Industry News

SRA Accounts Rules 2011

16 December 2016

The recent case of a solicitor who retained nearly £50,000 of client money for up to five years instead of paying professional disbursements has highlighted the importance of partners and managers, as well as those working in the accounts functions within an SRA regulated practice, understanding the SRA Accounts Rules 2011.

The partner from a legal practice in Stockport had allowed a cash shortage of just under £50,000 to build up in the firm’s client account, due to money received into the firm’s office account not being transferred into client account.  This was in breach of rule 17.1(b) which states:

‘by the end of the second working day following receipt of money from the client, a solicitor must either pay any unpaid professional disbursement, or transfer a sum for its settlement to a client account'.

Although the partner concerned remedied the breach within a month after the SRA visit in which it was discovered and ‘made full and prompt admissions of her misconduct to the SRA’, the SRA insisted upon progressing to the SDT.  A regulatory settlement agreement was subsequently agreed, in which the breaches of the SRA Accounts Rules 2011 and mandatory principles were formally acknowledged.  The partner was also rebuked and fined £2,000, in addition to costs.

This is a salutary reminder:

  • of the need to fully understand the SRA Accounts Rules 2011 in order to be able to properly supervise and direct accounts staff;
  • that it is not possible to delegate ultimate responsibility for compliance with the Rules; and 
  • that ignorance of the Rules or swift remedial action on discovering any non-compliance is no defence. 

LBS can provide training on the SRA Accounts Rules, covering the following: 

glossary;

client account;

receipt and transfer of costs;

residual balances;

authority for withdrawal from client account;

when sum in lieu of interest must be paid;

clients ledgers;

guidelines for accounting procedures & systems (Appendix 3).


The course also outlines the proposed changes, which are likely to be introduced in the SRA Accounts Rules 2017, following the SRA's consultation 'Looking to the Future: SRA Accounts Rules Review' earlier this year.  However, the 2017 Rules are not anticipated to come into force before 2018, so it will be necessary to understand the current Rules for some time yet. 

 

Somewhat ironically, the scenario of the Stockport solicitor outlined above is actually likely to be changed in the 2017 Rules: effectively, where the firm is responsible for discharging a disbursement (e.g. payment of counsels' fees), monies received from clients would not be classed as clients‘ money and would be paid directly into the office account (to be renamed the business account).  However, that is obviously subject to change in the final version of the Rules. 

If you would like more information about training on this topic, please get in touch with Ian Braithwaite Client Relationship Manager on 07432 695 289 or email ian.braithwaite@lbslegal.co.uk.

 

Ian Braithwaite
Client Relationship Manager

T: 0113 385 4483
M: 07432 695 289
E: ian.braithwaite@lbslegal.co.uk

For General Enquiries: Email enquiries@lbslegal.co.uk
24 hour Helpline 0845 0563949
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