SRA announce latest changes to Accounts Rules

The SRA have confirmed changes to the Handbook (including the Accounts Rules) – whilst the full implications for many of these amendments haven’t been fully digested we list the main points below but note that they are not due to be implemented before autumn 2018 and there will undoubtedly be further guidance issued between now and then in order to provide greater clarity. 

The full details are set out by the SRA in the two links below

Consultation response: Accounts Rules review:

https://sra.org.uk/documents/SRA/consultations/accounts-rules-our-respon...

Draft revised rules:

https://sra.org.uk/documents/SRA/consultations/accounts-rules-annex1-dra...

Overview 

  • Code of conduct to be drastically reduced (14 pages) and split into two separate codes; one for solicitors and another set for firms;
  • SRA Accounts rules to be reduced from 40 pages down to 6;
  • Prescribed nature of accounts rules pretty much removed – focusing instead on the key objective of keeping client money safe rather than prescribing how firms must run their accounts
  • References to specific time periods removed (i.e.2 and 14 days) replaced with ‘promptly’, ‘fair’ and ‘appropriate’ – this requires firms and reporting accountants to exercise their judgement 
  • Client money definition still includes POA of fees and disbursements (the originally suggestion was to remove these funds from the client money definition but this has not beeen implemented) – however where firms only receive client money in the form of advance payments for fees and disbursements (expenses incurred on behalf of client e.g. counsel fees) then there is an exemption that the firm may wish to take up allowing these monies to be paid directly into the office account and meaning they no longer need to operate a client account;
  • LAA (legal aid) funds no longer need to be paid into the client account (note the current need to put funds into the client account is only for advance monies relating to unpaid disbursements in certain circumstances) – in future all LAA is to be paid into and held in the office account;
  • An interest policy is still required however the firm can now come up with a different client agreement over whether the interest is paid to them – so long as the client gives informed consent;
  • TPMA (third party managed accounts) – the new rules provide the use of these accounts should firms wish to consider using them as an alternative to operating their own client accounts. These will be operated by a ‘payment service provider’ who will become responsible for the money (and will no longer be the responsibility of the firm). In such instances the firm will no longer hold client money and not need a report. It is expected that for most firms (whose client transactions are time sensitive e.g. conveyancing and where firms prefer to control/manage the funds) that these will not provide a viable option and so they will continue to operate their own client accounts.

The SRA plan to publish a toolkit that will operate alongside these new rules in order to provide guidance, along with case studies and question/answers that will guide firms with problem areas – this toolkit will be released prior to the rules being enforced at the end of 2018.

At bennettbrooks our specialist keep abreast of the latest changes in the sector. We also provide training and seminars on SRA compliance matters keeping firms aware of and providing support in implementing compliance processes. For more information or advice on the recent changes or any matters affecting your law firm, do not hesitate to contact me or the team on  01606 721300 or e-mail stuart.littler @bennettbrooks.co.uk