Solicitor Accounts

Question 1

What is the purpose of the SRA Accounts Rules?

Answer 1

To regulate how solicitors handle client money, ensuring responsible and transparent actions.

Question 2

Who oversees compliance with the SRA Accounts Rules?

Answer 2

The SRA (Solicitors Regulation Authority).

Question 3

What are the potential consequences of breaching the SRA Accounts Rules?

Answer 3

Significant penalties, regardless of intent.

Question 4

To whom do the SRA Accounts Rules apply?

Answer 4

All authorized bodies (firms and sole practitioners), their managers, and employees.

Question 5

What does “jointly and severally responsible” mean for managers?

Answer 5

They share equal responsibility for compliance, even if one cannot fulfill their share.

Question 6

Define “authorized bodies” according to the SRA Glossary.

Answer 6

Firms or practitioners authorized by the SRA.

Question 7

Who is considered a “manager” under the SRA Accounts Rules?

Answer 7

Sole principals, LLP members, company directors, partners, or members of governing bodies.

Question 8

How many sections are in the SRA Accounts Rules?

Answer 8

Four

Question 9

What does Rule 1 of the SRA Accounts Rules cover?

Answer 9

The application of the Rules, specifying who they apply to.

Question 10

What is the focus of Rules 2-8 in the SRA Accounts Rules?

Answer 10

Client money and client accounts, including definitions, handling obligations, and procedures.

Question 11

What key principle is emphasized regarding client money?

Answer 11

It must be kept separate from the firm’s funds.

Question 12

What aspects of client accounts are outlined in Rules 2-8?

Answer 12

Withdrawals, interest payments, breach corrections, and management systems.

Question 13

What do Rules 9-11 of the SRA Accounts Rules address?

Answer 13

Dealing with other client money, such as joint accounts and third-party managed accounts.

Question 14

What is the subject of Rules 12-13?

Answer 14

Accountants’ reports and record-keeping requirements.

Question 15

What type of reports must firms submit?

Answer 15

Regular accountant’s reports.

Question 16

What are firms’ obligations regarding accounting records?

Answer 16

They must comply with storage and retention requirements.

Question 17

What type of guidance does the SRA offer for compliance?

Answer 17

Resources like “Helping you keep accurate client accounting records” and “Do I need to operate a client account?”

Question 18

True or False: Only managers are responsible for compliance with the SRA Accounts Rules.

Answer 18

False. The Rules apply to all SRA-authorised firms, managers, and employees.

Question 19

What is the nature of managers’ responsibility for compliance?

Answer 19

Joint responsibility, meaning they share it equally.

Question 20

What must firms have in place for handling client money?

Answer 20

Adequate systems and controls tailored to the nature and volume of transactions.

Question 21

Which section of the SRA Accounts Rules is the largest?

Answer 21

Client money and accounts (Rules 2-8).

Question 22

When is a firm required to obtain an accountant’s report?

Answer 22

If they hold or receive client money or operate specific joint/client accounts.

Question 23

When must an accountant’s report be delivered to the SRA?

Answer 23

Only if it’s qualified, indicating a significant breach.

Question 24

What qualifies an accountant’s report?

Answer 24

Significant breaches of the Rules that risk client or third-party money.

Question 25

Provide examples of situations that might qualify an accountant’s report.

Answer 25

Unreplaced shortfalls in client accounts, fraud, failure to reconcile bank statements, using client accounts as banking facilities.

Question 26

Under what conditions can a firm be exempt from obtaining an accountant’s report?

Answer 26

If all client money is from the Legal Aid Agency or if the average/maximum client money balances are below specific thresholds.

Question 27

Who must prepare and sign an accountant’s report?

Answer 27

A member of a chartered accountancy body and a registered auditor.

Question 28

In what format must the accountant’s report be submitted?

Answer 28

The form prescribed by the SRA.

Question 29

Can the SRA request an accountant’s report even if it’s not qualified?

Answer 29

Yes, if a firm ceases operation or if it’s deemed in the public interest.

Question 30

What are the SRA’s powers regarding accountants preparing reports?

Answer 30

They can disqualify accountants for misconduct or lack of due care.

Question 31

What are the requirements for storing accounting records?

Answer 31

Firms must store them securely and retain them for at least six years.

Question 32

What types of documents are considered accounting records that need to be stored?

Answer 32

Bank statements, accountant’s reports, client instructions, and any documents proving compliance.

Question 33

True or False: Only qualified accountant’s reports need to be retained.

Answer 33

False. Both qualified and unqualified reports must be retained.

Question 34

Does the SRA provide guidance on accountant’s reports?

Answer 34

Yes, they offer detailed guidance, including advice on qualification and best practices, available on their website.

Question 35

What is a joint account in the context of the SRA Accounts Rules?

Answer 35

An account held jointly by a solicitor/firm and a client or third party, where the money is considered client money.

Question 36

Do most of the client money rules apply to joint accounts?

Answer 36

No, except for Rules 8.2 (bank statements) and 8.4 (record of bills).

Question 37

What is a client’s own account under Rule 10?

Answer 37

An account where a solicitor is a signatory but Part 2 of the Rules doesn’t apply, except for Rules 8.2, 8.3 (reconciliations), and 8.4.

Question 38

What is the purpose of bank reconciliations for a client’s own account?

Answer 38

To ensure the bank statement matches the cash book and ledger, identifying discrepancies.

Question 39

Define a Third-Party Managed Account (TPMA).

Answer 39

An escrow account held by an FCA-regulated institution, where the third party handles payments for the solicitor and client.

Question 40

What is the key requirement for authorized bodies when using a TPMA?

Answer 40

They must not receive or hold the client’s money directly.

Question 41

What must solicitors inform clients about before using a TPMA?

Answer 41

Terms, fees, the client’s right to terminate, and dispute resolution.

Question 42

Are funds in a TPMA considered client money under the SRA Accounts Rules?

Answer 42

No, because the solicitor doesn’t handle them directly.

Question 43

What is the requirement for notifying the SRA about TPMA use?

Answer 43

Firms must inform the SRA when they use a TPMA, make changes, or stop using one.

Question 44

What is the primary distinction emphasized in Rule 4.1 regarding client money?

Answer 44

Client money must be kept separate from non-client money (belonging to the authorized body).

Question 45

What are the four types of client money defined in Rule 2.1?

Answer 45

Money related to regulated services, belonging to third parties related to services, received for specific roles, and for fees/disbursements before billing.

Question 46

When does money become non-client money?

Answer 46

After a bill is sent to the client or when a disbursement has been paid by the solicitor.

Question 47

Is a deposit held for a property purchase considered client money?

Answer 47

Yes, if it’s held as an agent or stakeholder.

Question 48

Provide an example of non-client money.

Answer 48

A reimbursement received from a client for a Land Registry fee already paid by the firm.

Question 49

Where must client accounts be maintained?

Answer 49

In a bank or building society in England and Wales.