The regulator’s aim has been to give clarification (it says many law firms have found part of the wording unclear) and to reduce the burden on firms.
However, in December the SRA said it was putting introduction of the amendments on hold, at least for now. In an online statement, it said: “In light of recent events, including Axiom and a general increase in the number and size of interventions, we have decided that it is necessary to review our consumer protection arrangements.
“This includes reviewing risks to client money and the effectiveness of our current arrangements for protecting against them. We have reflected carefully and do not feel that it is the right time to make minor changes to the Accounts Rules while we are reviewing these wider issues.
“If we do not change our policy on our Accounts Rules following this review, we then plan to seek approval for these minor changes.”
The key amendments the SRA has been intending to implement are briefly headlined below.
Pending a final decision whether or not to seek final LSB approval for the changes, firms will find it reassuring that the SRA at least recognises that there is a level of uncertainty in these areas.
- Firms taking money for costs in advance of work being done (Part 2 Client money and client accounts). An amendment would clarify that money transferred into client account is protected until costs are actually incurred and a bill sent. Firms have found it unclear when it would be appropriate to take client money for anticipated costs from client account into their business account.
- Reimbursements for money spent on behalf of the client (r4.3 and 4.4) A bill for disbursements incurred and paid (or written notification of costs) would not be required before money can be transferred from client to office account. Clients would need to understand how their money will be used; and confirmed their instructions for disbursements to be incurred, paid and then transferred.
- Operation of a client’s own account and reconciliations (r10) (e.g. where the solicitor is a court-appointed deputy). The SRA has said some firms have found it difficult under the existing rules to comply with the regulatory requirements (e.g. reconciliation of client accounts is required every five weeks). The rules could be relaxed, for example lengthening the period for reconciliations to every 16 weeks; and a requirement to maintain a central register of clients’ own accounts under the firm’s control.
We will be watching closely to see which direction the SRA takes with this. In the meantime, it may be prudent for firms who are directly impacted by the above parts of the Accounts Rules to adopt the potentially amendments as best practice to avoid any inadvertent problems arising later on.
This topic is covered in our new 4-Hour SRA Webinar Bundle, learn more about these proposed changes when you book today.