On 10th December, The Solicitors Regulation Authority (SRA) announced that it will be conducting checks on several firms in the new year due to a decline in the number of accountants’ reports submitted each year. Although this decrease may reflect increased compliance among firms, there are concerns that it could indicate underlying compliance issues that need to be addressed.

Consequently, the spot checks aim to review a random selection of firms that have previously informed the regulator about holding client money.

An essential aspect for demonstrating compliance is maintaining an updated manual and providing training for all staff, which we usually recommend occurs every 2 years.

What firms need to be aware of:

• Spot-check Process
  • A random selection of firms, previously reporting they handle client money, will be contacted via email in December.
  • These firms must complete a regulatory questionnaire, including whether a recent accountant’s report has been obtained and detailing how residual client balances are managed.
• Compliance Requirement
  • Completing the questionnaire is mandatory, and failure to do so may lead to enforcement action.
  • Firms must provide their most recent accountant’s report via the provided mySRA link.
• Timeline
  • Notifications will be sent in December, and the questionnaire submission window will open in January.

You can read the announcement in full here: Accounts Rules Spot-check
You can view an example of the questions you will be asked here: Specimen questionnaire

Client Accounts and Accountants’ Reports

Any firm that has an active client account has an obligation under Rule 12 to:

• obtain an accountant’s report for that accounting period within six months of the end of the period
• deliver it to us within six months of the end of the accounting period if the accountant’s report is qualified to show a failure to comply with these rules, such that money belonging to clients or third parties is, or has been, or is likely to be placed, at risk

Account Rules provide a framework designed to safeguard client funds and ensure they are not put at risk and are an essential part of the SRA Standards and Regulations.

To ensure compliance with these rules, firms must establish appropriate systems and controls that align with the nature and volume of client transactions and the amount of client money held or received.

Support for Law Firms from The Regulation and Compliance Office

If you have been contacted by the SRA or have concerns about the spot-check requirements, we can provide tailored strategies to navigate these notifications from the SRA. We work with firms and their COLPs and COFAs to assist them with the management of risk, compliance, and regulation through a range of training and outsourced support solutions. Our goal is to ensure the firms we work with have and retain a compliant structure, enabling the firms, their managers, and owners to focus on running their businesses and servicing their clients.

Office and Accounts Manuals Drafting Service

We also provide an Office and Accounts Manuals Drafting Service to ensure compliance with the Accounts Rules, which also acts as a health check against the firm’s approach to SRA Accounts rules management and includes:

• Discovery – interviewing the COFA and Accounts team to understand, in detail, the processes adopted by the firm to enable the manual to reflect how the firm operates.
• Drafting – drafting the manual on the basis of the information provided in the discovery process.
• Review – Review and draft to perfect the manual to ensure it meets the requirements of the firm.
• Finalisation – Issue of the manual for roll out in the firm.
• Updates – An optional extra is to provide an update service whereby we will reflect any required changes due to rule or guidance change by the SRA. In addition, we will provide an annual review that enables us to reflect any changes in the business that need to be reflected in the manual.

Additional support is available that can include:

• Training of the staff involved in the processes and affected by them.
• Ongoing maintenance to ensure the manual is up to date and reflective of the changing needs of the firm.
• Implementation of a bespoke performance management programme.
• Implementing of an employee handbook.

Learn more: Office and Accounts Manuals Drafting Service.

Accounts Rule Training for Staff

Our Accounts Rules training is aimed at fee earning and support staff and provides a detailed insight into the Accounts Rules and where and how breaches can occur. The focus of the training is to avoid breaches through understanding and provision of case studies.

he course itself is approximately 2 hours and includes a detailed handout and Q&A session.
We recommend this training is delivered as standard every 2 years.

Reach Out to RACO

For more information on the Regulation & Compliance Office and how we can assist in accelerating your risk management, compliance and regulation, call us on: 0203 985 8550 or email us at: info@regulationandcomplianceoffice.co.uk