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Solicitors Regulation Authority to launch new accounts rules in November

The Solicitors Regulation Authority (SRA) has confirmed new regulations will come into force on 25 November 2019.

The regulator said the new standards and regulations are shorter and more targeted than the existing set and will remove many prescriptive rules, reducing the burden on solicitors and law firms and allowing solicitors greater freedom to use their professional judgement in considering how they meet the standards.

Key changes being introduced include creating separate codes of conduct for firms and solicitors; simpler account rules that focus on the principles of keeping client money safe, rather than lots of specific technical rules; freeing up solicitors to carry out ‘non-reserved’ legal work from within a business not regulated by a legal services regulator; and allowing solicitors to provide reserved legal services on a freelance basis.*

The emphasis over the last few years for the SRA has been to simplify the accounts rules, moving towards outcomes focused regulation to ensure greater flexibility for each firm on their internal systems and controls. This has been in the offing for a number of years including changing the way we, as accountants, have approached our review work.

Over the last three years as part of our review work we have worked closely with our clients to make recommendations and try to improve their internal reporting functions.

There are currently 52 rules and the new rules have been condensed into 13 principles.

Although a change can appear to be a daunting prospect, for the majority of firms with robust systems and controls already in place, the message should be more of the same.

The changes will allow an internal review and should enable some of the complex functions to be removed. As long as the following key principles are maintained then all other aspects should fall into line:

Ensuring client money is always maintained and recorded separately from the firm’s money
Ensuring client money is treated correctly and for its intended use (not providing bank facilities)
Ensuring the prompt returning of any remaining client money at the end of the matter.
Firms can do several things to embrace this change and if not already doing so, we would recommend that an internal breach report is set up and maintained by the COFA and COLP. Firms that have an open reporting approach are able to spot system errors and training needs a lot quicker than firms that do not.

Over the next few months we will be commenting further on this subject as we move to the November 2019 implementation date.

If you would like to discuss the new regulations, please contact Mike Buxton below.