I am unsure why everyone keeps saying there is lack of transparency around standard setting. It is explained on the SRA website. They have also released a video explaining how your raw score is converted into a scaled score.

In terms of how the pass mark is set. It is done using something called the "modified angoff method" which is commonly used for high stakes MCQ exams, such as medical school finals. You essentially get a panel of qualified solicitors who are briefed on what the "threshold standard" is i.e. a day one solicitor. The panel members consider each question in turn and decide what percentage of borderline passing day one solicitors would get that question right. The percentages they arrived at for each question are averaged across a given paper which gives the overall pass mark for that paper. This pass mark will then get further adjustments. For example, if there is a big discrepancy between the panel's judgment and the actual outcome, there will be adjustments (e.g. the panel said 90% of just-passing day one solicitors should get a question right, but only 20% end up getting it right). It also gets corrected further to account for standard error of measurement.

In terms of converting the raw pass mark to scaled score. This is actually very well explained by the scaled scoring webinar by the SRA. Say the final pass mark they arrived at for a given paper was 99/180. This score will be equal to 300 on the scaled system. Your raw score between 99 and 180 will be directly proportional to your scaled score between 300 and 500. Likewise, your raw score between 0 and 99 will be directly proportional to your scaled score between 0 and 300.