How Increased Regulation Of Legal Consultancy Strengthens The Profession

Practice points

• The SRA will require more data from consultant-led firms following its Growth Strategies Thematic Review. Firms should prepare now by documenting supervision arrangements, centralising AML controls, and ensuring file audit processes are auditable.
• The FCA will become the Single Professional Services Supervisor for anti-money laundering, replacing the SRA. Firms should anticipate a more data-intensive, financial services style approach to AML compliance during the transition period.
• Well-run consultant firms that invest in compliance infrastructure are positioned to benefit from increased regulatory clarity, which raises standards across the sector and differentiates responsible operators from those cutting corners.

The Consultant Solicitor Model has grown rapidly over the past decade. Typically, they provide regulatory infrastructure, professional indemnity insurance, technology platforms, and administrative support, while Consultant Solicitors deliver legal services as self-employed practitioners under the firm’s SRA-regulated entity. That growth has drawn the attention of the Solicitors Regulation Authority, and its regulations are now evolving to match the model’s scale and significance.

In late 2025, several developments accelerated this process. The SRA published its Growth Strategies Thematic Review in December, examining accumulator, acquisition, and consultant models for the first time. It signalled that it will require more data from firms operating consultant-led structures, alongside those working in high-risk practice areas such as conveyancing and immigration. Separately, the Government confirmed that the Financial Conduct Authority will assume responsibility for AML supervision of solicitors as part of a new Single Professional Services Supervisor regime.

For firms that have invested seriously in compliance, these changes are welcome. Greater regulatory clarity raises the bar for all participants, rewards those with robust systems, and strengthens public confidence in an increasingly important part of the legal services market.

The SRA’s Growth Strategies Thematic Review

The SRA’s Growth Strategies Thematic Review (11 December 2025) examined how firms pursuing growth through the Consultant Model managed the compliance risks specific to their structure. The findings were measured. The SRA acknowledged that Consultant Models ‘can be successful because they offer an efficient resource model and give solicitors more flexibility and control.’ Firms had identified key risks, including financing a new business model, putting compliance measures in place, integrating consultants into the firm’s culture, and recruiting the right number and calibre of practitioners.

On compliance, all firms examined had central processes for client onboarding, including conflict and money laundering checks. All maintained supervision arrangements: file audits, reviews by heads of department, and screening of correspondence by a senior lawyer. No consultants had direct access to client accounts. These findings will inform the SRA’s ongoing Consumer Protection Review, with further consultation expected in 2026. The review makes clear that the SRA does not object to the Consultant Model in principle; its concern is with ensuring that firms maintain the same standards of governance and client protection expected of all regulated entities.

Increased data requirements for consultant-led firms

The SRA has indicated that it will require more data from firms with consultant-led business models, alongside those working in high-risk areas. This responds in part to the fallout from the Axiom Ince and SSB Group failures, both of which involved firms that expanded rapidly without adequate compliance infrastructure. The Legal Services Board took enforcement action against the SRA for its handling of both cases, and the regulator has accepted all recommendations arising from independent reviews. It is now building a more proactive, data-driven approach to firm oversight.

For consultant-led firms with strong compliance systems, data collection requirements create a genuine opportunity. Firms that can demonstrate current firm-wide risk assessments, documented supervision arrangements, regular file audits, centralised client onboarding, and restricted client account access will be well positioned when the SRA requests evidence that systems work in practice. Those who cannot face legitimate scrutiny. The effect should be to separate firms that operate responsibly from those that have treated compliance as an afterthought.

The FCA as Single Professional Services Supervisor

On 21 October 2025, the Government announced that the FCA will become the Single Professional Services Supervisor for anti-money laundering and counter-terrorist financing. This will strip the SRA of its current AML supervisory function and consolidate oversight across legal services, accountancy, and trust and company service providers under one regulator. The FCA will oversee approximately 60,000 regulated firms in this capacity. Approximately 6,500 SRA-regulated law firms will, in practice, answer to two regulators: the FCA for AML, and the SRA for professional standards, accounts rules, and conduct.

The Government’s consultation on the FCA’s required powers closed in December 2025. Enabling legislation and a detailed transition plan will follow. The SRA is expected to retain its AML function throughout 2026 while the handover is prepared. Steve Smart, Joint Executive Director of Enforcement and Market Oversight at the FCA, stated that the new regime will ‘simplify the supervision of professional services, ensure more consistent oversight and help us identify and disrupt crime.’ The Law Society, through its President Mark Evans, urged the Government to ensure proportionate, risk-based supervision rather than ‘blind compliance.’

For firms operating Consultant Models, the shift towards FCA-style supervision is significant. The FCA’s established methodology emphasises data, systems, processes, and senior management responsibility. Firms that already collect and report compliance data systematically, maintain auditable trails for AML decisions, and invest in technology-enabled oversight will adapt more easily than those relying on informal or paper-based controls.

Sector-wide AML compliance

The SRA’s Anti-Money Laundering Annual Report 2024/25 provides important context. The SRA carried out 935 proactive AML engagements during the reporting period, up from 545 the previous year. Only 13% of inspected firms were fully compliant; nearly a third were non-compliant and referred for investigation. The most common weaknesses were incomplete client and matter risk assessments, inadequate source of funds checks, and policies that lacked sufficient detail or were not followed in practice.

The SRA’s Sectoral Risk Assessment, updated on 31 July 2025, addressed the growth of Consultant Solicitor Models directly. It noted that their decentralised nature ‘can carry risks’ and urged MLCOs and MLROs in such firms to be ‘more vigilant and potentially more interventionist.’ These findings reinforce the case for robust central compliance infrastructure. The sector-wide compliance record shows that many traditional firms also struggle with basic AML requirements. The Consultant Model does not inherently create greater risk; the risk arises where any firm, regardless of structure, fails to invest in effective systems, supervision, and training.

The Dentons appeal

In late March 2026, the Court of Appeal heard the appeal of Solicitors Regulation Authority Limited v Dentons UK and Middle East LLP [2025] EWHC 353 (Admin). The Solicitors Disciplinary Tribunal originally dismissed the SRA’s allegations, finding that while there had been a technical breach of the Money Laundering Regulations 2007 in relation to source of wealth checks on a politically exposed person, the breach did not reach the threshold for misconduct. On appeal to the High Court, Mrs Justice Lang quashed the SDT’s decision, holding that there is no universal requirement of ‘seriousness, culpability and reprehensible conduct’ for establishing a breach of the SRA Principles. Dentons subsequently appealed to the Court of Appeal.

If the High Court’s decision is upheld, any breach of the MLRs can give rise to disciplinary proceedings without the SRA needing to demonstrate additional culpability. In addition, factors like ‘good faith’ or ‘robust systems’ would only be considered at the sanctioning stage rather than as a defence against the finding of misconduct itself.

What firms should do now

Firms operating Consultant Models should treat the increase in regulatory oversight as an opportunity to differentiate themselves. The following steps will be relevant:

• Review and update the firm-wide risk assessment to reflect the SRA’s 2025 Sectoral Risk Assessment and the specific risks of decentralised working.
• Ensure client and matter risk assessments are completed consistently across all consultants, with central oversight and quality checks.
• Document supervision arrangements with evidence of file audits, review schedules, and escalation procedures.
• Establish systems to collect, store, and report the compliance data the SRA and, in due course, the FCA will require.
• Deliver AML training that reaches all consultants, including those who may not have had direct responsibility for AML processes in previous senior roles.
• Restrict and audit access to client accounts. The SRA’s thematic review confirmed that well-run consultant firms already prevent consultants from having direct access.

Looking ahead

Regulation is catching up with the Consultant Model because the model has earned its place in the profession. The SRA’s thematic review, its increased data requirements, and the forthcoming transfer of AML supervision to the FCA all reflect that consultant-led firms are a significant and growing part of the legal services market. For firms that take compliance seriously, these developments reduce the risk of being associated with the failures of less rigorous operators and create a clear competitive advantage.

Practitioners should watch closely the outcome of the Court of Appeal hearing in the Dentons case, the SRA’s 2026 consultation on proposals arising from the Consumer Protection Review, and the Government’s enabling legislation for the FCA’s new role. Each will shape the compliance obligations and supervisory expectations that apply to all legal practices, including those built on the Consultant Model. The firms that will thrive are those that welcome scrutiny and treat it as evidence that the model works.

Shaunagh Rogers is Chief Compliance Officer at Nexa Law