Solicitors Accounts: SRA Accounts Rules pt.2

Question 1

What four types of money does Rule 2.1 define as ‘client money’?

Answer 1

1. Relating to regulated services delivered to a client
2. On behalf of third party in relation to regulated services delivered by authorised body
3. As a trustee or holder of a specified office or appointment (carrying specific solicitor role)
4. In respect of your fees and any unpaid disbursements

Question 2

What does the SRA Glossary define ‘regulated services’ as?

Answer 2

Legal and other professional services a body provides that is regulated by sRA

Question 3

What are examples of third parties who send money to authorised body in relation to regulated services?

Answer 3

Money held as agent, stakeholder or held to third party’s order

Question 4

Has money that already been paid by the client to the solicitor ‘client money’?

Answer 4

No - it has to be unpaid to be ‘client money’

Question 5

What does the SRA Glossary define ‘fees’ as?

Answer 5

Your own charges or profit costs (including any VAT
element)

Question 6

What does the SRA Glossary define ‘client’ as?

Answer 6

The person whom you act for

Question 7

What does the SRAa Glossary define ‘disbursements’ as?

Answer 7

Any costs or expenses paid or to be paid to a third party on behalf of the client or trust (including any VAT
element)

Except office expenses such as postage and
courier fees

Question 8

What does the SRA Guidance: ‘Do I need to operate a client account?’ generally define or summarise ‘client money’ to be?

Answer 8

Money of any currency that is received and held by a firm when they are providing legal services

Question 9

What are some examples of types of client money?

Answer 9

• Client damages received by a firm in a personal injury matter
• Mortgage money received from lender on behalf of client
• Money held to pay nursing home fees
• Money for firm’s fees receiving before bill has been sent to client for those fees

Question 10

What is ‘non-client money’ referred to as in the SRA Glossary and Rule 4.1, despite having no definition in the SRA Accounts Rules?

Answer 10

SRA Glossary - ‘mixed payments’

Rule 4.1 - ‘money belonging to the authorised body’

Question 11

What is the category of money in the following scenario?:

Client has instructed you on purchase on property; has no client money held for him; body pays Land Registry fees out of firm’s business account; client sends cheque to reimburse you for the fees

Answer 11

Non-client money - it belongs to the authorised body because it is money received by them in respect of a paid disbursement

Question 12

Where does Rule 3.1 obligate client accounts must be maintained?

Answer 12

At a branch or head office of a bank/building society in England and Wales

Question 13

What are the two details the name of client accounts must include according to Rule 3.1?

Answer 13

a) the name of the authorised body
b) the word ‘client’ to distinguish it from other accounts held by authorised body

Question 14

What must client accounts not be used for?

Answer 14

Providing banking facilities to clients or third parties

Question 15

What must payments into, transfers and withdrawals from a client account be made in respect of?

Answer 15

The delivery of regulated services by the authorised body

Question 16

Does the ‘client account’ belong to the client?

Answer 16

No

Question 17

What is the time frame Rule 2.3 obliges client money to be paid into a client account?

Answer 17

‘Promptly’

Question 18

What are the 3 exceptions to Rule 2.3 when obliged to pay client money into a client account within the stated time frame?

Answer 18

a. Money held in specified office/appointment e.g., trustee, donee of a power of attorney etc.
b. If client money represents payments from the Legal Aid Agency
c. If you agree an alternative arrangement in writing for whom the money is held not to hold money in client acc

Question 19

Is it logical for money held representing payment from Legal Aid Agency to be treated as client money?

Answer 19

No

Question 20

Why does money held in the office/appointment of a specific position not need to be in a client account within the standard time frame?

Answer 20

May conflict with regulations under rules relating to that specified appointment

Question 21

How does Rule 2.2 instruct client money should be held when the authorised body does not have a client account?

Answer 21

• The only client money the body holds and receives in regarding their fees and unpaid disbursements before a bill is sent
• Any client money held for disbursements related to costs incurred by body on half of client and for which the body is liable
• Body does not maintain a client account

Question 22

What condition can an authorised body not be required to hold client money in a client account following the satisfaction of one of the Rule 2.2 circumstances?

Answer 22

They must have informed their client in advance of where and how the client money will be held

Question 23

What does Rule 2.5 say when there is no longer a proper reason to hold onto client money for authorised bodies who hold client money but not in a client account?

Answer 23

Needs to be returned promptly

Question 24

What does Rule 8.1(a) say in respect of a ‘client ledger’ for authorised bodies who hold client money but not in a client account?

Answer 24

The body should keep accurate records showing receipts and payments of client money in a client ledge

Question 25

What does Rule 4.3(a) say about what an authorised body must do if some of the client money that isn’t a client account will be used to pay some of their costs?

Answer 25

The client must be given a bill or another written notification of costs

Question 26

What rules do not apply according to Rule 2.2, where client money is not held in a client account?

Answer 26

• Client money doesn’t have to be paid promptly (Rule 2.3)
• Client money doesn’t have to be kept separate from authorised body’s money (Rule 4.2)
• Client money doesn’t have to be available on demand (Rule 2.4)
• No requirement for body to obtain and deliver accountant’s report (Rule 12)

Question 27

How does Rule 6.1 oblige authorised bodies to deal with breaches/improperly held/withdrawn client money?

Answer 27

It must be paid immediately into the account or replaced as appropriate

Question 28

What does Rule 7.1 say must be done with interest gained on client money?

Answer 28

Authorised body must account to clients or third parties for fair sum of interest on client money held on their behalf

Question 29

Where should non-client money i.e., authorised body’s money be paid into?

Answer 29

Business account

Question 30

What type of money is held in an authorised body’s business account?

Answer 30

Non-client money i.e., money belonging to the authorised body

Question 31

How does Rule 4.2 oblige funds from mixed payments is to be dealt with and within what time frame?

Answer 31

Funds should be allocated and divided to the correct client or business account

Promptly

Question 32

Why does Rule4.2 acknowledge or accept that mixed payments are allowed to be made into either the client or business account?

Answer 32

Because clients may not appreciate the need to keep the two separate

Question 33

What is an example of a client sending mixed payments into either a business or client account?

Answer 33

Money to pay a bill for work done (non-client) and

Money on account of costs for another matter that client has instructed you on (client money)

Question 34

What does ‘on account of costs’ mean?

Answer 34

When a client pays money towards legal costs before work is complete

Question 35

What are ‘separate designated client account(s)’?

Answer 35

Additional client bank accounts for holding individual client’s money in

Question 36

How does Rule 4.1 instruct authorised bodies to keep client money and non-client money?

Answer 36

Client money should be kept separate from non-client money

Question 37

What are the three conditions Rule 5.1 provide for withdrawing client money?

Answer 37

a) For the purposes of it being held
b) Following receipt of instructions from person money is held for (client or third party)
c) SRA’s prior written authorisation or in prescribed circumstances

Question 38

What is the only ‘prescribed’ circumstance SRA allows for the withdrawal of client money according to Rule 5.1(c)?

Answer 38

Withdraw client account balance of less than £500 on any one client matter provided its paid to charity of authorised body’s choice

The body needs to meet the conditions set out

Question 39

Why are there ‘designated client accounts’?

Answer 39

Because all clients’ money is held together in one client account

The ‘designated client account’ allows clients money to be separate

Question 40

TRUE OR FALSE

Rule 5.3 states that you can only withdraw client money from client account if there is a minimum of £500 held on behalf of the person it’s held for (i.e., the client or third party)

Answer 40

False

You can only withdraw if SUFFICIENT FUNDS held on behalf of the person it’s held for, otherwise you would be withdrawing another client’s money

Question 41

Which other three rules, excluding Rule 5.1 3 conditions, give rise to lawful withdrawals of client money from client account?

Answer 41

1. Rule 2.5 - when there’s no longer a proper reason to hold funds (withdrawing the funds and sending them to client)
2. Rule 4.2 - non-client money mixed with client must be withdrawn and transferred out
3. Rule 4.3 - money can be transferred out of client account to pay your costs

Question 41

How can the funds which are no longer needed for proper reason be given back to client under Rule 2.5?

Answer 41

Sent back to client by cheque or transferred to them

Question 42

What conditions must be met in order for money in client account to be withdrawn and transferred out to pay a ball of costs under Rule 4.3?

Answer 42

1. Bill must be given to client before transfer
2. Only the specific sum identified in bill is transferred
3. Client has sufficient money held on their behalf to cover the payment