Change in Solicitor Accounts Rules
Earlier this year the SRA announced that drastic changes will be made to the 52 rules, such that the SRA ‘rule book’ will be reduced to only 13 rules with effect from the 25th November, 2019.
There will still be an overarching principle being the protection of client money, however, the rules will be less rigid and allow an increase in professional judgement, giving the solicitor firm more freedom to meet the stands set by the SRA.
This new approach by the SRA puts each solicitor firm in the position of deciding for themselves how to protect client monies. The main principles will be as follows;
- Keeping client money secure and separate from the firms day to day trading activities
- Ensuring client money is used for its intended use
- Returning any outstanding monies promptly to the client
The onus has been put on the solicitor firm to meet the SRA standards, and the responsibility will remain with the firm.
The key rule changes from 25th November, 2019 are:
- Changes to the definition of what is ‘client money’
- Changes in how legal aid agency payments are treated
- Transferring monies - The 14 day rule has been removed
- An emphasis on ‘promptly’ and what this means to each solicitor firm
- Residual balances – the notification of residual balances has been eased
- Disbursements – A bill must be raised before funds can be transferred from the client account
- Costs – the definition of ‘cost’ includes disbursements
Can the old rules still be used?
Not entirely. The time frame to transfer monies, should the firm wish to, can be transferred within the parameters of the old rules. It is important, however, to document why these rules are still relevant to the solicitor firm. There are fundamental changes to the SRA rules which simply cannot be ignored by the solicitor firm.
What should solicitor firms do now?
- Read the reformed rules – they have been condensed to 7 pages!
- Review the firms internal controls and systems
- Document any decisions you as a firm decide on, providing rationale behind such decisions.
- Consider training so all staff are aware of the new rules / definitions and the implications thereon
From 25th November, 2019 it is mandatory for all solicitor firms to include the ‘clickable SRA logo’ – more information can be found here.
Should you wish to speak to any of our solicitor accounts specialists, then please do not hesitate to get in touch.
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