Key Takeaways
- • Pinsent Masons experts Jessica Wicker and Mark Wilson warn that rising private credit defaults could expose professional services firms to secondary disputes, professional negligence claims and heightened regulatory scrutiny.
- • London Bridging Limited (LBL), itself in administration, has instructed lawyers to bring a claim "against solicitors and barristers" over advice received before the February 2026 collapse of UK property lender Market Financial Solutions (MFS), which followed allegations of fraud and financial irregularities.
- • The Financial Conduct Authority opened an enforcement investigation into MFS and in July pledged closer scrutiny of Annex 1 unregulated lenders; last month it restricted six Annex 1 firms over anti-money laundering controls.
- • Wicker described the MFS collapse as showing a "contagion effect" as further failures of unregulated loan notes firms, including Woodville Consultants Ltd and Godwin Capital, add to the pressure.
- • Experts advise advisers to tighten scope management, documentation and ongoing risk assessment, and to act on red flags, since officeholders may examine conduct in earlier transactions long after failure.
Summary
Professional services firms face growing legal and regulatory exposure as private credit defaults rise, according to Pinsent Masons, whose insolvency specialist Mark Wilson and corporate and financial litigation expert Jessica Wicker have warned that advisers to lenders and their intermediaries could increasingly become targets of secondary disputes and scrutiny.
The clearest example cited is the collapse of Market Financial Solutions (MFS), a UK property lender that entered insolvency in February. As first reported by The Lawyer, London Bridging Limited (LBL), also in administration, has instructed lawyers to bring a claim against solicitors and barristers it had instructed before MFS failed. The law firm implicated, Sriharans Solicitors, disputes the allegations and intends to defend the claim. The MFS collapse has triggered a Financial Conduct Authority (FCA) enforcement investigation and raised wider concerns about consumer and market risks from unregulated lending, as well as underwriting standards in corporate lending.
The MFS case is one of several recent failures among unregulated loan notes firms. Litigation funder Woodville Consultants Ltd entered administration in July, and Godwin Capital collapsed in June 2025, leaving thousands of retail investors facing potentially million-pound losses. In July, the FCA pledged to increase scrutiny of Annex 1 firms, the unregulated lenders in this space, and last month it placed restrictions on six Annex 1 firms over concerns about their anti-money laundering policies, controls and procedures.
Wicker said the rising number of failing lenders, with large deficits arising from fraud, financial scandals and corporate collapses, illustrates a "contagion effect" from the MFS collapse. She noted that as banks involved in the private credit funding cycle face greater scrutiny, litigation risk could extend to professional firms that acted for lenders or intermediaries. "Officeholders will often examine the conduct of advisers involved in earlier transactions, restructurings or litigation strategy," she said, adding that professional negligence claims by insolvency practitioners seeking to recover losses for creditors are a growing risk. She advised firms to focus on "careful scope management, documentation and ongoing risk assessment" and warned lawyers not to "turn a blind eye to obvious red flags and anti-money laundering risks."
Wilson said auditors face particular exposure and must apply "appropriate professional scepticism", probe inconsistencies and deficits in accounts, and document the basis for their conclusions. He added that professional risk does not end when an insolvency begins, as officeholders scrutinise conduct in the run-up to failure. "Professionals who failed to escalate concerns — or who continued to act despite clear warning signs — may find themselves facing claims long after the event," he said.
The clearest example cited is the collapse of Market Financial Solutions (MFS), a UK property lender that entered insolvency in February. As first reported by The Lawyer, London Bridging Limited (LBL), also in administration, has instructed lawyers to bring a claim against solicitors and barristers it had instructed before MFS failed. The law firm implicated, Sriharans Solicitors, disputes the allegations and intends to defend the claim. The MFS collapse has triggered a Financial Conduct Authority (FCA) enforcement investigation and raised wider concerns about consumer and market risks from unregulated lending, as well as underwriting standards in corporate lending.
The MFS case is one of several recent failures among unregulated loan notes firms. Litigation funder Woodville Consultants Ltd entered administration in July, and Godwin Capital collapsed in June 2025, leaving thousands of retail investors facing potentially million-pound losses. In July, the FCA pledged to increase scrutiny of Annex 1 firms, the unregulated lenders in this space, and last month it placed restrictions on six Annex 1 firms over concerns about their anti-money laundering policies, controls and procedures.
Wicker said the rising number of failing lenders, with large deficits arising from fraud, financial scandals and corporate collapses, illustrates a "contagion effect" from the MFS collapse. She noted that as banks involved in the private credit funding cycle face greater scrutiny, litigation risk could extend to professional firms that acted for lenders or intermediaries. "Officeholders will often examine the conduct of advisers involved in earlier transactions, restructurings or litigation strategy," she said, adding that professional negligence claims by insolvency practitioners seeking to recover losses for creditors are a growing risk. She advised firms to focus on "careful scope management, documentation and ongoing risk assessment" and warned lawyers not to "turn a blind eye to obvious red flags and anti-money laundering risks."
Wilson said auditors face particular exposure and must apply "appropriate professional scepticism", probe inconsistencies and deficits in accounts, and document the basis for their conclusions. He added that professional risk does not end when an insolvency begins, as officeholders scrutinise conduct in the run-up to failure. "Professionals who failed to escalate concerns — or who continued to act despite clear warning signs — may find themselves facing claims long after the event," he said.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.