The SRA also proposed to provide an alternative to holding client funds by introducing “clear and consistent safeguards” for the use of third-party accounts as a mechanism for managing payments and transactions. While the rule changes are not radical, it is important that team members, especially COFA, understand what they need to do. As long as the company`s policies and procedures are up-to-date and compliant with the rules, companies should be well prepared for these updated rules. You are not required to hold this money in a client`s account if you have informed your client in advance of where and how the money will be held. Rules 2.3, 2.4, 4.1, 7, 8.1(b) and (c) and 12 do not apply to Client Funds held outside a Client Account under this Rule. As you would expect with such a change in rules and regulations, we have seen more violations in the past year than we would normally see in our work on the rules on lawyers` accounts. While there are some similarities between the “old” and “new” rules, there are a number of changes, including: Previously, the rules set a small amount of interest where you didn`t have to pay a dime to the customer. The cost of calculating and distributing interest is disproportionate to the amount paid. If your business continues to abide by the “old” rules, it`s usually not a violation of the new 2019 rules.
However, this must be specified in the company`s policies and procedures. For example: “Funds will be transferred from the customer`s account to the business account within 14 days of billing.” The guidelines cannot simply say that the company is following the 2011 rules. Rule 8.8 states that you must “ensure that any advertising relating to your practice is accurate and not misleading, including advertising relating to your fees and the circumstances in which interest is payable by or to clients.” This rule is included in the Code of Conduct for Companies pursuant to Rule 7.1(c). In 2015, former Bar Counsel Michael Webster was jailed for eight months after being convicted of making five fraudulent transactions from his law firm`s client account worth £75,605.27. Mr Webster, who was also removed from the list of lawyers, was ordered to pay £48,000 to a Latvian liability insurer. The firm is required to establish its policies and procedures in writing with respect to the following rules: After years of deliberation, the new rules on lawyers` accounts were introduced with immediate effect on 25 November 2019. As of that date, lawyers and law firms could no longer follow the previous rules (i.e. AR`11 rules) and had to update their policies and procedures to comply with the updated 2019 rules.
Rule 6.1 states that the Company`s principals are strictly liable for violations of the Account Rules. Therefore, it is imperative that managers at the highest levels understand the rules themselves and train all employees appropriately to ensure that not only are accounting rules followed, but anomalies are reported immediately. If a breach of a Company`s customer account is detected, it must be remedied immediately in accordance with Rule 7.1. Corrective actions include the replacement of funds that have been misappropriated. All contracting entities of an undertaking must ensure that the regulations are complied with by the contractors themselves and by all employees of the undertaking. This obligation also extends to directors of a recognized or accredited organization that is a corporation or to members of a recognized or accredited organization that is an LLP. It also extends to the Compliance Officer for Finance and Administration (COFA) of a company (whether a manager or a non-manager). Discrepancies in client accounts can lead to the public losing confidence in the legal profession. Therefore, it is taken very seriously. In 2015, 19% of cases before the Solicitors Disciplinary Tribunal (SDT) concerned breaches of SRA accounting rules. Accounting rules are, of course, very useful in this respect. You must “pay clients or third parties a reasonable amount of interest on all client funds you hold on their behalf” (Rule 7.1).
Practice notes represent the Law Society`s perspective on good practices in a particular area. They should not be the only standard of good practice that lawyers can follow. You don`t have to follow them, but it will make it easier to hold regulators accountable for your actions. The main conclusion of these new rules is that they give companies the ability to follow them as they see fit, as opposed to a “one size fits all” approach.