Following initial consultation in 2016, the Legal Services Board approved regulatory reforms for firms of solicitors some time ago, incorporating a new set of Solicitors Accounts Rules which were anticipated to be effective from 1 April 2019. It has recently been announced these are now to be effective from 25 November 2019.
The new rules are shorter, less prescriptive and much more outcomes focussed than the current prescriptive rules. There are now 13 rules over 6 and a half pages as opposed to 52 rules and over 80 pages. However, having removed many timescales the new rules create both uncertainty and freedom. The basic underlying principle remains – client money is to be protected and kept safe.
The Solicitors Regulation Authority (SRA) have indicated they do not expect major changes to be made to firm’s procedures, at least in the short term.
The concept of agreed fees has been removed and thus such monies will now have to be banked as client monies; the concept of professional disbursements has also been removed.
New rule 8.3 formally requires the COFA or a manager of the firm to formally review and sign off the “monthly” client account reconciliations, investigating and correcting any differences “promptly”.
Client’s own accounts are presently subject to limited record keeping and requirements – under the new rules it is confirmed these must be reconciled as client monies (every 5 weeks or more frequently). As such monies are usually held outside client ledgers to what these accounts are to be reconciled is unknown.
The old guidance has also been removed; the SRA indicated they would issue up to 15 toolkits to help guide firms through the changes – then said it would not issue anything; it is now saying guidance and potentially toolkits will follow over the coming months for both accounts’ rules and practical application of SRA principles – but no dates have been announced.
The word “promptly” appears in the new rules quite often – it will be interesting to see what the guidance will indicate is considered to be prompt.
Documented systems and controls for all solicitors’ practices covering procedures will become even more important than at present.
We’ll continue to look out for announcements and keep you updated. If you do have any questions please do not hesitate to contact me.