

Lord Chancellor David Lammy welcomed the New Year by unveiling unpopular plans to remit up to 75% of the interest earned on pooled client accounts to the Treasury for "[investment] in strengthening the justice system". The Ministry of Justice has opened a consultation on the 'Interest on Lawyers' Client Account Scheme' for a brief 5 weeks, ending on the 9 February 2025. Law Society president, Mark Evans, issued a scathing response to the slap-dash proposals: "The MoJ has decided to take money from the interest earned on law firms’ client accounts to boost its own budget. Yet, as its own consultation reveals, it has no clear idea how this proposal will work in practice and no understanding of the serious consequences this will have on high street firms and access to justice throughout England and Wales. Firms will close, fees will rise and clients will be impacted if the MoJ goes ahead with the proposal.'

Research by the Centre for Socio-Legal Studies (University of Oxford) into potential new funding streams for the not-for-profit legal sector notes that while there are almost 80 comparable schemes globally for managing interest on lawyers’ client accounts, they typically allocate interest to legal aid programmes rather than a ministry’s general budget.

The Law Society responded to the Department for Science, Innovation & Technology's (DSIT) call for evidence on the AI growth Lab, asking for guidance rather than the imposition of new regulatory obligations concerning the technology.

Following binding directions issued by the Legal Services Board (LSB) in May 2025, the SRA has now published an implementation plan for complying with the LSB directions. The directions, arising out of the LSB's review of the SRA's handling of supervision of Axiom Ince, require the SRA to address the failures identified during the review. The SRA's implementation plan targets six priority areas: (1) governance (2) risk management (3) authorisation (4) client money protection (5) the oversight of firm sales, mergers and acquisitions and (6) pre-intervention processes. The SRA points to its Consumer Protection Review at the start of 2024 as a large piece of work that will contribute to its implementation plan.

As for Axiom Ince itself, the firm's Professional Indemnity Insurers have issued a professional negligence claim against the regulator for its failure to prevent the large-scale misappropriation of funds.

The LSB launched a consultation on its draft business plan and budget for 2026/27, and announced the appointment of a new Chief Executive.

Since our last update, the SRA has issued (by our count) 14 fines for AML breaches totalling £185,238.

Other recent SRA decisions include:

• A rebuke for a solicitor who had pleaded guilty to assault occasioning ABH.
• A fine for a solicitor who failed to provide the SRA with copies of qualified accountant's reports to the SRA over a period of seven years, and allowed a £33,000 deficit to remain on client account for nearly two years.
• A referral to the SDT for a solicitor alleged to have made misleading statements while acting on a personal injury matter.
• A referral to the SDT for a solicitor alleged to have attempted to take unfair advantage of an individual's position as a litigant in person by requesting their contact details and subsequently obtaining them from a private investigator.

The SDT published reasoned judgments in cases including:

• A striking-off order, on an agreed outcome, for a solicitor who sent a misleading email to a third party, telling a colleague: "tell him client says we will withdraw our application to court as soon as we receive the signed docs from him (he doesn't know we haven't issued .... we just led him to believe we did)." (The colleague said no and reported the solicitor internally).
• Striking-off orders in two unrelated cases in which solicitors were found to have issued certified copies of documents without having seen the originals.
• A period of suspension for a solicitor who was found to have dishonestly amended an internal handover note to cover the fact that they had failed to carry out a task prompted in the note in respect of a wills and probate matter. The solicitor failed to conduct a Capital Gains Tax Mitigation. When the omission gave rise to a CGT liability to the client's estate, the solicitor failed to set out the circumstances around the liability by editing the note.
• A section 43 order in respect of a paralegal who sent dishonest emails in a conveyancing transaction whereby the sale was completed before the grant of probate had been received. Following completion, the buyer's solicitor chased the transfer form to which the paralegal falsely claimed that the transfer form and signed contract had been lost in the post and that there had been IT issues. The deed was then only provided to the buyer solicitors once the grant of probate was made. The Tribunal dismissed allegations from the paralegal that the supervising solicitor had given instructions in respect of the dishonest emails.