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SRA Accounts Rules
Introduction
These rules set out our requirements for when firms (including sole practices) authorised by us receive or deal with money belonging to clients, including trust money or money held on behalf of third parties. The rules apply to all firms we regulate, including all those who manage or work within such firms. Firms will need to have systems and controls in place to ensure compliance with these rules and the nature of those systems must be appropriate to the nature and volumes of client transactions dealt with and the amount of client money held or received.
PART 1: GENERAL
Application section
1.1 These rules apply to authorised bodies , their managers and employees and references to “you” in these rules should be read accordingly. 1.2 The authorised body’s managers are jointly and severally responsible for compliance by the authorised body , its managers and employees with the rules.
- 3 In relation to a licensed body , the rules apply only in respect of activities regulated by the SRA in accordance with the terms of its licence.
PART 2: CLIENT MONEY AND CLIENT ACCOUNTS
Client money
2.1 “ Client money ” is money held or received by you: (a) relating to regulated services delivered by you to a client ; (b) on behalf of a third party in relation to regulated services delivered by you (such as money held as agent, stakeholder or held to the sender’s order); (c) as a trustee or as the holder of a specified office or appointment, such as donee of a power of attorney, Court of Protection deputy or trustee of an occupational pension scheme; (d) in respect of your fees and any unpaid disbursements if held or received prior to delivery of a bill for the same. 2.2 In circumstances where the only client money you hold or receive falls within rule 2.1(d) above, and: (a) any money held for disbursements relates to costs or expenses incurred by you on behalf of your client and for which you are liable; and
(b) you do not for any other reason maintain a client account ; you are not required to hold this money in a client account if you have informed your client in advance of where and how the money will be held. Rules 2.3, 2.4, 4.1, 7, 8.1(b) and (c) and 12 do not apply to client money held outside of a client account in accordance with this rule.
- 3 You ensure that client money is paid promptly into a client account unless: (a) in relation to money falling within 2.1(c), to do so would conflict with your obligations under rules or regulations relating to your specified office or appointment; (b) the client money represents payments received from the Legal Aid Agency for your costs ; or (c) you agree in the individual circumstances an alternative arrangement in writing with the client , or the third party, for whom the money is held.
- 4 You ensure that client money is available on demand unless you agree an alternative arrangement in writing with the client , or the third party for whom the money is held.
- 5 You ensure that client money is returned promptly to the client , or the third party for whom the money is held, as soon as there is no longer any proper reason to hold those funds.
Client account
3 .1 You only maintain a client account at a branch (or the head office) of a bank or a building society in England and Wales. 3 .2 You ensure that the name of any client account includes: (a) the name of the authorised body ; and (b) the word “client” to distinguish it from any other type of account held or operated by the authorised body. 3 .3 You must not use a client account to provide banking facilities to clients or third parties. Payments into, and transfers or withdrawals from a client account must be in respect of the delivery by you of regulated services.
- 2 You may by a written agreement come to a different arrangement with the client or the third party for whom the money is held as to the payment of interest , but you must provide sufficient information to enable them to give informed consent.
Client accounting systems and controls
- 1 You keep and maintain accurate, contemporaneous, and chronological records to: (a) record in client ledgers identified by the client’s name and an appropriate description of the matter to which they relate: (i) all receipts and payments which client money on the client side of the client ledger account; (ii) all receipts and payments which are not client money and bills of costs including transactions through the authorised body’s accounts on the business side of the client ledger account; (b) maintain a list of all the balances shown by the client ledger accounts of the liabilities to clients (and third parties), with a running total of the balances; and (c) provide a cash book showing a running total of all transactions through client accounts held or operated by you.
- 2 You obtain, at least every five weeks, statements from banks , building societies and other financial institutions for all client accounts and business accounts held or operated by you.
- 3 You complete at least every five weeks, for all client accounts held or operated by you, a reconciliation of the bank or building society statement balance with the cash book balance and the client ledger total, a record of which must be signed off by the COFA or a manager of the firm. You should promptly investigate and resolve any differences shown by the reconciliation.
- 4 You keep readily accessible a central record of all bills or other written notifications of costs given by you. PART 3: DEALINGS WITH OTHER MONEY BELONGING TO CLIENTS OR THIRD PARTIES
Operation of joint accounts
9 .1 If, when acting in a client's matter, you hold or receive money jointly with the client or a third party, Part 2 of these rules does not apply save for: (a) rule 8.2 - statements from banks , building societies and other financial institutions; (b) rule 8. 4 - bills and notifications of costs.
Operation of a client's own account
10 .1 If, in the course of practice, you operate a client's own account as signatory, Part 2 of these rules does not apply save for: (a) rule 8.2 - statements from banks , building societies and other financial institutions; (b) rule 8.3 - reconciliations; (c) rule 8. 4 - bills and notifications of costs****.
Third party managed accounts
11 .1 You may enter into arrangements with a client to use a third party managed account for the purpose of receiving payments from or on behalf of, or making payments to or on behalf of, the client in respect of regulated services delivered by you to the client , only if: (a) use of the account does not result in you receiving or holding the client's money; and (b) you take reasonable steps to ensure, before accepting instructions, that the client is informed of and understands: (i) the terms of the contractual arrangements relating to the use of the third party managed account , and in particular how any fees for use of the third party managed account will be paid and who will bear them; and (ii) the client’s right to terminate the agreement and dispute payment requests made by you_._ 11 .2 You obtain regular statements from the provider of the third party managed account and ensure that these accurately reflect all transactions on the account. PART 4 : ACCOUNTANTS' REPORTS AND STORAGE AND RETENTION OF ACCOUNTING RECORDS
Obtaining and delivery of accountants' reports
12 .1 If you have, at any time during an accounting period , held or received client money , or operated a joint account or a client's own account as signatory, you must: (a) obtain an accountant's report for that accounting period within six months of the end of the period; and (b) deliver it to the SRA within six months of the end of the accounting period if the accountant’s report is qualified to show a failure to comply with these rules, such that money belonging to clients or third parties is, or has been, or is likely to be placed, at risk.
- 9 The accountant must complete and sign their report in the prescribed form.
Storage and retention of accounting records
13.1 You must store all accounting records securely and retain these for at least six years.
Supplemental notes
Made by the SRA Board on 30 May 2018. Made under sections 32, 33A, 34, 37 of the Solicitors Act 1974, section 9 of the Administration of Justice Act 1985, and section 83(5)(h) of, and paragraph 20 of Schedule 11 to, the Legal Services Act 2007.
