New Accounts Rules and Regulatory Model
Launching from 25 November 2019
A brand new regulatory model
Following much consultation, the Solicitors Regulation Authority (SRA) has now confirmed 25 November as the live date for its new regulatory model.
The SRA Standards and Regulations focus on simplicity and flexibility and this means a number of key changes, including:
- new Accounts Rules which are much simpler and more principles based
- separate codes of conduct for firms and individuals
- permitting freelance solicitors to provide reserved legal services
- allowing solicitors to carry out non-reserved work when operating within a business that is not regulated by a legal services regulator.
We anticipate that these changes will provide a catalyst for solicitors to explore new business models and service delivery outside of the traditional firm structure.
The new Accounts Rules
The good news is that there should be no cause for concern that wholesale changes to your systems are required.
The new Accounts Rules are shorter, simpler and reduce the number of prescriptive and date-sensitive requirements which caused so many trivial breaches of the 2011 Rules. We consider this principles-based approach to be a step forward as firms will now have the flexibility to develop their own systems and policies. Despite the significant rewrite, for most firms there should be few significant changes to implement.
Some of the areas where you should assess the impact of the new Rules are below.
- Monies received in respect of fees and paid disbursements are client money unless a bill of costs has been delivered. This infers that you must now include paid disbursements on a bill prior to transferring monies from client account to cover those disbursements.
- Although rare, there is the potential for some firms not to operate a client account if the only client money received is in the form of fees and paid disbursements.
- There is no longer a distinction between disbursements and professional disbursements.
- Legal Aid Agency monies no longer have a specific rule and can be held in office account.
- There is an option to operate a Third Party Managed Account (TPMA), although some criteria must be met.
- The definition of client money now includes monies received as a trustee or as the holder of a specified office or appointment, such as donee of a power of attorney, Court of Protection deputy or trustee of an occupational pension scheme. These monies must be paid into client account unless to do so conflicts with the requirements of that office or appointment.
- There is no reference to the existing £500 de minimis limit in respect of making payments of residual balances to charity without the need for SRA approval.
Further supporting guidance and toolkits have been promised by SRA over the coming months to help firms prepare. We expect additional clarity on the treatment of the above changes.
How we can help
The new rules provide an opportunity for you to reassess your current approach, whilst making sure that you remain compliant with the new rules.
Contact us today and we can help your firm by:
- assessing how the changes will impact you
- providing training and support for your fee earners and finance team
- providing annual Account Rules Reporting compliance and other assurance services.
