Solicitor Accounts Flashcards
What is the purpose of the SRA Accounts Rules?
To regulate how solicitors handle client money, ensuring responsible and transparent actions.
Who oversees compliance with the SRA Accounts Rules?
The SRA (Solicitors Regulation Authority).
What are the potential consequences of breaching the SRA Accounts Rules?
Significant penalties, regardless of intent.
To whom do the SRA Accounts Rules apply?
All authorized bodies (firms and sole practitioners), their managers, and employees.
What does “jointly and severally responsible” mean for managers?
They share equal responsibility for compliance, even if one cannot fulfill their share.
Define “authorized bodies” according to the SRA Glossary.
Firms or practitioners authorized by the SRA.
Who is considered a “manager” under the SRA Accounts Rules?
Sole principals, LLP members, company directors, partners, or members of governing bodies.
How many sections are in the SRA Accounts Rules?
Four
What does Rule 1 of the SRA Accounts Rules cover?
The application of the Rules, specifying who they apply to.
What is the focus of Rules 2-8 in the SRA Accounts Rules?
Client money and client accounts, including definitions, handling obligations, and procedures.
What key principle is emphasized regarding client money?
It must be kept separate from the firm’s funds.
What aspects of client accounts are outlined in Rules 2-8?
Withdrawals, interest payments, breach corrections, and management systems.
What do Rules 9-11 of the SRA Accounts Rules address?
Dealing with other client money, such as joint accounts and third-party managed accounts.
What is the subject of Rules 12-13?
Accountants’ reports and record-keeping requirements.
What type of reports must firms submit?
Regular accountant’s reports.
What are firms’ obligations regarding accounting records?
They must comply with storage and retention requirements.
What type of guidance does the SRA offer for compliance?
Resources like “Helping you keep accurate client accounting records” and “Do I need to operate a client account?”
True or False: Only managers are responsible for compliance with the SRA Accounts Rules.
False. The Rules apply to all SRA-authorised firms, managers, and employees.
What is the nature of managers’ responsibility for compliance?
Joint responsibility, meaning they share it equally.
What must firms have in place for handling client money?
Adequate systems and controls tailored to the nature and volume of transactions.
Which section of the SRA Accounts Rules is the largest?
Client money and accounts (Rules 2-8).
When is a firm required to obtain an accountant’s report?
If they hold or receive client money or operate specific joint/client accounts.
When must an accountant’s report be delivered to the SRA?
Only if it’s qualified, indicating a significant breach.
What qualifies an accountant’s report?
Significant breaches of the Rules that risk client or third-party money.
Provide examples of situations that might qualify an accountant’s report.
Unreplaced shortfalls in client accounts, fraud, failure to reconcile bank statements, using client accounts as banking facilities.
Under what conditions can a firm be exempt from obtaining an accountant’s report?
If all client money is from the Legal Aid Agency or if the average/maximum client money balances are below specific thresholds.
Who must prepare and sign an accountant’s report?
A member of a chartered accountancy body and a registered auditor.
In what format must the accountant’s report be submitted?
The form prescribed by the SRA.
Can the SRA request an accountant’s report even if it’s not qualified?
Yes, if a firm ceases operation or if it’s deemed in the public interest.
What are the SRA’s powers regarding accountants preparing reports?
They can disqualify accountants for misconduct or lack of due care.
What are the requirements for storing accounting records?
Firms must store them securely and retain them for at least six years.
What types of documents are considered accounting records that need to be stored?
Bank statements, accountant’s reports, client instructions, and any documents proving compliance.
True or False: Only qualified accountant’s reports need to be retained.
False. Both qualified and unqualified reports must be retained.
Does the SRA provide guidance on accountant’s reports?
Yes, they offer detailed guidance, including advice on qualification and best practices, available on their website.
What is a joint account in the context of the SRA Accounts Rules?
An account held jointly by a solicitor/firm and a client or third party, where the money is considered client money.
Do most of the client money rules apply to joint accounts?
No, except for Rules 8.2 (bank statements) and 8.4 (record of bills).
What is a client’s own account under Rule 10?
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.
What is the purpose of bank reconciliations for a client’s own account?
To ensure the bank statement matches the cash book and ledger, identifying discrepancies.
Define a Third-Party Managed Account (TPMA).
An escrow account held by an FCA-regulated institution, where the third party handles payments for the solicitor and client.
What is the key requirement for authorized bodies when using a TPMA?
They must not receive or hold the client’s money directly.
What must solicitors inform clients about before using a TPMA?
Terms, fees, the client’s right to terminate, and dispute resolution.
Are funds in a TPMA considered client money under the SRA Accounts Rules?
No, because the solicitor doesn’t handle them directly.
What is the requirement for notifying the SRA about TPMA use?
Firms must inform the SRA when they use a TPMA, make changes, or stop using one.
What is the primary distinction emphasized in Rule 4.1 regarding client money?
Client money must be kept separate from non-client money (belonging to the authorized body).
What are the four types of client money defined in Rule 2.1?
Money related to regulated services, belonging to third parties related to services, received for specific roles, and for fees/disbursements before billing.
When does money become non-client money?
After a bill is sent to the client or when a disbursement has been paid by the solicitor.
Is a deposit held for a property purchase considered client money?
Yes, if it’s held as an agent or stakeholder.
Provide an example of non-client money.
A reimbursement received from a client for a Land Registry fee already paid by the firm.
Where must client accounts be maintained?
In a bank or building society in England and Wales.
