Solicitors Regulation Authority Accounts Rules FAQs
Kate Arnott, head of professional services, partner at MHA MacIntyre Hudson, answers some popular questions surrounding the new SRA Accounts Rules.
While many of the changes in the new Solicitors Regulation Authority (SRA) Accounts Rules have been warmly welcomed, some have caused confusion, especially where detailed and prescriptive rules have been simplified or removed, leaving matters open to interpretation. Some common questions are answered here:
Q: Would retaining rent deposits on a client’s behalf be deemed as providing banking facilities?
A: Commercial rent deposits should not be held in client account. Rule 3.3 states: “Payments into, and transfers or withdrawals from a client account must be in respect of the delivery by you of regulated services.” The SRA’s belief is that the holding of rent deposits is in breach of this. Certainly, firms should not be holding new rent deposits. For deposits already held, depending on when they were first received, the SRA has suggested a more lenient approach, but professional advice should be sought.
Q: Is there a definition for ‘promptly’ with regards to when client account money, such as a cheque, must be paid into the bank?
A: There is no exact definition of ‘promptly’ in the rules. Your procedures may state, for example, that cheques should be paid into the bank within 2-3 days, which would be acceptable, but a week or more would not be considered promptly. Any delay in the current climate should be properly documented.
Q: Where a client is charged for a disbursement on a bill paid by direct debit, does the money for that disbursement need to stay in the client account until it is actually paid by the firm?
A: Many firms have a credit facility for Companies House fees and other such charges and there is no issue transferring that money before it has been paid as the liability remains with the firm. The issue that continues to be discussed relates to professional disbursements, for example, land registration charges where the liability of paying those fees is with the client not the firm.
Q: Are there any statistics on self-reporting and the nature of reports made?
A: The SRA has not issued official statistics, but law firms are understandably reluctant to report an issue that may lead to an enquiry. However, it’s important they update the breaches register, making it clear that a breach has been identified, assessed and a decision made to resolve it with consideration of the obligation to self-report.
Q: Would payment of third-party professional fees, such as estate agency fees, be deemed as banking?
A: Historically they haven’t be deemed as providing banking facilities, however the SRA is taking a much more stringent view, so this may be reassessed in future.
Q: Is an email sufficient as a written notification of costs?
An email setting out clearly what the cost is and what it relates to would be acceptable as a written notification of costs.
Our webinar recording covers guidance issued since the rules came into force, how firms have adapted them, the impact of Covid-19, common breaches and factors influencing professional indemnity premiums, and is available here.
