Version 21 of the Handbook was published on 6 December 2018. For more information, please click "History" above.
SRA Accounts Rules 2011
Preamble
Authority: made by the Solicitors Regulation Authority Board under sections 32, 33A, 34, 37, 79 and 80 of the Solicitors Act 1974, section 9 of the Administration of Justice Act 1985, section 83(5)(h) of, and paragraph 20 of Schedule 11 to, the Legal Services Act 2007 with the approval of the Legal Services Board;
date: 6 October 2011;
replacing: the Solicitors' Accounts Rules 1998;
regulating: the accounts of solicitors and their employees, registered European lawyers and their employees, registered foreign lawyers, recognised bodies and their managers and employees, and licensed bodies and their managers and employees, in respect of practice in England and Wales.
For the definition of words in italics see rule 2 - Interpretation.
Introduction
The Principles set out in the Handbook apply to all aspects of practice, including the handling of client money. Those which are particularly relevant to these rules are that you must:
- protect client money and assets;
- act with integrity;
- behave in a way that maintains the trust the public places in you and in the provision of legal services;
- comply with your legal and regulatory obligations and deal with your regulators and ombudsmen in an open, timely and co-operative manner; and
- run your business or carry out your role in the business effectively and in accordance with proper governance and sound financial and risk management principles.
The desired outcomes which apply to these rules are that:
- client money is safe;
- clients and the public have confidence that client money held by firms will be safe;
- firms are managed in such a way, and with appropriate systems and procedures in place, so as to safeguard client money;
- client accounts are used for appropriate purposes only; and
- the SRA is aware of issues in a firm relevant to the protection of client money.
Underlying principles which are specific to the accounts rules are set out in rule 1 below.
These rules apply to all those who carry on or work in a firm and to the firm itself (see rules 4 and 5). In relation to a multi-disciplinary practice, the rules apply only in respect of those activities for which the practice is regulated by the SRA, and are concerned only with money handled by the practice which relates to those regulated activities.
Part 1: General
Rule 1: The overarching objective and underlying principles
- 1.1
-
The purpose of these rules is to keep client money safe. This aim must always be borne in mind in the application of these rules.
- 1.2
-
You
must comply with the Principles set out in the Handbook, and the outcomes in Chapter 7 of the SRA Code of Conduct in relation to the effective financial management of the firm, and in particular must:
- (a)
-
keep other people's money separate from money belonging to you or your firm;
- (b)
-
keep other people's money safely in a bank or building society account identifiable as a client account (except when the rules specifically provide otherwise);
- (c)
-
use each client's money for that client's matters only;
- (d)
-
use money held as trustee of a trust for the purposes of that trust only;
- (e)
-
establish and maintain proper accounting systems, and proper internal controls over those systems, to ensure compliance with the rules;
- (f)
-
keep proper accounting records to show accurately the position with regard to the money held for each client and trust;
- (g)
-
account for interest on other people's money in accordance with the rules;
- (h)
-
co-operate with the SRA in checking compliance with the rules; and
- (i)
-
deliver annual accountants' reports as required by the rules.
Rule 2: Interpretation
- 2.1
-
The guidance notes do not form part of the rules.
- 2.2
-
The SRA Handbook Glossary 2012 shall apply and, unless the context otherwise requires:
- (a)
-
all italicised terms shall be defined; and
- (b)
-
all terms shall be interpreted,
in accordance with the Glossary.
- 2.3
-
References to the Legal Aid Agency are to be read, where appropriate, as including the Legal Services Commission.
Rule 3: Geographical scope
- 3.1
-
Parts 1 to 6 of these rules apply to practice carried on from an office in England and Wales. Part 7 of these rules applies to the practice of an REL from an office in England and Wales of an Exempt European Practice.
Rule 4: Persons governed by the rules
- 4.1
-
Save as provided in rule 4.2 below, Parts 1 to 6 of these rules apply to you.
- 4.2
-
In relation to an MDP, the rules apply to you only in respect of your regulated activities.
- 4.3
-
Part 6 of the rules (accountants' reports) also applies to reporting accountants.
- 4.4
-
If you have held or received client money, but no longer do so, whether or not you continue in practice, you continue to be bound by some of the rules.
Rule 5: Persons exempt from the rules
- 5.1
-
The rules do not apply to you when:
- (a)
-
practising as an employee of:
- (i)
-
a local authority;
- (ii)
-
statutory undertakers
;
- (iii)
-
a body whose accounts are audited by the Comptroller and Auditor General;
- (iv)
-
the Duchy of Lancaster;
- (v)
-
the Duchy of Cornwall; or
- (vi)
-
the Church Commissioners; or
- (b)
-
practising as the Solicitor of the City of London; or
- (c)
-
carrying out the functions of:
- (i)
-
a coroner or other judicial office; or
- (ii)
-
a sheriff or under-sheriff; or
- (d)
-
practising as a manager or employee of an authorised non-SRA firm, and acting within the scope of that firm's authorisation to practise.
Rule 6: Principals' responsibility for compliance
- 6.1
-
All the principals in a firm must ensure compliance with the rules by the principals themselves and by everyone employed in the firm. This duty also extends to the directors of a recognised body or licensed body which is a company, or to the members of a recognised body or licensed body which is an LLP. It also extends to the COFA of a firm (whether a manager or non-manager).
Rule 7: Duty to remedy breaches
- 7.1
-
Any breach of the rules must be remedied promptly upon discovery. This includes the replacement of any money improperly withheld or withdrawn from a client account.
- 7.2
-
In a private practice, the duty to remedy breaches rests not only on the person causing the breach, but also on all the principals in the firm. This duty extends to replacing missing client money from the principals' own resources, even if the money has been misappropriated by an employee or another principal, and whether or not a claim is subsequently made on the firm's insurance or the Compensation Fund.
Rule 8: Liquidators, trustees in bankruptcy, Court of Protection deputies and trustees of occupational pension schemes
- 8.1
-
If in the course of practice you act as:
- (a)
-
a liquidator,
- (b)
-
a trustee in bankruptcy,
- (c)
-
a Court of Protection deputy, or
- (d)
-
a trustee of an occupational pension scheme which is subject to section 47(1)(a) of the Pensions Act 1995 (appointment of an auditor) and section 49(1) (separate bank account) and regulations under section 49(2)(b) (books and records),
you
must comply with:
- (i)
-
the appropriate statutory rules or regulations;
- (ii)
-
the Principles referred to, and the underlying principles set out, in rule 1; and
- (iii)
-
the requirements of rule 8.2 to 8.4 below;
and will then be deemed to have satisfactorily complied with the Accounts Rules.
- 8.2
-
In respect of any records kept under the appropriate statutory rules, there must also be compliance with:
- (a)
-
rule 29.15 - bills and notifications of costs;
- (b)
-
rule 29.17(c) - retention of records;
- (c)
-
rule 29.20 - centrally kept records;
- (d)
-
rule 31- production of documents, information and explanations; and
- (e)
-
rule 43A.1- reporting accountant to check compliance.
- 8.3
-
If a liquidator or trustee in bankruptcy uses any of the firm's client accounts for holding money pending transfer to the Insolvency Services Account or to a local bank account authorised by the Secretary of State, he or she must comply with the Accounts Rules in all respects whilst the money is held in the client account.
- 8.4
-
If the appropriate statutory rules or regulations do not govern the holding or receipt of client money in a particular situation (for example, money below a certain limit), you must comply with the Accounts Rules in all respects in relation to that money.
Rule 9: Joint accounts
- 9.1
-
If, when acting in a client's matter, you hold or receive money jointly with the client, another practice or another third party, the rules in general do not apply, but the following must be complied with:
- (a)
-
rule 29.11 - statements from banks, building societies and other financial institutions;
- (b)
-
rule 29.15 - bills and notifications of costs;
- (c)
-
rule 29.17(b)(ii) - retention of statements and passbooks;
- (d)
-
rule 29.21 - centrally kept records;
- (e)
-
rule 31 - production of documents, information and explanations; and
- (f)
-
rule 43A.1- reporting accountant to check compliance.
A joint account is not a client account but money held in a joint account is client money.
Operation of the joint account by you only
- 9.2
-
If the joint account is operated only by you, you must ensure that you receive the statements from the bank, building society or other financial institution in accordance with rule 29.11, and have possession of any passbooks.
Shared operation of the joint account
- 9.3
-
If you share the operation of the joint account with the client, another practice or another third party, you must:
- (a)
-
ensure that you receive the statements or duplicate statements from the bank, building society or other financial institution in accordance with rule 29.11, and retain them in accordance with rule 29.17(b)(ii); and
- (b)
-
ensure that you either have possession of any passbooks, or take copies of the passbook entries before handing any passbook to the other signatory, and retain them in accordance with rule 29.17(b)(ii).
Operation of the joint account by the other account holder
- 9.4
-
If the joint account is operated solely by the other account holder, you must ensure that you receive the statements or duplicate statements from the bank, building society or other financial institution in accordance with rule 29.11, and retain them in accordance with rule 29.17(b)(ii).
Rule 10: Operation of a client's own account
- 10.1
-
If, in the course of practice, you operate a client's own account as signatory (for example, as donee under a power of attorney), the rules in general do not apply, but the following must be complied with:
- (a)
-
rule 30.1 to 30.4 - accounting records for clients' own accounts;
- (b)
-
rule 31 - production of documents, information and explanations; and
- (c)
-
rule 43A.1 - reporting accountant to check compliance.
Operation by you only
- 10.2
-
If the account is operated by you only, you must ensure that you receive the statements from the bank, building society or other financial institution in accordance with rule 30, and have possession of any passbooks.
Shared operation of the account
- 10.3
-
If you share the operation of the account with the client or a co-attorney outside your firm, you must:
- (a)
-
ensure that you receive the statements or duplicate statements from the bank, building society or other financial institution and retain them in accordance with rule 30.1 to 30.4; and
- (b)
-
ensure that you either have possession of any passbooks, or take copies of the passbook entries before handing any passbook to the client or co-attorney, and retain them in accordance with rule 30.1 to 30.4.
Operation of the account for a limited purpose
- 10.4
-
If you are given authority (whether as attorney or otherwise) to operate the account for a limited purpose only, such as the taking up of a share rights issue during the client's temporary absence, you need not receive statements or possess passbooks, provided that you retain details of all cheques drawn or paid in, and retain copies of all passbook entries, relating to the transaction, and retain them in accordance with rule 30.1 to 30.3.
Application
- 10.5
-
This rule applies only to private practice. It does not cover money held or received by a donee of a power of attorney acting in a purely personal capacity outside any legal practice (see rule 4, guidance notes (iii)-(iv)).
- 10.6
-
A "client's own account" covers all accounts in a client's own name, whether opened by the client himself or herself, or by you on the client's instructions under rule 15.1(b). A "client's own account" also includes an account opened in the name of a person designated by the client under rule 15.1(b).
Rule 11: Firm's rights not affected
- 11.1
-
Nothing in these rules deprives you of any recourse or right, whether by way of lien, set off, counterclaim, charge or otherwise, against money standing to the credit of a client account.
Rule 12: Categories of money
- 12.1
-
These rules do not apply to out-of-scope money, save to the limited extent specified in the rules. All other money held or received in the course of practice falls into one or other of the following categories:
- (a)
-
"client money" - money held or received for a client or as trustee, and all other money which is not office money; or
- (b)
-
"office money" - money which belongs to you or your firm.
- 12.2
-
"Client money" includes money held or received:
- (a)
-
as trustee;
- (b)
-
as agent, bailee, stakeholder, or as the donee of a power of attorney, or as a liquidator, trustee in bankruptcy, Court of Protection deputy or trustee of an occupational pension scheme;
- (c)
-
for payment of unpaid professional disbursements;
- (d)
-
for payment of stamp duty land tax, Land Registry registration fees, telegraphic transfer fees and court fees (but see also guidance note (i));
- (e)
-
as a payment on account of costs generally;
- (f)
-
as a financial benefit paid in respect of a client, unless the client has given you prior authority to retain it (see Chapter 1, outcome 1.15 and indicative behaviour 1.20 of the SRA Code of Conduct);
- (g)
-
jointly with another person outside the firm.
- 12.3
-
Money held to the sender's order is client money.
- (a)
-
If money is accepted on such terms, it must be held in a client account.
- (b)
-
However, a cheque or draft sent to you on terms that the cheque or draft (as opposed to the money) is held to the sender's order must not be presented for payment without the sender's consent.
- (c)
-
The recipient is always subject to a professional obligation to return the money, or the cheque or draft, to the sender on demand.
- 12.4
-
An advance to a client which is paid into a client account under rule 14.2(b) becomes client money.
- 12.5
-
A cheque in respect of damages and costs, made payable to the client but paid into a client account under rule 14.2(e), becomes client money.
- 12.6
-
Endorsing a cheque or draft over to a client or employer in the course of practice amounts to receiving client money. Even if no other client money is held or received, you must comply with some provisions of the rules, e.g.:
- (a)
-
rule 7 (duty to remedy breaches);
- (b)
-
rule 29 (accounting records for client accounts, etc.);
- (c)
-
rule 31 (production of documents, information and explanations);
- (d)
-
rule 32A (obtaining and delivery of accountants' reports).
- 12.7
-
"Office money" includes:
- (a)
-
money held or received in connection with running the firm; for example, PAYE, or VAT on the firm's fees;
- (b)
-
interest
on general client accounts; the bank or building society should be instructed to credit such interest to the office account - but see also rule 14.2(d);
- (c)
-
payments received in respect of:
- (i)
-
fees
due to the firm against a bill or written notification of costs incurred, which has been given or sent in accordance with rule 17.2;
- (ii)
-
disbursements
already paid by the firm;
- (iii)
-
disbursements
incurred but not yet paid by the firm, but excluding unpaid professional disbursements;
- (iv)
-
money paid for or towards an agreed fee;
- (d)
-
money held in a client account and earmarked for costs under rule 17.3;
- (e)
-
money held or received from the Legal Aid Agency as a regular payment (see rule 19.2).
- 12.8
-
If a firm conducts a personal or office transaction - for instance, conveyancing - for a principal (or for a number of principals), money held or received on behalf of the principal(s) is office money. However, other circumstances may mean that the money is client money, for example:
- (a)
-
If the firm also acts for a lender, money held or received on behalf of the lender is client money.
- (b)
-
If the firm acts for a principal and, for example, his or her spouse jointly (assuming the spouse is not a partner in the practice), money received on their joint behalf is client money.
- (c)
-
If the firm acts for an assistant solicitor, consultant or non-solicitor employee, or (if it is a company) a director, or (if it is an LLP) a member, he or she is regarded as a client of the firm, and money received for him or her is client money - even if he or she conducts the matter personally.
Part 2: Client money and operation of a client account
Rule 13: Client accounts
- 13.1
-
If you hold or receive client money, you must keep one or more client accounts (unless all the client money is always dealt with outside any client account in accordance with rule 8, rule 9, rule 15 or rule 16).
- 13.2
-
A "client account" is an account of a practice kept at a bank or building society for holding client money, in accordance with the requirements of this part of the rules.
- 13.3
-
The client account(s) of:
- (a)
-
a sole practitioner must be in the name under which the sole practitioner is recognised by the SRA, whether that is the sole practitioner's own name or the firm name;
- (b)
-
a partnership must be in the name under which the partnership is recognised by the SRA;
- (c)
-
an incorporated practice must be in the company name, or the name of the LLP, as registered at Companies House;
- (d)
-
in-house solicitors or RELs must be in the name of the current principal solicitor/REL or solicitors/RELs;
- (e)
-
trustees
, where all the trustees of a trust are managers and/or employees of the same recognised body or licensed body, must be either in the name of the recognised body/licensed body or in the name of the trustee(s);
- (f)
-
trustees
, where all the trustees of a trust are the sole practitioner and/or his or her employees, must be either in the name under which the sole practitioner is recognised by the SRA or in the name of the trustee(s);
and the name of the account must also include the word "client" in full (an abbreviation is not acceptable).
- 13.4
-
A client account must be:
- (a)
-
a bank account at a branch (or a bank's head office) in England and Wales; or
- (b)
-
a building society account at a branch (or a society's head office) in England and Wales.
- 13.5
-
There are two types of client account:
- (a)
-
a "separate designated client account", which is an account for money relating to a single client, other person or trust, and which includes in its title, in addition to the requirements of rule 13.3 above, a reference to the identity of the client, other person or trust; and
- (b)
-
a "general client account", which is any other client account.
- 13.6
-
[Deleted]
- 13.7
-
The clients of a licensed body must be informed at the outset of the retainer, or during the course of the retainer as appropriate, if the licensed body is (or becomes) owned by a bank or building society and its client account is held at that bank or building society (or another bank or building society in the same group).
- 13.8
-
Money held in a client account must be immediately available, even at the sacrifice of interest, unless the client otherwise instructs, or the circumstances clearly indicate otherwise.
Rule 14: Use of a client account
- 14.1
-
Client money
must without delay be paid into a client account, and must be held in a client account, except when the rules provide to the contrary (see rules 8, 9, 15, 16, 17 and 19).
- 14.2
-
Only client money may be paid into or held in a client account, except:
- (a)
-
an amount of the firm's own money required to open or maintain the account;
- (b)
-
an advance from the firm to fund a payment on behalf of a client or trust in excess of funds held for that client or trust; the sum becomes client money on payment into the account (for interest on client money, see rule 22.2(c));
- (c)
-
money to replace any sum which for any reason has been drawn from the account in breach of rule 20; the replacement money becomes client money on payment into the account;
- (d)
-
interest
which is paid into a client account to enable payment from the client account of all money owed to the client; and
- (e)
-
a cheque in respect of damages and costs, made payable to the client, which is paid into the client account pursuant to the Society's Conditional Fee Agreement; the sum becomes client money on payment into the account (but see rule 17.1(e) for the transfer of the costs element from client account);
and except when the rules provide to the contrary (see guidance note (ii) below).
- 14.3
-
Client money
must be returned to the client (or other person on whose behalf the money is held) promptly, as soon as there is no longer any proper reason to retain those funds. Payments received after you have already accounted to the client, for example by way of a refund, must be paid to the client promptly.
- 14.4
-
You
must promptly inform a client (or other person on whose behalf the money is held) in writing of the amount of any client money retained at the end of a matter (or the substantial conclusion of a matter), and the reason for that retention. You must inform the client (or other person) in writing at least once every twelve months thereafter of the amount of client money still held and the reason for the retention, for as long as you continue to hold that money.
- 14.5
-
You
must not provide banking facilities through a client account. Payments into, and transfers or withdrawals from, a client account must be in respect of instructions relating to an underlying transaction (and the funds arising therefrom) or to a service forming part of your normal regulated activities.
Rule 15: Client money withheld from client account on client's instructions
- 15.1
-
Client money
may be:
- (a)
-
held by you outside a client account by, for example, retaining it in the firm's safe in the form of cash, or placing it in an account in the firm's name which is not a client account, such as an account outside England and Wales; or
- (b)
-
paid into an account at a bank, building society or other financial institution opened in the name of the client or of a person designated by the client;
but only if the client instructs you to that effect for the client's own convenience, and only if the instructions are given in writing, or are given by other means and confirmed by you to the client in writing.
- 15.2
-
It is improper to seek blanket agreements, through standard terms of business or otherwise, to hold client money outside a client account.
- 15.3
-
If a client instructs you to hold part only of a payment in accordance with rule 15.1(a) or (b), the entire payment must first be placed in a client account, before transferring the relevant part out and dealing with it in accordance with the client's instructions.
- 15.4
-
A payment on account of costs received from a person who is funding all or part of your fees may be withheld from a client account on the instructions of that person given in accordance with rule 15.1.
Rule 16: Other client money withheld from a client account
- 16.1
-
The following categories of client money may be withheld from a client account:
- (a)
-
cash received and without delay paid in cash in the ordinary course of business to the client or, on the client's behalf, to a third party, or paid in cash in the execution of a trust to a beneficiary or third party;
- (b)
-
a cheque or draft received and endorsed over in the ordinary course of business to the client or, on the client's behalf, to a third party, or without delay endorsed over in the execution of a trust to a beneficiary or third party;
- (c)
-
money withheld from a client account on instructions under rule 15;
- (d)
-
money which, in accordance with a trustee's powers, is paid into or retained in an account of the trustee which is not a client account (for example, an account outside England and Wales), or properly retained in cash in the performance of the trustee's duties;
- (e)
-
unpaid professional disbursements included in a payment of costs dealt with under rule 17.1(b);
- (f)
-
in respect of payments from the Legal Aid Agency:
- (i)
-
advance payments from the Legal Aid Agency withheld from client account (see rule 19.1(a)); and
- (ii)
-
unpaid professional disbursements included in a payment of costs from the Legal Aid Agency (see rule 19.1(b)); and
- (g)
-
money withheld from a client account on the written authorisation of the SRA. The SRA may impose a condition that the money is paid to a charity which gives an indemnity against any legitimate claim subsequently made for the sum received.
Rule 17: Receipt and transfer of costs
- 17.1
-
When you receive money paid in full or part settlement of your bill (or other notification of costs) you must follow one of the following five options:
- (a)
-
determine the composition of the payment without delay, and deal with the money accordingly:
- (i)
-
if the sum comprises office money and/or out-of-scope money only, it must be placed in an office account;
- (ii)
-
if the sum comprises only client money, the entire sum must be placed in a client account;
- (iii)
-
if the sum includes both office money and client money, or client money and out-of-scope money, or client money, out-of-scope money and office money, you must follow rule 18 (receipt of mixed payments); or
- (b)
-
ascertain that the payment comprises only
office money
and/or
out-of-scope money
, and/or
client money
in the form of
professional disbursements
incurred but not yet paid, and deal with the payment as follows:
- (i)
-
place the entire sum in an office account at a bank or building society branch (or head office) in England and Wales; and
- (ii)
-
by the end of the second working day following receipt, either pay any unpaid professional disbursement, or transfer a sum for its settlement to a client account; or
- (c)
-
pay the entire sum into a
client account
(regardless of its composition), and transfer any
office money
and/or
out-of-scope money
out of the
client account
within 14 days of receipt; or
- (d)
-
on receipt of
costs
from the Legal Aid Agency, follow the option in rule 19.1(b); or
- (e)
-
in relation to a cheque paid into a
client account
under rule 14.2(e), transfer the
costs
element out of the
client account
within 14 days of receipt.
- 17.2
-
If you properly require payment of your fees from money held for a client or trust in a client account, you must first give or send a bill of costs, or other written notification of the costs incurred, to the client or the paying party.
- 17.3
-
Once you have complied with rule 17.2 above, the money earmarked for costs becomes office money and must be transferred out of the client account within 14 days.
- 17.4
-
A payment on account of costs generally in respect of those activities for which the practice is regulated by the SRA is client money, and must be held in a client account until you have complied with rule 17.2 above. (For an exception in the case of legal aid payments, see rule 19.1(a). See also rule 18 on dealing with mixed payments of client money and/or out-of-scope money when part of a payment on account of costs relates to activities not regulated by the SRA.)
- 17.5
-
A payment for an agreed fee must be paid into an office account. An "agreed fee" is one that is fixed - not a fee that can be varied upwards, nor a fee that is dependent on the transaction being completed. An agreed fee must be evidenced in writing.
- 17.6
-
You
will not be in breach of rule 17 as a result of a misdirected electronic payment or other direct transfer from a client or paying third party, provided:
- (a)
-
appropriate systems are in place to ensure compliance;
- (b)
-
appropriate instructions were given to the client or paying third party;
- (c)
-
the client's or paying third party's mistake is remedied promptly upon discovery; and
- (d)
-
appropriate steps are taken to avoid future errors by the client or paying third party.
- 17.7
-
Costs
transferred out of a client account in accordance with rule 17.2 and 17.3 must be specific sums relating to the bill or other written notification of costs, and covered by the amount held for the particular client or trust. Round sum withdrawals on account of costs are a breach of the rules.
- 17.8
-
In the case of a trust of which the only trustee(s) are within the firm, the paying party will be the trustee(s) themselves. You must keep the original bill or notification of costs on the file, in addition to complying with rule 29.15 (central record or file of copy bills, etc.).
- 17.9
-
Undrawn costs must not remain in a client account as a "cushion" against any future errors which could result in a shortage on that account, and cannot be regarded as available to set off against any general shortage on client account.
Rule 18: Receipt of mixed payments
- 18.1
-
A "mixed payment" is one which includes client money as well as office money and/or out-of-scope money.
- 18.2
-
A mixed payment must either:
- (a)
-
be split between a client account and office account as appropriate; or
- (b)
-
be placed without delay in a client account.
- 18.3
-
If the entire payment is placed in a client account, all office money and/or out-of-scope money must be transferred out of the client account within 14 days of receipt.
Rule 19: Treatment of payments to legal aid practitioners
Payments from the Legal Aid Agency
- 19.1
-
Two special dispensations apply to payments (other than regular payments) from the Legal Aid Agency:
- (a)
-
An advance payment, which may include client money, may be placed in an office account, provided the Legal Aid Agency instructs in writing that this may be done.
- (b)
-
A payment for costs (interim and/or final) may be paid into an office account at a bank or building society branch (or head office) in England and Wales, regardless of whether it consists wholly of office money, or is mixed with client money in the form of:
- (i)
-
advance payments for fees or disbursements; or
- (ii)
-
money for unpaid professional disbursements;
provided all money for payment of disbursements is transferred to a client account (or the disbursements paid) within 14 days of receipt.
- 19.2
-
The following provisions apply to regular payments from the Legal Aid Agency:
- (a)
-
"Regular payments" (which are office money) are:
- (i)
-
standard monthly payments paid by the Legal Aid Agency under the civil legal aid contracting arrangements;
- (ii)
-
standard monthly payments paid by the Legal Aid Agency under the criminal legal aid contracting arrangements; and
- (iii)
-
any other payments for work done or to be done received from the Legal Aid Agency under an arrangement for payments on a regular basis.
- (b)
-
Regular payments
must be paid into an office account at a bank or building society branch (or head office) in England and Wales.
- (c)
-
You
must within 28 days of submitting a report to the Legal Aid Agency, notifying completion of a matter, either:
- (i)
-
pay any unpaid professional disbursement(s), or
- (ii)
-
transfer to a client account a sum equivalent to the amount of any unpaid professional disbursement(s),
relating to that matter.
- (d)
-
In cases where the Legal Aid Agency permits you to submit reports at various stages during a matter rather than only at the end of a matter, the requirement in rule 19.2(c) above applies to any unpaid professional disbursement(s) included in each report so submitted.
Payments from a third party
- 19.3
-
If the Legal Aid Agency has paid any costs to you or a previously nominated firm in a matter (advice and assistance or legal help costs, advance payments or interim costs), or has paid professional disbursements direct, and costs are subsequently settled by a third party:
- (a)
-
The entire third party payment must be paid into a client account.
- (b)
-
A sum representing the payments made by the Legal Aid Agency must be retained in the client account.
- (c)
-
Any balance belonging to you must be transferred to an office account within 14 days of your sending a report to the Legal Aid Agency containing details of the third party payment.
- (d)
-
The sum retained in the client account as representing payments made by the Legal Aid Agency must be:
- (i)
-
either recorded in the individual client's ledger account, and identified as the Legal Aid Agency's money;
- (ii)
-
or recorded in a ledger account in the Legal Aid Agency's name, and identified by reference to the client or matter;
and kept in the client account until notification from the Legal Aid Agency that it has recouped an equivalent sum from subsequent payments due to you. The retained sum must be transferred to an office account within 14 days of notification.
- 19.4
-
Any part of a third party payment relating to unpaid professional disbursements or outstanding costs of the client's previous firm is client money, and must be kept in a client account until you pay the professional disbursement or outstanding costs.
Rule 20: Withdrawals from a client account
- 20.1
-
Client money
may only be withdrawn from a client account when it is:
- (a)
-
properly required for a payment to or on behalf of the client (or other person on whose behalf the money is being held);
- (b)
-
properly required for a payment in the execution of a particular trust, including the purchase of an investment (other than money) in accordance with the trustee's powers;
- (c)
-
properly required for payment of a disbursement on behalf of the client or trust;
- (d)
-
properly required in full or partial reimbursement of money spent by you on behalf of the client or trust;
- (e)
-
transferred to another client account;
- (f)
-
withdrawn on the client's instructions, provided the instructions are for the client's convenience and are given in writing, or are given by other means and confirmed by you to the client in writing;
- (g)
-
transferred to an account other than a client account (such as an account outside England and Wales), or retained in cash, by a trustee in the proper performance of his or her duties;
- (h)
-
a refund to you of an advance no longer required to fund a payment on behalf of a client or trust (see rule 14.2(b));
- (i)
-
money which has been paid into the account in breach of the rules (for example, money paid into the wrong separate designated client account) - see rule 20.5 below;
- (j)
-
money not covered by (a) to (i) above, where you comply with the conditions set out in rule 20.2; or
- (k)
-
money not covered by (a) to (i) above, withdrawn from the account on the written authorisation of the SRA. The SRA may impose a condition that you pay the money to a charity which gives an indemnity against any legitimate claim subsequently made for the sum received.
- 20.2
-
A withdrawal of client money under rule 20.1(j) above may be made only where the amount held does not exceed £500 in relation to any one individual client or trust matter and you:
- (a)
-
establish the identity of the owner of the money, or make reasonable attempts to do so;
- (b)
-
make adequate attempts to ascertain the proper destination of the money, and to return it to the rightful owner, unless the reasonable costs of doing so are likely to be excessive in relation to the amount held;
- (c)
-
pay the funds to a charity;
- (d)
-
record the steps taken in accordance with rule 20.2(a)-(c) above and retain those records, together with all relevant documentation (including receipts from the charity), in accordance with rule 29.16 and 29.17(a); and
- (e)
-
keep a central register in accordance with rule 29.22.
- 20.3
-
Office money
may only be withdrawn from a client account when it is:
- (a)
-
money properly paid into the account to open or maintain it under rule 14.2(a);
- (b)
-
properly required for payment of your costs under rule 17.2 and 17.3;
- (c)
-
the whole or part of a payment into a client account under rule 17.1(c);
- (d)
-
part of a mixed payment placed in a client account under rule 18.2(b); or
- (e)
-
money which has been paid into a client account in breach of the rules (for example, interest wrongly credited to a general client account) - see rule 20.5 below.
- 20.4
-
Out-of-scope money
must be withdrawn from a client account in accordance with rules 17.1(a), 17.1(c) and 18 as appropriate.
- 20.5
-
Money which has been paid into a client account in breach of the rules must be withdrawn from the client account promptly upon discovery.
- 20.6
-
Money withdrawn in relation to a particular client or trust from a general client account must not exceed the money held on behalf of that client or trust in all your general client accounts (except as provided in rule 20.7 below).
- 20.7
-
You
may make a payment in respect of a particular client or trust out of a general client account, even if no money (or insufficient money) is held for that client or trust in your general client account(s), provided:
- (a)
-
sufficient money is held for that client or trust in a separate designated client account; and
- (b)
-
the appropriate transfer from the separate designated client account to a general client account is made immediately.
- 20.8
-
Money held for a client or trust in a separate designated client account must not be used for payments for another client or trust.
- 20.9
-
A client account must not be overdrawn, except in the following circumstances:
- (a)
-
A separate designated client account operated in your capacity as trustee can be overdrawn if you make payments on behalf of the trust (for example, inheritance tax) before realising sufficient assets to cover the payments.
- (b)
-
If a sole practitioner dies and his or her client accounts are frozen, overdrawn client accounts can be operated in accordance with the rules to the extent of the money held in the frozen accounts.
Rule 21: Method of and authority for withdrawals from client account
- 21.1
-
A withdrawal from a client account may be made only after a specific authority in respect of that withdrawal has been signed by an appropriate person or persons in accordance with the firm's procedures for signing on client account. An authority for withdrawals from client account may be signed electronically, subject to appropriate safeguards and controls.
- 21.2
-
Firms
must put in place appropriate systems and procedures governing withdrawals from client account, including who should be permitted by the firm to sign on client account. A non-manager owner or a non-employee owner of a licensed body is not an appropriate person to be a signatory on client account and must not be permitted by the firm to act in this way.
- 21.3
-
There is no need to comply with rule 21.1 above when transferring money from one general client account to another general client account at the same bank or building society.
- 21.4
-
A withdrawal from a client account in your favour must be either by way of a cheque, or by way of a transfer to the office account or to your personal account. The withdrawal must not be made in cash.
Part 3: Interest
Rule 22: When interest must be paid
- 22.1
-
When you hold money in a client account for a client, or for a person funding all or part of your fees, or for a trust, you must account to the client or that person or trust for interest when it is fair and reasonable to do so in all the circumstances. (This also applies if money should have been held in a client account but was not. It also applies to money held in an account in accordance with rule 15.1(a) (or which should have been held in such an account), or rule 16.1(d).)
- 22.2
-
You
are not required to pay interest:
- (a)
-
on money held for the payment of a professional disbursement, once counsel etc. has requested a delay in settlement;
- (b)
-
on money held for the Legal Aid Agency;
- (c)
-
on an advance from you under rule 14.2(b) to fund a payment on behalf of the client or trust in excess of funds held for that client or trust; or
- (d)
-
if there is an agreement to contract out of the provisions of this rule under rule 25.
- 22.3
-
You
must have a written policy on the payment of interest, which seeks to provide a fair outcome. The terms of the policy must be drawn to the attention of the client at the outset of a retainer, unless it is inappropriate to do so in the circumstances.
Rule 23: Amount of interest
- 23.1
-
The interest paid must be a fair and reasonable sum calculated over the whole period for which the money is held.
Rule 24: Interest on stakeholder money
- 24.1
-
When you hold money as stakeholder, you must pay interest on the basis set out in rule 22 to the person to whom the stake is paid, unless the parties have contracted out of this provision (see rule 25.3).
Rule 25: Contracting out
- 25.1
-
In appropriate circumstances you and your client may by a written agreement come to a different arrangement as to the matters dealt with in rule 22 (payment of interest).
- 25.2
-
You
must act fairly towards your clients when entering into an agreement to depart from the interest provisions, including providing sufficient information at the outset to enable them to give informed consent.
- 25.3
-
When acting as stakeholder you may, by a written agreement with your own client and the other party to the transaction, come to a different arrangement as to the matters dealt with in rule 22.
Part 4: Accounting systems and records
Rule 26: Guidelines for accounting procedures and systems
- 26.1
-
The SRA may from time to time publish guidelines for accounting procedures and systems to assist you to comply with Parts 1 to 4 of the rules, and you may be required to justify any departure from the guidelines.
Rule 27: Restrictions on transfers between clients
- 27.1
-
A paper transfer of money held in a general client account from the ledger of one client to the ledger of another client may only be made if:
- (a)
-
it would have been permissible to withdraw that sum from the account under rule 20.1; and
- (b)
-
it would have been permissible to pay that sum into the account under rule 14;
(but there is no requirement in the case of a paper transfer for a written authority under rule 21.1).
- 27.2
-
No sum in respect of a private loan from one client to another can be paid out of funds held for the lender either:
- (a)
-
by a payment from one client account to another;
- (b)
-
by a paper transfer from the ledger of the lender to that of the borrower; or
- (c)
-
to the borrower directly,
except with the prior written authority of both clients.
- 27.3
-
If a private loan is to be made by (or to) joint clients, the consent of each client must be obtained.
Rule 28: Executor, trustee or nominee companies
- 28.1
-
If your firm owns all the shares in a recognised body or a licensed body which is an executor, trustee or nominee company, your firm and the recognised body or licensed body must not operate shared client accounts, but may:
- (a)
-
use one set of accounting records for money held, received or paid by the firm and the recognised body or licensed body; and/or
- (b)
-
deliver a single accountant's report for both the firm and the recognised body or licensed body.
- 28.2
-
If such a recognised body or licensed body as nominee receives a dividend cheque made out to the recognised body or licensed body, and forwards the cheque, either endorsed or subject to equivalent instructions, to the share-owner's bank or building society, etc., the recognised body or licensed body will have received (and paid) client money. One way of complying with rule 29 (accounting records) is to keep a copy of the letter to the share-owner's bank or building society, etc., on the file, and, in accordance with rule 29.23, to keep another copy in a central book of such letters. (See also rule 29.17(f) (retention of records for six years)).
Rule 29: Accounting records for client accounts, etc.
Accounting records which must be kept
- 29.1
-
You
must at all times keep accounting records properly written up to show your dealings with:
- (a)
-
client money
received, held or paid by you; including client money held outside a client account under rule 15.1(a) or rule 16.1(d); and
- (b)
-
any office money relating to any client or trust matter.
- 29.2
-
All dealings with client money must be appropriately recorded:
- (a)
-
in a client cash account or in a record of sums transferred from one client ledger account to another; and
- (b)
-
on the client side of a separate client ledger account for each client (or other person, or trust).
No other entries may be made in these records.
- 29.3
-
If separate designated client accounts are used:
- (a)
-
a combined cash account must be kept in order to show the total amount held in separate designated client accounts; and
- (b)
-
a record of the amount held for each client (or other person, or trust) must be made either in a deposit column of a client ledger account, or on the client side of a client ledger account kept specifically for a separate designated client account, for each client (or other person, or trust).
- 29.4
-
All dealings with office money relating to any client matter, or to any trust matter, must be appropriately recorded in an office cash account and on the office side of the appropriate client ledger account.
- 29.5
-
A cheque or draft received on behalf of a client and endorsed over, not passing through a client account, must be recorded in the books of account as a receipt and payment on behalf of the client. The same applies to cash received and not deposited in a client account but paid out to or on behalf of a client.
- 29.6
-
Money which has been paid into a client account under rule 17.1(c) (receipt of costs), or rule 18.2(b) (mixed money), and for the time being remains in a client account, is to be treated as client money; it must be appropriately identified and recorded on the client side of the client ledger account.
- 29.7
-
Money which has been paid into an office account under rule 17.1(b) (receipt of costs), rule 19.1(a) (advance payments from the Legal Aid Agency), or rule 19.1(b) (payment of costs from the Legal Aid Agency), and for the time being remains in an office account without breaching the rules, is to be treated as office money. Money paid into an office account under rule 19.2(b) (regular payments) is office money. All these payments must be appropriately identified and recorded on the office side of the client ledger account for the individual client or for the Legal Aid Agency.
- 29.8
-
Client money
in a currency other than sterling must be held in a separate account for the appropriate currency, and you must keep separate books of account for that currency.
Current balance
- 29.9
-
The current balance on each client ledger account must always be shown, or be readily ascertainable, from the records kept in accordance with rule 29.2 and 29.3 above.
Acting for both lender and borrower
- 29.10
-
When acting for both lender and borrower on a mortgage advance, separate client ledger accounts for both clients need not be opened, provided that:
- (a)
-
the funds belonging to each client are clearly identifiable; and
- (b)
-
the lender is an institutional lender which provides mortgages on standard terms in the normal course of its activities.
Statements from banks, building societies and other financial institutions
- 29.11
-
You
must, at least every 5 weeks:
- (a)
-
obtain hard copy statements (or duplicate statements permitted in lieu of the originals by rule 9.3 or 9.4 from banks, building societies or other financial institutions, or
- (b)
-
obtain and save in the firm's accounting records, in a format which cannot be altered, an electronic version of the bank's, building society's or other financial institution's on-line record,
in respect of:
- (i)
-
any general client account or separate designated client account;
- (ii)
-
any joint account held under rule 9;
- (iii)
-
any account which is not a client account but in which you hold client money under rule 15.1(a) or rule 16.1(d); and
- (iv)
-
any office account maintained in relation to the firm;
and each statement or electronic version must begin at the end of the previous statement.
This provision does not apply in respect of passbook-operated accounts, nor in respect of the office accounts of an MDP operated solely for activities not subject to SRA regulation.
Reconciliations
- 29.12
-
You
must, at least once every five weeks:
- (a)
-
compare the balance on the client cash account(s) with the balances shown on the statements and passbooks (after allowing for all unpresented items) of all general client accounts and separate designated client accounts, and of any account which is not a client account but in which you hold client money under rule 15.1(a) or rule 16.1(d), and any client money held by you in cash; and
- (b)
-
as at the same date prepare a listing of all the balances shown by the client ledger accounts of the liabilities to clients (and other persons, and trusts) and compare the total of those balances with the balance on the client cash account; and also
- (c)
-
prepare a reconciliation statement; this statement must show the cause of the difference, if any, shown by each of the above comparisons.
- 29.13
-
Reconciliations must be carried out as they fall due, or at the latest by the due date for the next reconciliation. In the case of a separate designated client account operated with a passbook, there is no need to ask the bank, building society or other financial institution for confirmation of the balance held. In the case of other separate designated client accounts, you must either obtain statements at least monthly or written confirmation of the balance direct from the bank, building society or other financial institution. There is no requirement to check that interest has been credited since the last statement, or the last entry in the passbook.
- 29.14
-
All shortages must be shown. In making the comparisons under rule 29.12(a) and (b), you must not, therefore, use credits of one client against debits of another when checking total client liabilities.
Bills and notifications of costs
- 29.15
-
You
must keep readily accessible a central record or file of copies of:
- (a)
-
all bills given or sent by you (other than those relating entirely to activities not regulated by the SRA); and
- (b)
-
all other written notifications of costs given or sent by you (other than those relating entirely to activities not regulated by the SRA).
Withdrawals under rule 20.1(j)
- 29.16
-
If you withdraw client money under rule 20.1(j) you must keep a record of the steps taken in accordance with rule 20.2(a)-(c), together with all relevant documentation (including receipts from the charity).
Retention of records
- 29.17
-
You
must retain for at least six years from the date of the last entry:
- (a)
-
all documents or other records required by rule 29.1 to 29.10, 29.12, and 29.15 to 29.16 above;
- (b)
-
all statements required by rule 29.11(a) above and passbooks, as printed and issued by the bank, building society or other financial institution; and/or all on-line records obtained and saved in electronic form under rule 29.11(b) above, for:
- (i)
-
any general client account or separate designated client account;
- (ii)
-
any joint account held under rule 9;
- (iii)
-
any account which is not a client account but in which you hold client money under rule 15.1(a) or rule 16.1(d); and
- (iv)
-
any office account maintained in relation to the practice, but not the office accounts of an MDP operated solely for activities not subject to SRA regulation;
- (c)
-
any records kept under rule 8 (liquidators, trustees in bankruptcy, Court of Protection deputies and trustees of occupational pension schemes) including, as printed or otherwise issued, any statements, passbooks and other accounting records originating outside your office;
- (d)
-
any written instructions to withhold client money from a client account (or a copy of your confirmation of oral instructions) in accordance with rule 15;
- (e)
-
any central registers kept under rule 29.19 to 29.22 below; and
- (f)
-
any copy letters kept centrally under rule 28.2 (dividend cheques endorsed over by nominee company).
- 29.18
-
You
must retain for at least two years:
- (a)
-
originals or copies of all authorities, other than cheques, for the withdrawal of money from a client account; and
- (b)
-
all original paid cheques (or digital images of the front and back of all original paid cheques), unless there is a written arrangement with the bank, building society or other financial institution that:
- (i)
-
it will retain the original cheques on your behalf for that period; or
- (ii)
-
in the event of destruction of any original cheques, it will retain digital images of the front and back of those cheques on your behalf for that period and will, on demand by you, your reporting accountant or the SRA, produce copies of the digital images accompanied, when requested, by a certificate of verification signed by an authorised officer.
- (c)
-
The requirement to keep paid cheques under rule 29.18(b) above extends to all cheques drawn on a client account, or on an account in which client money is held outside a client account under rule 15.1(a) or rule 16.1(d).
- (d)
-
Microfilmed copies of paid cheques are not acceptable for the purposes of rule 29.18(b) above. If a bank, building society or other financial institution is able to provide microfilmed copies only, you must obtain the original paid cheques from the bank etc. and retain them for at least two years.
Centrally kept records for certain accounts, etc.
- 29.19
-
Statements and passbooks for client money held outside a client account under rule 15.1(a) or rule 16.1(d) must be kept together centrally, or you must maintain a central register of these accounts.
- 29.20
-
Any records kept under rule 8 (liquidators, trustees in bankruptcy, Court of Protection deputies and trustees of occupational pension schemes) must be kept together centrally, or you must maintain a central register of the appointments.
- 29.21
-
The statements, passbooks, duplicate statements and copies of passbook entries relating to any joint account held under rule 9 must be kept together centrally, or you must maintain a central register of all joint accounts.
- 29.22
-
A central register of all withdrawals made under rule 20.1(j) must be kept, detailing the name of the client, other person or trust on whose behalf the money is held (if known), the amount, the name of the recipient charity and the date of the payment.
- 29.23
-
If a nominee company follows the option in rule 28.2 (keeping instruction letters for dividend payments), a central book must be kept of all instruction letters to the share-owner's bank or building society, etc.
Computerisation
- 29.24
-
Records required by this rule may be kept on a computerised system, apart from the following documents, which must be retained as printed or otherwise issued:
- (a)
-
original statements and passbooks retained under rule 29.17(b) above;
- (b)
-
original statements, passbooks and other accounting records retained under rule 29.17(c) above; and
- (c)
-
original cheques and original hard copy authorities retained under rule 29.18 above.
There is no obligation to keep a hard copy of computerised records. However, if no hard copy is kept, the information recorded must be capable of being reproduced reasonably quickly in printed form for at least six years, or for at least two years in the case of digital images of paid cheques retained under rule 29.18 above.
Suspense ledger accounts
- 29.25
-
Suspense client ledger accounts may be used only when you can justify their use; for instance, for temporary use on receipt of an unidentified payment, if time is needed to establish the nature of the payment or the identity of the client.
Rule 30: Accounting records for clients' own accounts
- 30.1
-
When you operate a client's own account as signatory under rule 10, you must retain, for at least six years from the date of the last entry, the statements or passbooks as printed and issued by the bank, building society or other financial institution, and/or the duplicate statements, copies of passbook entries and cheque details permitted in lieu of the originals by rule 10.3 or 10.4; and any central register kept under rule 30.2 below.
- 30.2
-
You
must either keep these records together centrally, or maintain a central register of the accounts operated under rule 10.
- 30.3
-
If you use on-line records made available by the bank, building society or other financial institution, you must save an electronic version in the firm's accounting records in a format which cannot be altered. There is no obligation to keep a hard copy but the information recorded must be capable of being reproduced reasonably quickly in printed form for at least six years.
- 30.4
-
If, when you cease to operate the account, the client requests the original statements or passbooks, you must take photocopies and keep them in lieu of the originals.
- 30.5
-
This rule applies only to private practice.
Part 5: Monitoring and investigation by the SRA
Rule 31: Production of documents, information and explanations
- 31.1
-
You
must at the time and place fixed by the SRA produce to any person appointed by the SRA any records, papers, client and trust matter files, financial accounts and other documents, and any other information, necessary to enable preparation of a report on compliance with the rules.
- 31.2
-
A requirement for production under rule 31.1 above must be in writing, and left at or sent by post or document exchange to the most recent address held by the SRA's Information Directorate, or sent electronically to the firm's e-mail or fax address, or delivered by the SRA's appointee. A notice under this rule is deemed to be duly served:
- (a)
-
on the date on which it is delivered to or left at your address;
- (b)
-
on the date on which it is sent electronically to your e-mail or fax address; or
- (c)
-
48 hours (excluding Saturdays, Sundays and Bank Holidays) after it has been sent by post or document exchange.
- 31.3
-
Material kept electronically must be produced in the form required by the SRA's appointee.
- 31.4
-
The SRA's appointee is entitled to seek verification from clients and staff, and from the banks, building societies and other financial institutions used by you. You must, if necessary, provide written permission for the information to be given.
- 31.5
-
The SRA's appointee is not entitled to take original documents away but must be provided with photocopies on request.
- 31.6
-
You
must be prepared to explain and justify any departures from the Guidelines for accounting procedures and systems published by the SRA (see rule 26).
- 31.7
-
Any report made by the SRA's appointee may, if appropriate, be sent to the Crown Prosecution Service or the Serious Fraud Office and/or used in proceedings before the Solicitors Disciplinary Tribunal. In the case of an REL or RFL, the report may also be sent to the competent authority in that lawyer's home state or states. In the case of a solicitor who is established in another state under the Establishment Directive, the report may also be sent to the competent authority in the host state. The report may also be sent to any of the accountancy bodies set out in rule 34.1(a) and/or taken into account by the SRA in relation to a possible disqualification of a reporting accountant under rule 34.3.
- 31.8
-
Without prejudice to rule 31.1 above, you must produce documents relating to any account kept by you at a bank or with a building society:
- (a)
-
in connection with your practice; or
- (b)
-
in connection with any trust of which you are or formerly were a trustee,
for inspection by a person appointed by the SRA for the purpose of preparing a report on compliance with the rules or on whether the account has been used for or in connection with a breach of any of the Principles or other SRA Handbook requirements made or issued by the SRA. Rules 31.2-31.7 above apply in relation to this paragraph in the same way as to rule 31.1.
Part 6: Accountants' reports
Rule 32: Delivery of accountants' reports [Deleted]
Rule 32A: Obtaining and delivery of accountants' reports
- 32A.1
-
Subject to rule 32A.1A, if you have, at any time during an accounting period, held or received client money, or operated 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 accounting period; and
- (b)
-
if the report has been qualified, deliver it to the SRA within six months of the end of the accounting period.
This duty extends to the directors of a company, or the members of an LLP, which is subject to this rule.
- 32A.1A
-
Subject to rule 32A.2, you are not required to obtain or deliver an accountant's report if:
- (a)
-
all of the client money held or received during an accounting period is money held or received from the Legal Aid Agency or in the circumstances set out in rule 19.3; or
- (b)
-
in the accounting period, the statement or passbook balance of client money you have held or received does not exceed:
- (i)
-
an average of £10,000; and
- (ii)
-
a maximum of £250,000,
or the equivalent in foreign currency.
- 32A.1B
-
In rule 32A.1A above:
- (a)
-
a "statement or passbook balance" is the total balance obtained at least once every five weeks, from a bank, building society or other institution of all general client accounts and separate designated client accounts, and accounts that are not client accounts but are holding client money, when carrying out reconciliations in accordance with rules 29.11 to 29.14; and
- (b)
-
an average "statement or passbook balance" is the total of all statement or passbook balances obtained in any accounting period divided by the number of such balances in that period.
- 32A.2
-
Notwithstanding the provisions of rules 32A.1 and 32A.1A, the SRA may require you to obtain or deliver an accountant's report at any time in circumstances other than those set out in rules 32A.1 and in the circumstances set out in rule 32A.1A if the SRA has reason to believe that it is in the public interest to do so.
Rule 33: Accounting periods
The norm
- 33.1
-
An "accounting period" means the period for which your accounts are ordinarily made up, except that it must:
- (a)
-
begin at the end of the previous accounting period; and
- (b)
-
cover twelve months.
Rules 33.2 to 33.5 below set out exceptions.
First and resumed reports
- 33.2
-
If you are under a duty to obtain your first report, the accounting period must begin:
- (a)
-
on the date when you first held or received client money (or operated a client's own account as signatory); or
- (b)
-
at the end of the last accounting period in which an exemption under rule 32A.1A applied.
- 33.3
-
If you are under a duty to obtain your first report after a break, the accounting period must begin:
- (a)
-
on the date when you, for the first time after the break, held or received client money (or operated a client's own account as signatory); or
- (b)
-
at the end of the last accounting period in which an exemption under rule 32A.1A applied
and may cover less than twelve months.
Change of accounting period
- 33.4
-
If you change the period for which your accounts are made up (for example, on a merger, or simply for convenience), the accounting period immediately preceding the change may be shorter than twelve months, or longer than twelve months up to a maximum of 18 months, provided that the accounting period shall not be changed to a period longer than twelve months unless the SRA receives written notice of the change before expiry of the deadline for delivery of the accountant's report which would have been expected on the basis of your old accounting period.
Final reports
- 33.5
-
If you for any reason stop holding or receiving client money (and operating any client's own account as signatory), you must obtain and deliver a final report to the SRA. The accounting period must end on the date upon which you stopped holding or receiving client money (and operating any client's own account as signatory), and may cover less than twelve months.
Rule 34: Qualifications for making a report
- 34.1
-
A report must be prepared and signed by an accountant:
- (a)
-
who is a member of:
- (i)
-
the Institute of Chartered Accountants in England and Wales;
- (ii)
-
the Institute of Chartered Accountants of Scotland;
- (iii)
-
the Association of Chartered Certified Accountants;
- (iv)
-
the Institute of Chartered Accountants in Ireland; or
- (v)
-
the Association of Authorised Public Accountants; and
- (b)
-
who is also:
- (i)
-
an individual who is a registered auditor within the terms of section 1239 of the Companies Act 2006; or
- (ii)
-
an employee of such an individual; or
- (iii)
-
a partner in or employee of a partnership which is a registered auditor within the terms of section 1239 of the Companies Act 2006; or
- (iv)
-
a director or employee of a company which is a registered auditor within the terms of section 1239 of the Companies Act 2006; or
- (v)
-
a member or employee of an LLP which is a registered auditor within the terms of section 1239 of the Companies Act 2006.
- 34.2
-
An accountant is not qualified to make a report if:
- (a)
-
at any time between the beginning of the accounting period to which the report relates, and the completion of the report:
- (i)
-
he or she was a partner or employee, or an officer or employee (in the case of a company), or a member or employee (in the case of an LLP) in the firm to which the report relates; or
- (ii)
-
he or she was employed by the same non-solicitor employer as the solicitor or REL for whom the report is being made; or
- (iii)
-
he or she was a partner or employee, or an officer or employee (in the case of a company), or a member or employee (in the case of an LLP) in an accountancy practice which had an ownership interest in, or was part of the group structure of, the licensed body to which the report relates; or
- (b)
-
he or she has been disqualified under rule 34.3 below and notice of disqualification has been given under rule 34.4 (and has not subsequently been withdrawn).
- 34.3
-
The SRA may disqualify an accountant from making any accountant's report if:
- (a)
-
the accountant has been found guilty by his or her professional body of professional misconduct or discreditable conduct; or
- (b)
-
the SRA is satisfied that you have not complied with the rules in respect of matters which the accountant has negligently failed to specify in a report.
In coming to a decision, the SRA will take into account any representations made by the accountant or his or her professional body.
- 34.4
-
Written notice of disqualification must be left at or sent by recorded delivery to the address of the accountant shown on an accountant's report or in the records of the accountant's professional body. If sent through the post, receipt will be deemed 48 hours (excluding Saturdays, Sundays and Bank Holidays) after posting.
- 34.5
-
An accountant's disqualification may be notified to any firm likely to be affected and may be printed in the Society's Gazette or other publication.
Rule 35: Reporting accountant's rights and duties - letter of engagement
- 35.1
-
You
must ensure that the reporting accountant's rights and duties are stated in a letter of engagement incorporating the following terms:
"In accordance with rule 35 of the SRA Accounts Rules 2011, you are instructed as follows:
- (a)
-
I/this firm/this company/this limited liability partnership recognises that, if during the course of preparing an accountant's report:
- (i)
-
you discover evidence of fraud or theft in relation to money
- (A)
-
held by a solicitor (or registered European lawyer, or registered foreign lawyer, or recognised body, or licensed body, or employee of a solicitor or registered European lawyer, or manager or employee of a recognised body or licensed body) for a client or any other person (including money held on trust), or
- (B)
-
held in an account of a client, or an account of another person, which is operated by a solicitor (or registered European lawyer, registered foreign lawyer, recognised body, licensed body, employee of a solicitor or registered European lawyer, or manager or employee of a recognised body or licensed body); or
- (ii)
-
you obtain information which you have reasonable cause to believe is likely to be of material significance in determining whether a solicitor (or registered European lawyer, or registered foreign lawyer, or recognised body, or licensed body, or employee of a solicitor or registered European lawyer, or manager or employee of a recognised body or licensed body) is a fit and proper person
- (A)
-
to hold money for clients or other persons (including money held on trust), or
- (B)
-
to operate an account of a client or an account of another person,
- (iii)
-
you discover a failure by the firm to submit a qualified accountant's report to the Solicitors Regulation Authority, as required by these rules,
you must immediately give a report of the matter to the Solicitors Regulation Authority in accordance with section 34(9) of the Solicitors Act 1974 or article 3(1) of the Legal Services Act 2007 (Designation as a Licensing Authority) (No. 2) Order 2011 as appropriate;
- (b)
-
you may, and are encouraged to, make that report without prior reference to me/this firm/this company/this limited liability partnership;
- (c)
-
you are to report directly to the Solicitors Regulation Authority should your appointment be terminated following the issue of, or indication of intention to issue, a qualified accountant's report, or following the raising of concerns prior to the preparation of an accountant's report;
- (d)
-
you are to deliver to me/this firm/this company/this limited liability partnership your report which you should also retain for at least six years from the date of its signature and to produce the copy to the Solicitors Regulation Authority on request;
- (e)
-
you are to retain these terms of engagement for at least six years after the termination of the retainer and to produce them to the Solicitors Regulation Authority on request; and
- (f)
-
following any direct report made to the Solicitors Regulation Authority under (a) or (c) above, you are to provide to the Solicitors Regulation Authority on request any further relevant information in your possession or in the possession of your firm.
To the extent necessary to enable you to comply with (a) to (f) above, I/we waive my/the firm's/the company's/the limited liability partnership's right of confidentiality. This waiver extends to any report made, document produced or information disclosed to the Solicitors Regulation Authority in good faith pursuant to these instructions, even though it may subsequently transpire that you were mistaken in your belief that there was cause for concern."
- 35.2
-
The letter of engagement and a copy must be signed by you and by the accountant. You must keep the copy of the signed letter of engagement for at least six years after the termination of the retainer and produce it to the SRA on request. Both you and the reporting accountant must also retain a copy of the accountant's report, whether qualified or not, for at least six years from the date of its signature and produce the copy to the SRA on request.
- 35.3
-
The specified terms may be included in a letter from the accountant to you setting out the terms of the engagement but the text must be adapted appropriately. The letter must be signed in duplicate by both parties, with you keeping the original and the accountant the copy.
Rule 36: Change of accountant
- 36.1
-
On instructing an accountancy practice to replace that previously instructed to produce accountant's reports, you must immediately notify the SRA of the change and provide the name and business address of the new accountancy practice.
Rule 37: Place of examination [Deleted]
Rule 38: Provision of details of bank accounts, etc.
- 38.1
-
The accountant must request, and you must provide, details of all accounts kept or operated by you in connection with your practice at any bank, building society or other financial institution at any time during the accounting period to which the report relates. This includes client accounts, office accounts, accounts which are not client accounts but which contain client money, and clients' own accounts operated by you as signatory.
Rule 39: Test procedures [Deleted]
Rule 40: Departures from guidelines for accounting procedures and systems [Deleted]
Rule 41: Matters outside the accountant's remit [Deleted]
Rule 42: Privileged documents [Deleted]
Rule 43: Completion of checklist [Deleted]
Rule 43A: Work to be undertaken
- 43A.1
-
The accountant should exercise his or her professional judgement in determining the work required for the firm they are instructed to obtain the report on in order to assess risks to client money arising from compliance with these rules. This should cover the work that the accountant considers is appropriate to enable completion of the report required by the SRA at the date the report is commissioned (referred to in Rule 44 below).
Rule 43B: Failure to provide documentation
- 43B.1
-
You
must provide documentation to the accountant as required to enable completion of the accountant's report. When acting on a client's instructions, you will normally have the right on the grounds of privilege as between solicitor and client to decline to produce any document requested by the accountant for the purposes of his or her examination. A significant failure to provide documentation may result in the accountant deciding that they should qualify the report if they consider that as a result, they cannot properly prepare the report in accordance with these rules.
Rule 44: Form of accountant's report
- 44.1
-
The accountant must complete and sign his or her report in the form published from time to time by the SRA.
Rule 45: Firms with two or more places of business
- 45.1
-
If a firm has two or more offices:
- (a)
-
separate reports may be obtained in respect of the different offices; and
- (b)
-
separate accounting periods may be adopted for different offices, provided that:
- (i)
-
separate reports are obtained;
- (ii)
-
every office is covered by a report obtained within six months of the end of its accounting period; and
- (iii)
-
there are no gaps between the accounting periods covered by successive reports for any particular office or offices.
Rule 46: Waivers
- 46.1
-
The SRA may waive in writing in any particular case or cases any of the provisions of Part 6 of the rules, and may revoke any waiver.
Part 7: Practice as an REL from an office in England and Wales of an Exempt European Practice
Rule 47: Purpose of the overseas accounts provisions [Deleted]
Rule 47A: Purpose of rules applying to RELs in Exempt European Practices
- 47A.1
-
The purpose of applying different accounts provisions to the practice of an REL from an office in England and Wales of an Exempt European Practice is to ensure similar protection for client monies but by way of rules which recognise that the body in which the REL is practising is not itself a regulated entity.
Rule 48: Application and Interpretation
- 48.1
-
Part 7 of these rules applies to your practice as an REL from an office in England and Wales of an Exempt European Practice.
- 48.2
-
The SRA Handbook Glossary 2012 shall apply and, unless the context otherwise requires:
- (a)
-
all italicised terms shall be defined; and
- (b)
-
all terms shall be interpreted,
in accordance with the Glossary.
Rule 49: Interest [Deleted]
Rule 50: Accounts [Deleted]
Rule 50A: Client money
- 50A.1
-
You must comply with this Part if you have held or received client money.
- 50A.2
-
In all dealings with client money, you must:
- (a)
-
keep client money separate from money which is not client money;
- (b)
-
on receipt, pay client money into a client account without undue delay and keep it there, unless the client has agreed otherwise, or it is paid directly to a third party in the execution of a trust under which it is held;
- (c)
-
ensure by use of proper accounting systems and processes that client money is used for client's matters only and for the purposes for which it has been paid;
- (d)
-
use money held as trustee of a trust for the purposes of that trust only;
- (e)
-
establish and maintain proper accounting systems and proper internal controls over those systems to ensure compliance with these rules;
- (f)
-
return client money to the person on whose behalf the money is held promptly, as soon as there is no longer any proper reason to retain those funds;
- (g)
-
keep accounting records to show accurately the position with regard to the money held for each client and trust for a minimum period of six years;
- (h)
-
Account for interest on client money in accordance with rule 22.
Rule 50B: Accountants' Reports
- 50B.1
-
You must obtain an accountant's report in respect of any period during which you or the Exempt European Practice from which you practice have held or received client money unless you fall within any of the exceptions contained in rule 32A.1A.
- 50B.2
-
You must comply with the rules in Part 6 in relation to any accountant's report that you are required to obtain under rule 50B.1.
Rule 51: Production of documents, information and explanations
- 51.1
-
You must promptly comply with:
- (a)
-
a written notice from the SRA that you must produce for inspection by the appointee of the SRA all documents held by you or held under your control and all information and explanations requested:
- (i)
-
in connection with your practice; or
- (ii)
-
in connection with any trust of which you are, or formerly were, a trustee;
for the purpose of ascertaining whether any person subject to Part 7 of these rules is complying with or has complied with any provision of this Part of these rules, or on whether the account has been used for or in connection with a breach of any of the Principles or other SRA Handbook requirements made or issued by the SRA; and
- (b)
-
a notice given by the SRA in accordance with section 44B or 44BA of the SA or section 93 of the LSA for the provision of documents, information or explanations.
- 51.2
-
You must provide any necessary permissions for information to be given so as to enable the appointee of the SRA to:
- (a)
-
prepare a report on the documents produced under rule 51.1 above; and
- (b)
-
seek verification from clients, staff and the banks, building societies or other financial institutions used by you.
- 51.3
-
You must comply with all requests from the SRA or its appointee as to:
- (a)
-
the form in which you produce any documents you hold electronically; and
- (b)
-
photocopies of any documents to take away.
- 51.4
-
A notice under this rule is deemed to be duly served:
- (a)
-
on the date on which it is delivered to or left at your address;
- (b)
-
on the date on which it is sent electronically to your e-mail or fax address; or
- (c)
-
48 hours (excluding Saturdays, Sundays and Bank Holidays) after it has been sent by post or document exchange to your last notified practising address.
Rule 52: Waivers
- 52.1
-
The SRA may waive in writing in any particular case or cases any of the provisions of Part 7 of the rules, may place conditions on, and may revoke, any waiver.
Part 8: [Deleted]