Joint Accounts, the Client’s Own Bank Account and Third Party Managed Accounts Flashcards
Outside of the SRA Accounts Rules, what are some key principles that a solicitior must comply with, when dealing with client money?
Solicitors must always act in the client’s best interests and must take reasonable steps safeguard money or assets entrusted to them by clients or others
How do joint accounts relate to the SRA Accounts Rules? Do they still apply? Give details
A solicitor or firm may open a joint account with a client or 3rd party (common when acting as joint executors)
- Both joint account holders can pay money into and withdrawn from the account
- As it wouldn’t be in the solicitor’s/firm’s name alone, it isn’t a client account, but the money is still client money
The main SRA Accounts Rules that are still relevant are:
- (a) obtaining statements from banks and building societies and other financial institutions at least every five weeks; and
- (b) keeping a readily accessible central record of bills and other notifications of costs
As solicitors must safeguard money, they should require that the account operates on joint signatures only to minimise risk
How does a solicitor operating a client’s own account as signatory relate to the SRA Accounts Rules? Do they still apply? Give details
Common where solicitor appointed as deputy by court of protection or they have power of attorney
- The client’s money will not pass through the firm’s accounts and it is not a ‘client account,’ as it isn’t in the solicitor’s/firm’s name
May or may not be client money
- If solicitor holding money as trustee, it would be client money
The main SRA Accounts Rules that are still relevant are:
- (a) obtaining statements from banks and building societies and other financial institutions at least every five weeks;
- (b) completing reconciliations of the account at least every five weeks; and
- (c) keeping a readily accessible central record of bills and other notifications of costs
If a solicitor/firm cannot carry out reconciliations every 5 weeks due to limited account access, they won’t be in breach of SRA Accounts Rules, if they have taken reasonable steps to satisfy themselves that the money is not at risk and have recorded the position appropriately
What are third party managed accounts (TPMAs)? What are the advantages?
Firms can agree with clients to use a third party managed account (TPMA) to hold client money, instead of using the firm’s own client bank account
Money is therefore held by TPMA provider, so isn’t classed as ‘client money’
To comply with their obligations to safeguard client money and act in client’s best interests, the decision to use and selection of the particular TPMA must be appropriate in each case
Use of TPMAs may reduce firm overheads and they can be more secure/reduce money laundering risk
What requirements/authorisations must the TPMA provider meet/have?
TPMA provider must be FCA regulated
TPMA provider must be:
- an authorised payment institution; or
- a small payment institution which has adopted voluntary safeguarding arrangements to the same level as an authorised payment institution; or
- an EEA authorised payment institution
TPMA must be an account held at a bank by which the 3rd party receives and pays out money on the solicitor’s and client’s behalf
What must the client be aware of before a firm and client agree to use a TPMA?
Before arranging to enter a TPMA with a client, the client must understand how their money will be held and how the transaction will work
The firm should also take reasonable steps to ensure, before accepting instructions, that the client understands:
- The terms of the contractual arrangements relating to the use of the TPMA
- Fees of the TPMA and who pays them
- The client’s right to terminate the agreement and dispute payment requests made by the firm
Who operates the TPMA? What monitoring obligations does the solicitor/firm have in relation to?
TPMA is operated by the 3rd party
Solicitor must keep a record of the transactions on the account + should obtain regular statements from the provider to ensure they accurately reflect the transactions on the account
Firms must have an internal system to monitor the TPMA’s operation
What regulatory protections will the client have in relation to the TPMA?
FCA’s regulatory protection under the TPMA will differ from SRA’s regulatory protection for an ordinary client bank account
Client needs to be aware of the difference + that complaints about the TPMA provider must be made to them
What information does a firm need to provide the SRA before they use a TPMA provider?
Firms should notify SRA using a TPMA form if they intend to use a TPMA
- Only need informing the first time each provider (if multiple) is used
TPMA form asks for:
- the name and SRA number of the firm;
- the name of the TPMA provider;
- the TPMA provider’s FCA authorisation number; and
- the date on which the plans to start using a TPMA as part of its business
