A senior executive at the Solicitors Regulation Authority (SRA) has reassured solicitors that no firm decision has been made regarding the potential removal of client accounts, as reported by The Law Society Gazette.
The recent SRA consultation, which closed at the end of February, raised the spectre of the end of client accounts and solicitors holding client monies. A briefing note in the consultation said 75% of SRA regulated firms declared they held client monies in the twelve months to August 2023. Of those, just under half held more than £1m, with the largest firms holding anywhere between £100m and £1bn. The consultation proposed further exploration of third party managed accounts (TPMAs) and centralised functions like CARPA in France. It also acknowledged the work being done on synchronisation where funds are directly transferred from one lender to another.
Industry bodies have hit back at the consultation, accusing the SRA of fundamentally misunderstanding how law firms operate day to day, and describing the proposals as ‘unworkable, unjustified, and contrary to the rule of law’. The Law Society president Richard Atkinson said members were ‘strongly opposed’ to changes to client account and warned ‘removing client accounts may have huge ramifications for the quality of legal services including higher costs, delays and reduced access to justice.’
Speaking at the Law Society’s Risk and Compliance Conference, Aileen Armstrong, the SRA’s Executive Director of Strategy, Innovation, and External Affairs, said the regulator had received over 300 responses and emphasised discussions are still ongoing and no decision had been made. She suggested that an intermediary account, similar to those used by the Bank of England, could be one possible solution. However, she also acknowledged that “the most useful alternative might not exist yet”.
In a separate session, solicitor advocate Jayne Willetts criticised the SRA’s proposal, calling it ‘naïve and simplistic’. She argued that a third-party managed account could not adequately replace the solicitor’s client account. She told The Law Society Gazette:
“This is a step too far, and the SRA seem to have prepared the ground rather before they launched the consultation. They are saying we are not to be trusted with the client account when we have been doing it for years – how on earth are we going to deal with transactional work if we can’t deal with client money?”
During the Q&A session, Armstrong was asked whether the SRA needed to do more to gain the trust of the legal profession. She said:
“I understand and appreciate the question. In order to have a strong sector we need strong firms and solicitors and we need the regulator to play its part. We [the SRA] need to be credible and engage well with the sector.”
