Legal Services Act 2007 -
New Solicitors' Accounts Rules
Under the Legal Services Act 2007, the Solicitors' Regulation
Authority have launched the New Solicitors' Accounts Rules which
come into force on 6th October 2011.
These replace the previous rules that have been in place since
1998. Part 4 of our guide explains the new Accounts Rules in more
detail.
The new Accounts Rules will have a major effect on your accounting
function and advice may be needed to assist your firm through this
transitional period.
These new Accounts Rules are part of the renewed focus on
Outcomes Focused Regulation in the Act. That is,
all law firms must base their practice on the overarching
principles found in the SRA Handbook which should always lead to
enhanced service provision and 'mandatory' outcomes for
clients.
According to the new SRA Handbook, the main aims and objectives of
the new Accounts Rules are:
• To keep client money
safe;
• To ensure that clients and the public have
confidence that client money held by firms will be safe;
• To ensure that firms are managed, and have
appropriate systems and procedures in place, so as to safeguard
client money;
• To ensure that client accounts are used for
appropriate purposes only; and
• To ensure that the SRA is aware of issues in a
firm relevant to the protection of client money.
The principle aim of the new Accounts Rules is to keep clients'
money safe. In order to achieve this aim, your Accounts Rules must
be clear, specific and detailed.
Many of the old rules have been retained and some operational
flexibility has been introduced in relation to signing on clients'
accounts and the payment of interest.
Provision has also been made as a result of the new rules
regarding Alternative Business Structures. External owners or
investors who are not employees or managers cannot sign on behalf
of clients.
Importantly, to be an appropriate client account signatory, there
must be some element of proximity to the client's matters. This is
unlikely with non-experts and external owners.
Risk management in regards to clients' money is
key, as outlined by the SRA's new principles and code of
conduct. In all your activities, law firms must comply with the
principles and if you believe that there may be a regulatory issue
then you must use the principles as the first point of
reference.
Importantly, the SRA need to see clear evidence that you, as a
legal firm, are identifying potential risks with regards to
clients' money and that you are managing and mitigating your own
risk in relation to the principles in the new SRA Handbook.
Go to Part 5 - How
can Mitchell Charlesworth help your law firm?
For more information, please contact Mike Buxton on tel:
0151 255 2300 or email: mike.buxton@mitchellcharlesworth.co.uk