Joint Accounts, the Client's Own Bank Account and Third Party Managed Accounts

Question 1

what does para 4.2 of the SRA Code of Conduct for solicitors provide?

Answer 1

Solicitors must take steps to safeguard money or assets entrusted to the solicitor by clients and others.

Question 2

Is money held in at the joint names of the firm and the client clarified as client money?

Answer 2

Yes.

Question 3

Why would a firm open a joint account with a client?

Answer 3

Usually when a solicitor is acting as a joint executor with another person and is dealing with the administration of the estate.

Question 4

Which SRA accounts rules do not apply to money held in joint accounts?

Answer 4

Rules 2-8 of the SRA Accounts rules.

The only two that apply are:

• Rule 8.2 (requirement to obtain bank statements form the bank/ building society at least every 5 weeks); and
• Rule 8.4 (keeping a readily accessible central record of bills and other notifications of costs).

Question 5

When might a firm have control over a client’s personal bank account?

Answer 5

• If that client has executed a power of attorney in favour of the firm over their finances; or
• The firm has been appointed as a deputy by the court of protection to deal with the financial affairs of a vulnerable person.

Question 6

Which solicitors accounts rules do not apply to a client’s personal bank account which is in the control of the firm?

Answer 6

Rules 2-8 of the SRA accounts rules do not apply apart from the following (which do apply):

• Rule 8.2 (obtain bank statements at least every 5 weeks);
• Rule 8.3 (completing reconciliations of the account at least every 5 weeks); and
• Rule 8.4 (keeping a readily accessible central record of bills and other notifications of costs.

Question 7

Rule 8.2 (obtaining bank statements at least every 5 weeks) applies to solicitors in control of a client’s personal bank account. When can a solicitor be exempt from this requirement?

Answer 7

If the solicitor does not have frequent/ regular access to the bank statements of the client’s personal bank account.

They will not be in breach in such instances provided they have taken reasonable steps to satisfy themself that client’s money is not at risk.

Question 8

Explain the provision of SRA Account rule 11.1.

Answer 8

It allows firm’s to enter into agreement with client to use a third party managed account to hold client money (as opposed to the firm’s client bank account).

Question 9

What is the SRA guidance on third party accounts?

Answer 9

• The decision to use the third party account and the selection of the particular bank account must be appropriate in each in individual case (in order to comply with the requirement to act in the client’s best interests and safeguard a client’s money).
• The third party account must also be regulated by the FCA. therefore the account provider must be:

1) an authorised payment institution; or
2) a small payment institution which has adopted voluntary safeguarding arrangements to the sae level as an authorised payment institution; or
3) an EEA authorised payment institution.

• The third party account provider must also be an account held at a bank or building society by which the third party receives and pays out money on the solicitors and client’s behalf.

Question 10

Explain the requirements (in relation to third part accounts holdings client money) for engaging with the client.

Answer 10

• The client must be in a position to make informed decisions (rule 8.6 code of conduct).
• As such, the client must understand how their money will be held and how the transaction will work.
• Firm must also take reasonable steps to ensure, before accepting instructions, the client is informed of and understands:
  1) Terms of contractual arrangements relating to use of the account, and how any fees for sue of the third party account will be paid and who will pay them (rule 11.1(b)(i)); and
  2) The client’s right to terminate the agreement and dispute payment requests made by the firm (rule 11.1(b)(ii)).

Question 10

the firm has an obligation to notify the SRA when a third party account is being used to hold client money. What information does this notification need to contain?

Answer 10

• name and SRA number of the firm;
• name of the third party provider;
• the third party providers FCA authorisation number; and
• the date which the firm plans to use the third party account as part of its business.

Question 11

Explain the provision of rule 11.2 of the SRA accounts rules.

Answer 11

Solicitor must obtain regular statements from the provider to ensure these accurately reflect all the transactions on the account.

To comply with rule 2.1 of SRA code of conduct, the firm will also need to have an internal system in place for monitoring the operation of the third party account.