Client funds: SRA Accounts Rules:
Wednesday, 12 August 2020
It’s now more than eight months since the new SRA (Solicitors Regulation Authority) Accounts Rules came into effect on 25 November 2019, replacing the SRA Accounts Rules 2011. However, from our reviews of client money held, residual balances are still an issue.
The SRA Accounts Rules have always required solicitors to return client money promptly to the client, or third party to whom the money is held, as soon as there’s no longer a proper reason to hold those funds (currently Rule 2.5; previously Rule 14.3). For different reasons, this doesn’t always happen, and as time elapses, it becomes more difficult to return the money to the rightful owner. The SRA continues to expect you to make intensive efforts to locate the rightful owner, including making use of social media, Companies House, the Probate Registry, the Department of Work and Pensions’ letter forwarding service and internet searches.
In spite of conducting relevant searches, the rightful owner can’t always be located. Under the SRA Accounts Rules 2011, Rules 20.1(j), 20.1(k) and 20.2 provided guidance as to how these sums could be withdrawn. The new and less prescriptive SRA Accounts Rules do not contain such guidance in the body of the rules; this is covered by Rule 5.1(c): “On the SRA’s prior written authorisation or in prescribed circumstances.” Further details of this Rule can be found here.
The guidance is basically the same as that contained in the SRA Accounts Rules 2011 in that for amounts over £500, SRA authority to withdraw the funds is required. This can be obtained by completing the Application Information Form within the guidance note. For amounts under £500, the residual balance can be paid to a charity of your choice, provided you:
- Have taken reasonable steps to return the money to the rightful owner
- Have recorded the steps taken and you retain documentation for at least six years
- Keep a central register of payments made together with charity receipts
The guidance does make it clear that expenses incurred by you in trying to locate the rightful owner cannot be deducted from the residual balance.
MHA Larking Gowen is holding a webinar on 2 September 2020 to discuss the issues encountered when adopting the new SRA Accounts Rules and how best to manage these rules. For more information and to register, please click here.
We have considerable experience with Solicitors Accounts Rules engagements and practice development. If you need any guidance on compliance, please get in touch. You can find contact details on the Our People section of the MHA Larking Gowen website. Alternatively, call 0330 024 0888 or email email@example.com.