New SRA accounting rules 

A much simpler set of Accounts Rules will come into force in November 2019, and will for the first time give firms, managers and sole practitioners considerable flexibility on how they go about complying and dealing with client money.

A much simpler set of Accounts Rules will come into force in November 2019, and will for the first time give firms, managers and sole practitioners considerable flexibility on how they go about complying and dealing with client money.

The changes over time are substantial. In 1998 we had 50 pages of prescriptive detail enforced with rigidity by the Office for the Supervision of Solicitors and then for a short time by the SRA before it introduced its own slightly slimmed down 2011 Rules. Change since then has accelerated and there is no doubt that accounting life will be much easier from 2019. Now we have only 7 pages, but it’s still regulated and public protection and professional reputation remain paramount.

The new rules need to be read in conjunction with a new set of Principles to come into force at the same time. A sufficiently serious breach of the Accounts Rules will engage one or more Principles, but that has been the position for years so nothing new there. When dealing with money you must still act: 

  • in a way that upholds public trust and confidence in the solicitors' profession and in legal services;
  • with independence; with honesty;
  • with integrity;
  • in the best interests of each client.

So what is new?

  1. Firms will need to have systems and controls in place to ensure compliance, but ones which are appropriate to the nature and volume of client transactions and the amount of money held or received. This gives firms flexibility on how they choose to implement and monitor compliance. In other words, we can exercise professional judgment taking account of the work type and sums of money involved. We are in many ways a more diverse profession than ever with increasing numbers of small specialised practices which do not hold significant sums of transactional client money. It is therefore entirely appropriate that we should be free to judge how best to safeguard client money.
  2. The Rules impose joint and several liability on the part of Managers for compliance by the firm, its managers and employees. It’s not an entirely new concept because partners and owners have long been strictly liable for breaches, but it is now set out explicitly.
  3. The definition of “client money” is revamped and set out in Rule 2.1. If it satisfies the definition it must go into a client account.  Client money is money held or received by you:
    1. relating to regulated services delivered by you to the client;
    2. on behalf of a third party in relation to regulated services delivered by you;
    3. as a trustee or officeholder;
    4. in respect of your fees and any unpaid disbursements held or received prior to delivery of a bill. 
  1. Rules 2.1 (a) and (c) highlight the link between client money and delivery of a regulated service. The SRA has been very concerned with money laundering and the mischief of client accounts being used for the provision of banking facilities. In short, if the money received or held has no connection with the provision of a regulated service, it is not client money and should not be in client account. On top of that Rule 3.3 explicitly prohibits the provision of a banking facility through client account to clients or third parties, and also emphasises the need to connect transfers or withdrawals with the delivery of a regulated service. Rule 2.5 requires you to ensure that you don’t hold client money for longer than you need to.


  • There is nothing particularly complicated in any of this.


  1. You may no longer need a client account at all, and this is new. Rule 2.2 (a) provides that if 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 it in a client account if you have informed your client in advance of where and how the money will be held. Furthermore Rule 2.2 (c) allows you to agree alternative arrangements in writing with the client. For those practices where money has hitherto been held in client account “on account of costs and disbursements” the need for a designated client account could disappear altogether.
  2. Third Party Managed Accounts. Rule 11.1 permits you to enter into arrangements with a client to use third-party managed account for the purpose of receiving payments to and from or on behalf of clients in respect of regulated services. The client must be informed and must understand the nature of the contractual arrangement you have with the third-party, and there are some obvious safeguards ultimately targeted at ensuring that client money is protected.



What is not new?

  1. The need to keep and maintain accurate, contemporaneous, and chronological records in client ledgers showing dealings with client money;
  2. That you carry out a reconciliation at least every five weeks;
  3. That you obtain at least every five weeks statements from the bank or building society;
  4. That the account is open with a bank or building society in England and Wales;
  5. That any breaches are rectified promptly on discovery;
  6. That within six months of the end of an accounting period you deliver an accountant’s report to the SRA. There is no requirement to do this if the amounts of money passing through client account fall below the threshold is specified in rule 12.2. This threshold exemption is very useful. Even if its exceeded it may be possible to obtain a waiver;
  7. You must store and retain accounting records securely for at least six years
    The is much that is familiar and some that is refreshingly new. As long as client money is safeguarded, client account is properly used and you behave honestly and with integrity none of the new Rules should be difficult.


No comments so far - why not be the first?

(HTML markup not supported)
Solicitors public vs personal life. Ryan Beckwith v SRA 2020] EWHC 3231 (Admin), The SRA has said it will not appeal,
The SRA has at last issued a brief statement on this very significant issue. I suspect the virus has massively impacted on the Authority and I know many employees are working from home. It is not business as usual and of course, it is not
The article below was printed in the Law Society Gazette and prompted quite a discussion! In September 2018 I described how the SRA were dealing with solicitors convicted of drink driving, and the need for a more discerning and informed
The Leigh Day appeal reaffirmed some basic principles for appeals of SRA judgements
The Solicitors Disciplinary Tribunal regularly deals with applications brought by the SRA following the conclusion of criminal proceedings against solicitors. The conviction sometimes forms the entire basis of the proceedings, but otherwise
In late 2013 Aidan Loy committed three drink driving offences for which he was sentenced in December 2013 and February 2014. The second two offences were dealt with together, and as they were all committed in a very short period of time with
The recently published judgment in Forz Khan v Bar Standards Board provides insight into the professional consequences of careless talk and use of LinkedIn. It comes hot on the heels of an SDT judgment in Deborah Daniels who was prosecuted by
LawCare released striking statistics at the beginning of 2018 which show the number of lawyers calling for help is increasing. Lawyers' mental and emotional health has been slowly creeping up the agenda and even the SRA is recognising
The Solicitors Disciplinary Tribunal is now consulting on whether to reduce the standard of proof in disciplinary cases from a criminal to a civil one.
Solicitors have been warned to watch their language and it is highly likely that other regulators will adopt a similar approach.
Solicitors and firms are required to report to the SRA promptly, serious misconduct but what constitutes serious misconduct
The SRA and other regulators frequently bring disciplinary proceedings based on "a lack of integrity." But what is integrity?
In September 2017 Majid Mahmood was fined £25,000 and was the subject of a deferred period of suspension as a result of wholly inappropriate posts on his Facebook Page
On the 21 September 2017 the SRA published a warning notice to solicitors, firms and anyone else it regulates who provide tax planning services
There is a procedure in the Solicitors Disciplinary Tribunal which allows the parties to apply for disciplinary proceedings to be concluded by a Statement of Agreed Facts and Outcome.
Michael Cremin was a man who presented himself to the outside world as a Lawyer and Advocate. He had a professional profile on the web site of Cotswold Barristers Chambers, along with his photograph. Cremin was neither.
This has long been a guiding principle. Solicitors are guardians and trustees of client money and are expected to exercise proper stewardship over it. Everything that we do with client money has to in accordance with the SRA Accounts Rules
The Solicitors Disciplinary Tribunal has confirmed that it will consult on where to set the standard of proof when determining allegations of misconduct against solicitors. The Bar Standards Board is also looking at a new civil standard of
In proceedings before the Solicitors Disciplinary Tribunal it has for very many years been a requirement that a solicitor should clearly know the case that he or she has to meet. In other words, there is an obligation on the SRA to properly
The need to deal carefully, thoroughly and openly with the SRA during investigations cannot be overstated. There is an explicit professional obligation to cooperate with the Authority and to provide it with whatever information it might need
Web site powered by CommsBox™