The Law Society of England and Wales has called on the Solicitors Regulation Authority (SRA) to ensure new regulations for third-party litigation funding in response to the collapse of a string of firms running mass consumer claims address genuine risks while safeguarding access to justice.
The England and Wales solicitors' regulator proposed the measures, which feature new professional conduct rules for all funding arrangements, in July, when Aileen Armstrong, the SRA’s executive director of strategy, said there was “clear evidence that third-party litigation funding can create risks to firm stability and lead to poor outcomes for consumers” thanks to failures in due diligence.
High-profile law firm failures involving mass claims include those of SSB Law, which went into administration in January 2024, and PM Law, which closed suddenly in February amid an investigation into the suspected misuse of around £39.5m in client funds.
The SRA proposed five new requirements, the first of which – a new set of professional conduct requirements for funding arrangements – would apply to all solicitors and firms involved in third-party funding. These include requirements to maintain independence from a funder, act in clients' best interests, only disclose confidential information with informed client consent and inform clients and funders of these obligations, as well as alerting clients to the fact that funders are not regulated by the SRA.
The remaining proposals focus on consumer claims. The consultation suggested consumer clients should be properly informed about their options, such as redress schemes and legal expenses insurance claims. It also proposed that firms be required to notify the SRA when arranging litigation funding for consumer claims and provide a third-party litigation funding risk assessment upon request.
It also suggested that certain firms provide the SRA with an updated, approved plan every six months outlining how the firm would close in an orderly manner, if needed.
In response, the Law Society urged the SRA to make better use of existing regulatory powers and guidance before imposing additional requirements on solicitors.
Mark Evans, the society’s president, said: “We support the SRA’s efforts to improve transparency and consumer protection, but any new requirements must target genuine risks rather than create unnecessary burden.
“Litigation funding can be a vital route to justice for consumers who could not otherwise afford to pursue a claim, but additional regulation must be in-line with the risks identified. Although the collapse of firms, such as SSB Group, highlighted the importance of effective safeguards, a one-size-fits-all approach could ultimately make it more difficult for people to resolve their claims.”
Those views were shared by claimant lawyers’ groups, like the Collective Redress Lawyers Association, CORLA.
Martyn Day, co-president of CORLA, said that while it supported SRA oversight of litigation funders, “we share the society’s concern that imposing additional burdens on all solicitors who use litigation funding could adversely affect access to justice”.
Existing professional conduct provisions were proportionate and sufficient, he said, reflecting fundamental professional duties.
Day, co-founder of Leigh Day, added: “Only if the SRA identifies problematic practices where there is a greater risk of consumer harm should more burdensome obligations such as notification, prescribed risk assessments or orderly closure planning be imposed on that law firm.
“It can’t be the case that one bad apple, such as the collapse of SSB Group, spoils the whole barrel.”
Jeremy Marshall, chief investment officer of Winward Litigation Finance, agreed: “A one-size-fits-all regulatory regime for solicitors that use funding to protect against all potential risks would be impossible to devise and onerous for law firms.”
He added that the SRA should be alive to risks and act when, “for example, a law firm is overly concentrated in a certain claim type or where there is obvious mismanagement that puts consumers at risk”.
The proposals come as the UK government considers regulating third-party litigation funding, following on from a Civil Justice Counci report in 2025 which recommended a "light-touch" regime – a move supported by the SRA.
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