As you are probably aware, the new SRA Accounts Rules come into effect on 25 November 2019.
These new rules are significantly shorter and less prescriptive than the current rules thereby allowing law firms more flexibility when it comes to designing systems and implementing procedures to look after client money.
Law firms will be able to reflect on their current systems and processes and may wish to make changes to better suit their size/type of practice.
Some firms may be able to take advantage of an exemption from the requirement to hold money in a client account whilst others may wish to explore the idea of using a TPMA (Third Party Managed Account) instead of, or as well as, their own client account.
In addition to this flexibility, the definition of client money (in the form of fees and disbursements) has changed to
‘money held or received by you in respect of your fees and any unpaid disbursements if held or received prior to delivery of a bill for the same’.
There is no longer any distinction between professional disbursements and ‘the rest’ and the current concept of ‘agreed fees’ disappears, so law firms may wish or need to review their billing procedures to ensure compliance with this rule.
For those firms operating client’s own account(s) there is an additional requirement to reconcile this/these account(s) at least every five weeks.
What should accountants be doing?
Principals and staff involved in SRA assignments need to make sure they are fully conversant with the new rules. The rules are available on the SRA website www.sra.org.uk/sra/news/press/standards-regulations-start-date-2019.page
Mercia are running SRA Accounts Rules Update courses in the autumn which will cover the new rules and guidance issued by the SRA. In addition, we will be updating the Solicitors’ Accounts Rules Manual to deal with these changes. Further details on both of these can be found here.
The rule changes also present an opportunity to engage with your clients to provide help and assistance with any changes to their systems and procedures they may need/wish to make. We have written a client letter to update and prepare your solicitor clients for these changes.