Lovewell Blake: Solicitors Accounts Rules

Solicitors Accounts Rules

It is nearly two years since the Solicitors Accounts Rules were updated, and while the new rules have generally been well received, they have thrown up a couple of issues regarding client money which still require attention.

The new rules centre around keeping client money safe, with some specific requirements, such as regular bank reconciliations signed off by the COFA, maintaining a central register of client accounts and a separate record of transactions carried out in respect of the client’s own account. The rules put the onus on individual practices to set out their own procedures, timescales and controls to ensure they are compliant.

One of the main pitfalls we are seeing is regarding dormant client balances. Where there is no longer a proper reason to hold the funds, the balances should be returned ‘promptly’ to the client. It is down to the practice to ensure there are proper review procedures in place to spot where funds have lain dormant for a period of time.

The word ‘promptly’ appears frequently in the new rules, with individual practices encouraged to set out and document their own time frames which fit the needs of their individual business, whilst ensuring that client money is protected. There is an expectation that each firm will have its own explicit policies, which they will then be expected to comply with. Our experience from the past 22 months suggests that it is here that some practices are falling down, failing to put in place adequate policies.

Red flags such as breaches happening too often, those concerning high values, breaches not being corrected in a timely manner and loss of client money, are all likely to attract an auditor’s attention. As accountants, we report on the practice’s compliance with the Solicitors Accounts Rules. We assess whether any breaches or weaknesses found are considered “significant,” or have put client money at risk. Any such issues would be reported to the Solicitors Regulation Authority (SRA).

The SRA has some useful guidance on the subject here: https://www.sra.org.uk/solicitors/guidance/clients-own-account/, and we at Lovewell Blake are very happy to offer practical advice on ensuring robust policies and procedures are in place to help your practice operate in line with the Accounts Rules.

We love to work closely with our clients to put in place and review proper policies and accounting systems, that are tailored to their individual businesses.