The SRA Accounts Rules: Banking facilities updates

The SRA has recently published new case studies to help law firms remain compliant with the SRA Accounts Rule 3.3. This rule states that solicitors cannot provide banking facilities to clients or third parties and that there must be proper connection between client funds held and the delivery of regulated services.

This update reaffirms the SRA’s focus on this rule and how seriously they view the provision of banking facilities. We summarise each of the additional case studies and provide action points.

Additional case studies

1. Lender’s condition on mortgage offer

Where the conditions of a mortgage offer require other debts to be settled before the balance is released to the borrower, there would not be a breach of rule 3.3, provided the conditions are detailed specifically.

2. Legal advice only retainers

This example is where a firm is providing advice in relation to Stamp Duty Land Tax (SDLT) but did not act for the property purchase. The client wants to forward the tax payable to the firm for onward payment to HMRC on their behalf. The conclusion is that this is a breach of rule 3.3 as there is no obvious reason for the money to pass through the firm’s client account and it’s not directly related to the advice being provided.

3. Sale of the matrimonial home as part of divorce proceedings

This case describes a situation where net sale proceeds have not been distributed as an agreement between the parties is yet to be reached. In the absence of a court order, the SRA don’t consider there to be a breach of rule 3.3 and the firm can retain the funds.

Where a solicitor is asked to settle a debt to a third party from the net sale proceeds and there is no court order, again, the SRA would not consider a payment a breach of rule 3.3. However, they do expect firms to be mindful of their professional obligations and make sure that:

• The payment is in respect of an existing debt which would be taken into account in the resolution of the ancillary proceedings.
• The firm has the written consent of both of their respective solicitors.
• The firm is satisfied that this is not an insolvency situation risking the preferential treatment of one creditor over others.
  
  

4. Parent paying child’s legal fees

This example is where a firm has acted on a matter for a parent, and their child has instructed another solicitor in the firm to act on an unassociated matter. If money is retained on the parent’s matter to cover the firm’s fees on the child’s matter, there is no breach of rule 3.3, so long as there are no other red flags as outlined in the warning notice. 

5. Conveyancing and retentions

Where a retention is held as part of a conveyancing matter, there shouldn’t be a breach of rule 3.3. Ordinarily, the money for a retention would not be required to be held for long, although the SRA acknowledges there are instances where it will take longer. In those instances, firms are advised to review the need to hold the retention on a regular basis so that funds are not held for longer than necessary.

Action points:

• It’s important to remember that each matter should be reviewed on an individual basis and firms should consider the circumstances unique to that case in detail. Matters should not be “shoehorned” into one of the case study examples where the underlying facts are different.
• Make sure that you continually question why you’re being asked to receive or send funds and how this is related to the services provided.
• Ensure your teams are sufficiently trained on the requirements of the rules and know who to approach if they have a query in relation to compliance.
• Make sure sufficient notes are kept on file of any judgement reached.

If you have any queries in relation to the SRA Accounts Rules, please reach out to our Legal accounting team. We would be delighted to assist you. Call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Ellis Lake