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Professional Conduct > Solicitors Accounts: SRA Accounts Rules pt.1 > Flashcards

Solicitors Accounts: SRA Accounts Rules pt.1 Flashcards

**Topic** - SRA Risk Outlook - SRA Accounts Rules: Introduction - SRA Accounts Rules: Reports and Records - SRA Account Rules: Join Accounts - SRA Account Rules: Third Party Managed Accounts

1
Q

What does the ‘SRA’s Risks Outlook’ set out?

A

What the SRA think are the key risks and challenges faced by the profession

One of them is client money

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2
Q

What does the SRA recommend if client money is lost or taken?

A

The firm must report this breach to them promptly, even if the money has been replaced

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3
Q

What does the Risk Outlook deem necessary for protecting client money?

A

Good accounting systems

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4
Q

What must firms do to comply with the Risk Outlook and have good accounting systems?

A
  • Train and supervise staff
  • Ensure everyone knows their responsibility to keep client money safe
  • Business succession and contingency plans for accounting staff
  • Strong IT systems with good backups
  • Engage with SRA following any concerns
  • Not allow client account to be used as a banking facility
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5
Q

TRUE OR FALSE

Only compliance officers are responsible for keeping client money safe

A

False - all solicitors

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6
Q

What can client money breaches lead to for solicitors?

A
  • Proceedings before the Solicitors Disciplinary Tribunal (SDT)
  • Potentially striking off
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7
Q

Who do the SRA state that the SRA Accounts Rules apply to in their introduction?

A

To all firms that are regulated by the SRA, including those who manage and work within such firms

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8
Q

What three categories of people does Part 1 of the SRA Accounts Rules say the rules apply to?

A
  1. Authorised bodies
  2. ^ their managers
  3. ^^ their employees
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9
Q

Who is defined as being a ‘manager’ in reference to Part 1 of the SRA Accounts Rules?

A
  • Sole principal in a recognised sole practice
  • Members of an LLP
  • Directors of a company
  • Partners in partnership
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10
Q

Who are the ‘authorised bodies’ Part 1 of the SRA Accounts Rules says the Rules are applicable to?

A

Any body authorised by the SRA to practice as bodies licensed or recognised by SRA

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11
Q

What does Part 1 say regarding who is responsible for compliance?

A

The manager’s of the authorised body are joint and severally responsible for compliance with SRA Accounts Rules

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12
Q

What is meant when the SRA gives the responisbility of manages being ‘joint and severally responsible’ for complaince?

A

Managers share the responsibility equally, together and separately, so that if one manager is unable to share the responsible, the others become responsible for that manager’s share

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13
Q

How are the four sections of the 13 SRA Accounts Rules split?

A
  1. Application
  2. Client money and client accounts
  3. Dealings with other money belonging to clients or third parties
  4. Accountants’ reports and storage and retention of account records
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14
Q

What topic do the majority of the SRA Accounts Rules relate to?

A

Client money and client accounts

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15
Q

What two steps must a firm and its managers take if they ever hold or receive client money according to Rule 12? (put briefly)

A
  1. Obtain an accountants report within six months of the accounting period to which the report relates to
  2. Deliver the report to SRA within six months if it is qualified
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16
Q

Does the authorised body need to obtain an accountant’s report if is has not ever held client money for the relevant account period?

A

No

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17
Q

Does the authorised body need to ensure that the accountant’s report is delivered to the SRA is the report is not qualified?

A

No

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18
Q

When does the SRA expect a report to be qualified?

A

When there has been a significant breach of the Accounts Rules

i.e., client or third party money is, has been or may be placed at risk

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19
Q

When may administrative errors likely become significant according to the SRA Guidance?

A

When they become persistent and come from a lack of controls or breakdown of existing controls, putting client money at risk

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20
Q

What illustrative factors does SRA’s Guidance: ‘Planning for and completing an accountant’s report’ provide on when the SRA would expect would lead to a report being qualified?

A
  • Significant and/or unreplaced shortfall
  • Actual or suspected fraud or dishonesty by managers or employees
  • Accounting records not available
  • Client account bank reconciliations not being carried out
  • Client account being improperly used as a banking facility
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21
Q

Which two circumstances can SRA require an authorised body to deliver an accountants to the SRA on reasonable notice according to Rule 12.4?

A
  1. A final report, where the authorised body has ceased to operate in that capacity
  2. If SRA considers it in the public interest to do so
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22
Q

What are the two exceptional circumstances that excuse a firm from obtaining an accountant’s report if they did hold client money during an accounting period?

A
  1. If all of it was received from the Legal Agency
  2. The statement or passbook balance of client money that the firm has held or received doesn’t exceed an average of £10k AND max of £250k
23
Q

What is a ‘statement or passbook balance of client money’ the total balance of?

A

Both

  1. All client accounts held or operated by you
  2. Any joint accounts and clients’ own accounts operated by you
24
Q

What are the rules governing the type of accountant carrying out the report and the form of the report according to rules 12.5 and 12.9?

A
  • Accountant needs to be a member of chartered accountancy body AND work for/be a registered auditor
  • Report must be in the form prescribed by the SRA
25
Q

What rights do Rules 12.6 set out of SRA’s entitlement to disqualify an accountant from preparing a report?

A
  • If the accountant has been found guilty by the professional body of misconduct or equivalent
  • If SRA believe accountant has failed to exercise due care and skill in preparation of report
26
Q

TRUE OR FALSE

Rule 12.8 sets out the authorised body’s obligation to provide the accountant with account details and all other information the accountant requires to complete their report

A

True

27
Q

TRUE OR FALSE

Rule 12.7 states that the SRA will not be responsible for specifying matters that the firm must ensure are incorporated into the terms of engagement between the authorised body and the accountant

A

False

The SRA may do this from time to time

28
Q

How long does Rule 13.1 say authorised bodies must store accounting records securely and retain for?

A

At least 6 years

29
Q

What does the SRA Glossary define Accounting records as?

A
  • Bank and building society statements
  • Accountant reports (both qualified and unqualified)
  • Records relating to third party managed accounts
  • Any other records or documents necessary to show compliance with SRA Accounts Rules
30
Q

What does SRA’s Guidance: ‘Joint accounts and record keeping’ explain in terms of how a ‘joint account’ works?

A

The solicitor/authorised body is enabled to operate and manage the account with the money it along with another person

31
Q

Who may be the other person managing a client account with a solicitor/authorised body?

A

Client, another law firm or third party

32
Q

What is a common circumstances where a joint account may be operated?

A

Firm’s solicitor being named as joint executor with a lay person on the administration of an estate

33
Q

What does Rule 8.2 oblige authorised body’s to obtain every so often when dealing with joint accounts?

A

Statements from banks, building societies etc. at least every five weeks for all joint accounts

34
Q

What kind of documents does Rule 8.4 oblige authorised bodies to keep readily accessible when dealing with joint accounts?

A

A central record of all bills or other written notifications of costs given by firm

35
Q

Would bills and bank statements for joint accounts need to be kept securely and retained for at least six years according to Rule 13.1 too?

A

Yes

36
Q

Would an authorised body be required to obtain an accountant’s report if they’ve operated a joint account according to Rule 12.1?

A

Yes

37
Q

Do the two exceptional circumstances of Legal Aid money and average and maximum statement balances in Rule 12.2 apply for joint accounts?

A

They may apply

38
Q

What does Rule 8.3 oblige for those operating joint accounts in addition to Rule 8.2 when obtaining certain records at least every weeks?

A

Firms are required to complete reconciliation of bank/building society statements balance with cash book balance and client ledger total

39
Q

Which two Rules of Part 2 of SRA Accounts Rules apply when an authorised body is managing a joint account?

A
  1. Rule 8.2 - bank statements
  2. Rule 8.4 - bills of costs
40
Q

What purposes may give rise to an authorised body entering into arrangements with a client to sue a third part managed account (‘TPMA’) according to Rule 11.1?

A

For the purpose of receiving payments

  • from
  • on behalf of
  • making payments to or on behalf of client

in respect of regulated services delivered by to the client

41
Q

What conditions do SRA impose must be met in Rule 11 for TPMA to be used?

A

a) use of account does not result in receiving or holding client’s money
b) you take reasonable steps to ensure client understands terms of contractual arrangements:
- relating to use of TPMA; including fees and who will bear them
- the client’s right to terminate agreement
- the client’s right to dispute payment request

42
Q

What must the authorised body consider that they must do/obtain when they use a TPMA according to Rule 11.2?

A

The authorised body must obtain regular statements from the provider of the PRMA and ensure that the statements accurately reflect all transactions

43
Q

What does the SRA Glossary define a TPMA as?

A

An account held at a bank/building society in a third party’s name which is an authroised payment institution

44
Q

How and who are monies owned by in a TPMA?

A

Beneficially by the third party

45
Q

Who are terms upon the TPMA is managed/operated?

A

Operated upon terms agreed between you, third party and your client

46
Q

Does Rule 12.1 on obtaining an accountant’s report apply to TPMA?

A

No

47
Q

Does Rule 13.1 on storing accounting records securely for at least six years apply to TPMA?

A

Yes

48
Q

How does SRA’s Guidance: ‘Third party managed accounts’ explain a TPMA can be used as an alternative to?

A

TPMAs can be used as alternatives to client accounts or alongside client accounts

49
Q

Why does SRA’s Guidance: ‘Third party managed accounts’ say money held in a TPMA does not fall under definition of client money?

A

Because it is not held or received by the authorised body

50
Q

What do SRA’s Guidance: ‘Third party managed accounts’ oblige TPMAs to be?

A
  • Regulated by the FCA
  • Authorised payment institution
  • An account at a bank/building society
  • Funds owned beneficially by third party
  • Operated as an escrow payment service
51
Q

What is an ‘escrow payment service’?

A

Third party receives and disburses money on you and your client’s behalf

52
Q

Does an authorised body need the SRA’s permission to us a TPMA?

A

No

53
Q

What does the SRA expected of an authorised body if a TPMA is being used?

A

That the authorised body inform the SRA

54
Q

What do the SRA expect if more than one TPMA provider is being used?

A

To be notified of all providers

To be informed of any switches between providers or if the authorised body stops using a TPMA for updating records purposes

Professional Conduct (5 decks)

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