Friday 27th September 2019
This article is provided in association with Infolegal
Much has been made by the Solicitors Regulation Authority (SRA) of how much shorter the rulebook for solicitors will be when the revised Standards and Regulations take effect in November 2019. The overall reduction will see the current 500 plus page Handbook reduced to nearer 150, and nowhere is this more the case than with the Accounts Rules, shortened now to barely seven pages.
The overall picture is made slightly more complex, however, as the SRA continues to release guidance notes on a range of regulatory topics, many of them relating to the interpretation of the new regime and the operation of the Accounts Rules in particular. In this way the Accounts Rules themselves might indeed be shorter in length but the total information to take on board will be longer than claimed through the need to refer also to the website guidance.
To date there are six issues of ‘key new guidance’ covering the following:
Adopting changes in your firm
Of these the most eye-catching are likely to be the enhanced ability to dispense with the use of a client account or an accountant’s report. It will be possible to dispense with the client account, and instead to operate through an office (now ‘business’) account only, if the only client money that is received by you is advance payments for fees and unpaid disbursements and then only those disbursements that the firm would have responsibility for such as counsel’s fees rather than the client’s disbursements.
Whether many firms will take advantage of this liberalisation of the current regime remains to be seen – probably not, especially if the firm undertakes any form of transactional work. Where these arrangements do apply the client must have these arrangements explained to them but is not required to give their consent to them. Further guidance suggests that this explanation should include the risks to the client’s money in the event of the firm’s insolvency which will hardly be an encouraging start to the retainer.
It might also be argued that the firm that does take advantage of this relaxation would be placing itself in a position of ‘own interest’ conflict with its clients (even if one that is to be permitted by the SRA) since it will clearly benefit from the cash flow advantage of having such advance payments at their disposal, while the client could be seen to be at a disadvantage from not having the usual protection of having their funds in a specified client account. Even then, however, the funds will remain client funds until billed.
Other Accounts Rules guidance still pending and to watch out for include the handling of residual client balances. The current draft rule 5.1 covers this by merely stating that such funds may be withdrawn “in prescribed circumstances” but we await guidance as to whether this remain the current £500 limit or perhaps be increased, as some have suggested, to £1,000.
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