1 - SRA Account Rules Flashcards
What is the purpose of the SRA’s Accounts Rules?
The SRA Accounts Rules establish requirements for handling money belonging to clients, including trust money or money held on behalf of third parties.
They apply to all regulated firms, including sole practices.
Firms must have appropriate systems and controls to ensure compliance, tailored to the nature and volume of client transactions and the amount of client money handled.
Who do the SRA’s Accounts Rules apply to?
The SRA Accounts Rules apply to:
- Authorised bodies
- Their managers
- Their employees
Authorised bodies include bodies authorised by the SRA to practice.
Managers are:
Sole principals in a recognised sole practice
Members of an LLP
Directors of a company
Partners in a partnership
Members of the governing body of any other body
Who is responsible for compliance with SRA Account Rules?
The authorised body’s managers are jointly and severally responsible for compliance.
This means they share responsibility equally and if one manager is unable to fulfill their responsibility, the others become responsible for their share.
What are the four sections of the SRA Account Rules, how many rules are there, and what do they contain?
13 Rules.
Application Section: Rule 1 defines who the rules apply to.
Client Money and Client Accounts: Rules 2-8 cover obligations related to client money, keeping it separate from the firm’s money, withdrawals, breach corrections, interest payments, and accounting systems.
Dealings with Other Money Belonging to Clients or Third Parties: Rules 9-11 address joint accounts, client’s own accounts, and third-party managed accounts.
Accountants’ Reports and Storage: Rules 12-13 focus on obtaining accountants’ reports and storing/retaining accounting records.
What does Rule 2.1 specify to be the four types of client money?
- Money relating to regulated services:
Covers payments for services regulated by the SRA, the vast majority of work solicitors do, such as court application fees or company purchases. - Money received from a third party for regulated services:
Money belonging to someone else (a third party) but received by the solicitor in relation to regulated services delivered by the solicitor
E.g.,
Money sent to the authorised body (eg the law firm or solicitor) by a third party (not their client) to be held to the order of that third party and
Money sent to a seller’s solicitor at exchange as a deposit for a property purchase. The money does not belong to the authorised body (the firm or solicitor) and nor does it belong to a client of the firm’s however it is “client money”. - Money received while performing non-solicitor roles:
Includes payments received while acting in roles such as a donee of a power of attorney, even if the donor is not a client. - Money for fees and unpaid disbursements before billing:
Includes funds held or received for fees or disbursements that have not yet been billed. For example, a payment made to an expert witness in court proceedings or to a local authority for a local search to be carried out.
Ceases to be client money once a bill is delivered or if disbursements have been paid.
What is non-client money?
Money received or held by the authorised body that does not fall under Rule 2.1 (client money).
Includes funds used for the authorised body’s business operations.
May be called ‘office money’ or ‘the firm’s money.’
How must client money be stored by law firms?
Rule 4.1 states that client money must be kept separate from money belonging to the authorised body.
