Introduction
On 19 June 2026 the Solicitors Regulation Authority (SRA) opened another consultation, the latest in what has been a busy year for regulatory reform. Titled as part of its wider consumer protection review, the consultation proposes a deceptively simple change: that firms should have to tell the regulator about certain ‘prescribed events’ as they happen. Two events are targeted in this first round. Firms would have to notify the SRA when they merge with or acquire another firm, and when they start holding or receiving client money. The consultation runs until 17 August 2026.
The stated rationale is earlier visibility of risk. The SRA's Executive Director for Strategy and Policy, Aileen Armstrong, framed it around ‘having the right information at the right time’ so that the regulator can identify and, where necessary, act on risks before harm is done — in particular the loss of client money. The proposal comes soon after this month's announcement of new rules requiring all firms holding client money to submit annual accountants' reports, and the separation of compliance officer roles from those who make significant management decisions. It also forms part of a broader shift towards what the SRA calls a more ‘intelligence-led’ model of supervision.
Few would argue with the objective. The case behind all of this is, of course, Axiom Ince — named expressly in the consultation, alongside PM Law — where catastrophic client money losses followed rapid acquisition activity that the regulator did not see coming in time. If advance notice of mergers and acquisitions can help the SRA spot the next Axiom Ince before clients lose their money, that is plainly in the public interest, and in the interest of the profession whose reputation and compensation fund contributions are on the line. But as with so many recent reforms, the principle is easy to support and the practical detail is where the difficulty lies. This article looks at the proposals from the perspective of an ordinary high-street or mid-sized practice — the kind of firm that is not Axiom Ince, has never been anywhere near it, and yet will bear the compliance cost of rules designed to catch it.
What is actually being proposed
The mechanism is a new regulatory requirement obliging firms to notify the SRA of prescribed events. The consultation is careful to frame this as targeting ‘points where changes to a firm's profile might indicate the potential of a higher risk of harm’. In other words, the SRA is not asking for more routine data across the board; it is identifying specific trigger moments at which a firm's risk picture may change materially, and requiring a notification at those moments.
The two initial triggers are well chosen in principle. A merger or acquisition is exactly the kind of event that can transform a firm's size, client base, financial exposure and management culture overnight — and the integration of two sets of systems and ledgers is a classic moment for things to go wrong. The point at which a firm first starts to hold client money is similarly significant: it marks the moment a practice takes on the single greatest source of regulatory risk in the profession. Capturing both makes intuitive sense.
The SRA is also explicit that this is a first step. The consultation sits within a programme that will ‘continue into next year’, and the draft 2026/27 business plan flags a wider review of whether the current model for holding client money remains fit for purpose, and whether senior individuals should bear clearer personal responsibility for protecting it. Firms should therefore read this consultation not as a self-contained tweak but as the first stage of a much wider programme of client money reform.
The issues for an average practice
For most firms the proposals are unlikely to be onerous in themselves. A handful of notifications, at moments that are by definition infrequent, is not a heavy administrative load. The concerns are more subtle, and they are worth articulating clearly so that firms can raise them in their consultation responses.
1. Definitional uncertainty — what counts as a ‘merger or acquisition’?
The single biggest practical question is what actually triggers the duty. ‘Merger or acquisition’ is a term of art in corporate law but a far blurrier concept in the life of a typical practice. Does it capture a two-partner firm taking on a sole practitioner's small caseload on retirement? The absorption of a niche team from another firm? An asset purchase of a book of files, as opposed to a share or partnership merger? A group reorganisation that moves an existing practice into a new ABS structure? The lateral hire of a partner who brings their clients with them? Unless the prescribed event is defined with real precision, firms will face the familiar compliance dilemma: notify defensively about everything and generate noise, or exercise judgement and risk a breach. The average firm, without an in-house compliance team to sort out the grey areas, is the one most exposed to that uncertainty.
2. Timing — ‘in advance’ collides with commercial confidentiality
The consultation's logic is pre-emptive: the SRA wants to know before the event so it can act if necessary. But merger negotiations are commercially sensitive and frequently fall through. Requiring notification of a planned merger before it is concluded raises awkward questions. At what point does a tentative conversation become a notifiable ‘planned’ transaction? What happens to a notification about a deal that then collapses? How does the SRA propose to keep early-stage notifications confidential, given the reputational damage that premature disclosure of a failed merger could cause? For a small firm in a competitive local market, the prospect of having to flag deals that may never happen — and the uncertainty about how that information will be handled — is a genuine concern that the consultation will need to address.
3. Proportionality — a response built for the few, applied to all
The reforms are a response to a very small number of catastrophic failures at firms engaged in aggressive, debt-funded consolidation. The risk is that the regulatory response is calibrated to those outliers and then applied uniformly to the thousands of firms that present no such risk. A small conveyancing practice starting to hold client money for the first time, or two long-established local firms combining on the retirement of a senior partner, are not Axiom Ince. If the notification duty is accompanied by intrusive follow-up — information requests, questionnaires, or enhanced scrutiny triggered automatically by the notification — then a measure presented as light-touch could become a meaningful burden for ordinary firms, with no corresponding consumer benefit. Firms will want assurance that a notification is just that, and not the opening of a file.
4. Duplication and the cumulative burden
This consultation does not exist in isolation. It lands in the same few weeks as new annual accountants' report rules, the COLP/COFA separation requirements, a continuing competence consultation, and the wider client money review — let alone the coming transfer of AML supervision to the FCA, mandatory tax adviser registration, Companies House identity verification and the Data (Use and Access) Act. Each measure is individually defensible. The cumulative weight on a small firm's compliance function — which in many practices is one partner doing it alongside a full fee-earning caseload — is becoming considerable. The SRA already collects a great deal of information at authorisation, on the annual return, and through firms' standing obligations to report material changes. Firms are entitled to ask whether a new standalone notification duty genuinely adds intelligence the regulator could not otherwise obtain, or simply adds another reporting obligation to an already crowded calendar.
5. The existing duty to report — is this necessary at all?
Firms and their compliance officers are already under broad obligations to report serious or material matters to the SRA, and the Standards and Regulations require firms to be open with the regulator. A reasonable question for the consultation is whether the problem identified — the SRA not knowing about high-risk M&A activity soon enough — is really a gap in the rules, or a gap in the regulator's own use of the information already available to it. Axiom Ince has prompted considerable criticism of the SRA's own supervisory response, and firms may feel that the answer to a regulatory intelligence failure should not fall entirely on the regulated. That is a legitimate point to make, provided it is made constructively.
What firms should do now
None of these concerns is a reason to oppose the proposals outright. Earlier visibility of genuine risk is a sound objective, and a well-run firm has little to fear from telling the SRA when it merges or starts to hold client money. The objective should be to ensure the rules are drafted so that they catch real risk without sweeping up routine practice. In the meantime, firms can sensibly:
- respond to the consultation before 17 August 2026 — particularly on the definition of a notifiable ‘merger or acquisition’, the timing of advance notification, and the confidentiality of early-stage notifications;
- review their internal procedures so that compliance officers are alerted early to any merger, acquisition, team move or restructuring under discussion, and to any plan to begin holding client money;
- treat the wider client money review as the more significant development on the horizon, and begin thinking now about how the firm would demonstrate robust client money controls and clear personal accountability for them;
- keep a consolidated view of the firm's compliance obligations across all the current reform strands, so that the cumulative deadlines do not catch the practice out; and
- watch for the SRA's response to the consultation and the resulting rule changes, which will need to be reflected in the firm's compliance plan and, potentially, its risk register.
The SRA's instinct — to know about risk sooner — is the right one, and the chosen triggers are sensible. The test, as ever, will be in the drafting. A precisely defined, genuinely light-touch notification duty would be a proportionate and welcome reform. A vaguely worded one, backed by automatic scrutiny and layered onto an already heavy compliance burden, would not. The consultation period is the moment for the average firm to make sure the SRA hears the difference.
