Cubism's offices. Credit: Wikimedia/Basher Eyre

The Solicitors Regulation Authority (SRA) has been notified of a significant shortfall in client account money that contributed to the collapse of 'New Law' firm Cubism, which closed its doors in July. 

As part of its investigation into the collapse, the firm's administrators Quantuma are now liaising with the SRA following the discovery of an unexplained client account shortfall which, according to three people close to the matter, hovers around the £250,000 mark. Two people said the shortfall was a factor leading to the firm's collapse. 

The client in question was a major U.K. franchisee of fast-food chain KFC, according to three people with detailed knowledge of the situation, which turned to Cubism following last year's widely-publicised chicken supply shortage.

Administrator Andrew Hosking of Quantuma told Legal Week: "Cubism Law was clearly suffering significant financial pressures prior to entering insolvency. During the period prior to the insolvency, a full reconciliation of all client accounts was performed, which is quite the normal check procedure necessary before advising a regulator." 

Hosking continued: "During that period of reconciliation, it was discovered that there was indeed a client account shortfall on one particular matter. This was promptly notified to the regulator [SRA] and the directors of [Cubism], who made good this discrepancy from their own personal funds.

"Accordingly, all client interests had been protected prior to the firm's demise. The shortfall and the reasons for the shortfall are currently subject to our investigation and we are liaising closely with the regulator on this matter."

Cubism – which operates on a New Law model, whereby lawyers work as self-employed consultants – last month fell into administration, with fee-earners dispersing across London to rival firms Keystone Law and Gunnercooke, among several others.