As a solicitor, you will often find yourself holding money on behalf of a client. This is subject to a special set of rules called the Solicitors Regulation Authority (SRA) accounts rules.
You’re probably familiar with these already, but refreshing your memory is never a bad idea.
Here’s our guide to the SRA accounts rules and how to make sure you don’t get caught out.
What are the SRA accounts rules?
The SRA is the main regulatory body for solicitors in England and Wales. It regulates over 157,000 solicitors with the aim of ensuring a consistent standard of legal practice across the country.
This sometimes means acting on behalf of the public to hold solicitors to account for malpractice. If necessary, the SRA has the power to prosecute solicitors at a tribunal.
The SRA regulates all aspects of the legal profession, but it mainly focuses on money. The SRA accounts rules are a set of requirements for any law firm that holds funds belonging to a client. These were simplified in 2019, but there’s still room for confusion.
The rules fall into three categories: keeping client money, returning client money, and keeping records of client transactions. Let’s take a look at each in turn.
Keeping client money
You’re well within your rights to hold money for a client, but it has to be done in a certain way. The key principle is that client money should always be kept separate from your own. You can do this by opening a bank account for each client or keeping all client money in a dedicated client account. Either way, the account has to meet two criteria:
- The name of the account must contain the word “client” and the name of your firm
- The account must be held at the branch or head office of a building society or bank in England or Wales
There’s been a recent change to the rules regarding fees. In the past, you could treat a client’s money as your own if it was earmarked to pay your fees. Now, this money must be treated as the client’s until you’ve billed the client for your services. Only then can you transfer it to your own account.
Returning client money
The other main principle of the SRA accounts rules is that client funds should be returned promptly. There’s no set time limit for this, but you’re expected to return money as soon as you no longer have a good reason to hold onto it.
In some cases, you may be unable to return the money because a client has died or fallen out of contact. You’re not allowed to keep it, but you may donate it to a charity. If this donation is more than £500, you must obtain authorisation from the SRA first.
As well as setting out guidelines for holding client money, the SRA accounts rules stipulate the records you need to keep. You’re required to keep detailed records of any transaction involving client money. These records should be stored safely for at least six years. The SRA also provides a list of good accounting practices. These are not compulsory, but following them will make it easier to stay compliant.
What should I do if I break the rules?
Everyone makes mistakes, and the SRA understands this. If you find yourself in breach of the accounts rules, the best course of action is to inform the SRA immediately.
Most errors can be cleared up easily, without any disciplinary action. The SRA has the power to impose fines, but these are usually reserved for persistent negligence or deliberate malpractice.
Don’t hesitate to contact us if you’re unsure of the rules or worried you’ve made a mistake.
We know the accounts rules back to front, and we’re always happy to offer advice.