Client money withheld from client account on client's instructions

Version 19 of the Handbook was published on 1 October 2017. For more information, please click "History" above.

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.

Guidance notes

(i)

Money withheld from a client account under rule 15.1(a) remains client money, and all the record-keeping provisions of rule 29 will apply.

(ii)

Once money has been paid into an account set up under rule 15.1(b), it ceases to be client money. Until that time, the money is client money and, under rule 29, a record is required of your receipt of the money, and its payment into the account in the name of the client or designated person. If you can operate the account, rule 10 (operating a client's own account) and rule 30 (accounting records for clients' own accounts) will apply. In the absence of instructions to the contrary, rule 14.1 requires any money withdrawn to be paid into a client account.

(iii)

Rule 29.17(d) requires clients' instructions under rule 15.1 to be kept for at least six years.