The UK’s legal regulator has been slammed for mishandling the collapse of Axiom Ince, which resulted in over 1,000 job losses.

The law firm became engulfed in a scandal last year after it emerged that approximately £60m in client money had gone missing. Not long after, the firm folded and 1,400 employees lost their jobs.

Senior management at the firm are now being investigated by the Serious Fraud Office for suspected fraud.

In a scathing report published today, the Solicitor’s Regulation Authority (SRA) was found to have not taken enough steps to help prevent the firm’s collapse.

The review, conducted by law firm Carson McDowell on behalf of the Legal Services Board (LSB), found that the SRA “did not take all the steps it could or should have taken” in the lead-up to the closure of the firm in October last year and “did not act adequately, effectively and efficiently”.

As a result, the LSB said it has launched an enforcement action against the regulator.

“The SRA’s actions and omissions have in our view adversely impacted on confidence and trust in the regulation of legal services,” Alan Kershaw, chair of the LSB, said in a statement today.

Reacting to the report, SRA chief executive Paul Philip said: “There is a lot in the report that we don’t agree with, and we don’t understand the basis for enforcement action. However, we think it is important to focus on working with the LSB and others to tackle future challenges in the legal sector.”

“At the heart of this issue is a suspected complex and well-hidden fraud carried out by a solicitor, with an ongoing criminal investigation by the SFO,” he said.

“We will be consulting soon on changes to better protect clients’ money. This will include exploring the more radical solution of whether we should stop law firms holding client money,” he added.