The Solicitors Regulation Authority (SRA) has confirmed new accounting 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. Much reduced in length, the new regulations will remove many prescriptive rules, reducing the burden on solicitors and law firms and allowing for greater freedom to use their professional judgement in considering how they meet the standards.
What are the key changes to the SRA Accounts Rules 2019?
Key changes being introduced include:
- Creating separate codes of conduct – one for law firms and one for solicitors
- The existing 52 rules and have been condensed into 13 principles
- The Accounts Rules have reduced from 41 pages to just 7.
Essentially, the above will mean 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. These changes have been on the horizon 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.
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 followed, 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 created and maintained by the COFA and COLP. We find that firms that have an open reporting approach are able to spot system errors and identify training needs a lot quicker than firms that do not.
Mitchell Charlesworth act for a number of law firms, so please do contact us if you would like to discuss the new regulations: