Why are the SRA Accounts Rules so important for solicitors’ firms?
The SRA Accounts Rules underpin the protection of client money and the integrity of the profession. They exist to ensure that funds belonging to clients are safeguarded and never used improperly. Breaches can cause not only regulatory sanctions but also irreparable reputational harm. This is where a system such as Lawsyst proves invaluable: its built-in compliance checks and alerts help prevent errors before they occur, giving the firm confidence that day-to-day transactions meet regulatory standards.
What constitutes “client money” under the SRA Accounts Rules?
Client money is any money received on behalf of a client, including funds for disbursements, payments on account of costs, or sums held pending completion. Even small advances are classed as client money. Lawsyst automatically distinguishes between client and office money within its ledgers, ensuring funds are always categorised correctly and eliminating the risk of inadvertent commingling.
Do all firms need to maintain a client account?
Most firms handling client funds must maintain a client account, save for certain narrow exceptions. For practices that do so, the burden of accurate postings and reconciliations can be heavy. Lawsyst reduces this burden considerably: the platform posts entries automatically against the correct ledgers and generates reconciliation reports, ensuring the client account is always accurate and up to date.
How should client money be kept separate from office money?
Segregation is absolute. Client funds must be ring-fenced in a designated client account, never used to settle office liabilities. With Lawsyst, this separation is embedded into the accounting architecture: office and client ledgers cannot be confused, and transfers can only be actioned when supported by the correct documentation, preventing costly mistakes.
What are the rules around withdrawing money from client accounts?
Withdrawals are permissible only for proper purposes such as disbursements, repayments to clients, or billed costs. Crucially, no transfer of costs may take place until a bill has been delivered. Lawsyst enforces this automatically: the system prevents funds being moved unless a corresponding bill exists, thereby ensuring compliance without requiring constant manual policing.
How quickly must client funds be paid into a client account?
The rules require client money to be banked promptly, normally the next working day. Firms relying on paper-based systems often risk delay or oversight. Lawsyst integrates directly with banking feeds, ensuring that receipts are logged in real time and allocated immediately, reducing the risk of breaches.
What is meant by “residual client balances”?
Residual balances are small sums left behind when a matter is concluded, often because of unclaimed interest or rounding. Firms must actively attempt to return these monies. Lawsyst generates automatic reports of residual balances, prompting timely action so that funds do not sit unlawfully on client account.
How often should reconciliations be carried out?
A three-way reconciliation between bank, ledger, and cash book must be done at least every five weeks. With Lawsyst, reconciliations are not only automated but also flagged with alerts if anomalies arise, allowing the COFA to spot and resolve discrepancies before they escalate into compliance issues.
What role does the COFA play in legal accounting compliance?
The COFA oversees compliance with the Accounts Rules, recording and reporting breaches where necessary. In practice, the role can be onerous without technological support. Lawsyst provides the COFA with dashboards, breach logs, and compliance audit trails, enabling proactive management rather than reactive fire-fighting.
What happens if a solicitor makes a minor accounting error?
Minor errors must be corrected promptly and logged. While one error alone may not attract regulatory censure, repeated or systemic errors certainly will. Lawsyst minimises these risks by reducing manual data entry, automatically validating postings, and giving the COFA visibility over patterns of error.
Can firms earn interest on client money?
Firms may retain interest from pooled accounts, but must pay a fair sum of interest to clients where appropriate. Lawsyst helps by calculating interest on balances over set thresholds and by maintaining a clear record of any interest payable, ensuring fairness and transparency.
Are firms allowed to use suspense accounts for unidentified funds?
Suspense accounts may be used temporarily while ownership is clarified, but they must not become long-term dumping grounds. Lawsyst generates audit reminders when suspense entries remain unresolved, ensuring they are properly allocated or refunded.
What is the significance of the “no debit balances” rule?
A debit balance on a client ledger suggests the firm has misused client money or extended unauthorised credit. This is a serious breach. Lawsyst prevents client ledgers from going into debit by design, ensuring this fundamental rule cannot be broken inadvertently.
How are professional disbursements treated under the Accounts Rules?
Disbursements, once funds are received, must be paid promptly to the relevant professional. Delays may amount to misuse of client money. Lawsyst tracks outstanding disbursements automatically, reminding fee-earners and accounts teams when payments are overdue.
Can client money ever be used to cover short-term cash flow difficulties?
Never. Using client funds to manage firm cash flow is one of the gravest breaches possible and may lead to striking-off. Lawsyst’s rigid separation of office and client ledgers ensures such misuse cannot be actioned within the system.
What are the record-keeping requirements under the Accounts Rules?
Accurate, up-to-date records must be kept, including ledgers and reconciliations, and retained for at least six years. Lawsyst automatically stores digital records securely, with audit trails and retrieval functionality, making compliance and audits far simpler.
How do the Accounts Rules interact with anti-money laundering obligations?
Solicitors must both safeguard client money and ensure funds are not the proceeds of crime. Lawsyst integrates compliance workflows, requiring source-of-funds checks and recording AML due diligence alongside financial records, ensuring both regimes are addressed holistically.
What are the consequences of serious breaches of the Accounts Rules?
Serious breaches can result in regulatory fines, suspension, or even striking off, alongside civil liability to restore lost client money. Lawsyst minimises exposure by creating an auditable record of compliance and by embedding preventative checks that make breaches far less likely.
Do the Accounts Rules apply to firms operating under legal aid contracts?
Yes, legal aid payments remain client money until transferred properly. Lawsyst simplifies this by handling legal aid billing codes, payments, and reconciliations automatically, ensuring compliance with both the Legal Aid Agency’s requirements and the SRA’s rules.
How can firms best prepare for an SRA audit of their accounts?
Preparation is about systems, not last-minute tidying. Lawsyst provides firms with audit-ready reports, reconciliation histories, and breach logs at the click of a button, so if the SRA calls, the firm can demonstrate compliance effortlessly.
What does the SRA expect in terms of overall compliance culture?
The SRA expects compliance to be embedded into the fabric of the firm, not treated as a box-ticking exercise. With Lawsyst, compliance obligations are woven into daily workflows, meaning staff are guided towards the right process every time, creating a culture of compliance without excessive bureaucracy.
How important is file management from an SRA perspective?
Proper file management is critical for client care, confidentiality, and audit readiness. Lawsyst ensures every document, communication, and financial entry is stored securely in one place, with permissions and audit trails to protect confidentiality and demonstrate compliance.
How do firms manage conflicts of interest under SRA rules?
Conflicts must be identified and managed before acting for a client. Lawsyst includes conflict-checking functionality at the point of opening a new matter, dramatically reducing the risk of breaches.
What is the SRA’s stance on supervision of junior staff?
Firms must ensure adequate supervision at all times. Lawsyst facilitates supervision by providing dashboards and matter overviews, so supervisors can monitor activity, billing, and deadlines in real time.
How should firms handle client complaints under SRA requirements?
A clear complaints procedure is essential, and records must be kept of how complaints are managed. Lawsyst provides workflow tools for logging, tracking, and reporting on complaints, ensuring they are resolved within regulatory timeframes.
How does AML compliance intersect with the SRA’s role?
Solicitors are regulated both by the Money Laundering Regulations and by the SRA. Lawsyst integrates ID verification, risk assessments, and ongoing monitoring directly into matter workflows, ensuring firms meet both regimes efficiently.
What about GDPR and data protection obligations?
The SRA expects solicitors to comply fully with data protection law. Lawsyst secures data in the cloud with encryption, access controls, and audit logs, giving firms confidence that client confidentiality is safeguarded.
How do firms demonstrate they have adequate risk management systems?
The SRA looks for evidence that risks are identified, assessed, and mitigated. Lawsyst includes risk assessment tools at matter inception, with ongoing monitoring that allows firms to demonstrate proactive risk management.
Are time recording and billing relevant to compliance?
Yes, particularly in legal aid and publicly funded work. Inaccurate billing may amount to dishonesty. Lawsyst ensures time recording is linked directly to the correct codes and billing schemes, preventing misclaiming and ensuring audit-ready records.
What is the importance of training in SRA compliance?
Training is vital to ensure all staff understand their responsibilities. Lawsyst supports this by embedding compliance prompts and reminders into daily workflows, reinforcing training with practical tools.
What does the SRA expect regarding client care letters?
Client care letters must set out costs, scope, and terms clearly. Lawsyst generates templated yet bespoke client care documents automatically, ensuring consistency and compliance with transparency obligations.
How should firms handle undertakings?
Undertakings must be recorded, tracked, and discharged promptly. Lawsyst maintains a central register of undertakings, with alerts until they are fulfilled, preventing oversight.
How are referrals and introducers regulated?
Firms must ensure referrals comply with the SRA Standards and Regulations, avoiding conflicts or improper incentives. Lawsyst enables transparent recording of referral sources and terms, creating an auditable trail.
What about outsourcing and third-party providers?
Outsourcing does not relieve the firm of responsibility. Lawsyst helps by recording due diligence on providers and keeping contractual records linked to matters.
How do firms deal with financial crime risks?
The SRA expects firms to have systems for detecting and reporting suspicious activity. Lawsyst provides screening tools and risk flags integrated into client onboarding.
How should firms approach equality and diversity monitoring?
The SRA requires data collection and fair treatment. Lawsyst includes HR modules that facilitate anonymous reporting and diversity tracking, helping firms evidence compliance.
How often should compliance audits be conducted?
Regular internal audits are advisable, not just when required. Lawsyst generates compliance reports instantly, making audits far less resource-intensive.
What records must be retained for SRA purposes?
Key records, including financial and client files, must be retained for defined periods. Lawsyst automates retention schedules and flags when records can be securely destroyed.
How do firms manage regulatory reporting obligations?
Breaches and material risks must be reported to the SRA promptly. Lawsyst provides a breach register with escalation workflows, ensuring timely reporting.
What about confidentiality breaches?
Firms must take immediate action if confidentiality is compromised. Lawsyst audit trails allow firms to identify and address breaches quickly, minimising risk.
How does technology itself fit into compliance?
The SRA requires firms to use technology responsibly. Lawsyst is purpose-built for solicitors, with compliance embedded, giving regulators confidence that risks are managed appropriately.
What are the expectations around succession planning?
Firms must plan for orderly closure or succession. Lawsyst stores all financial and case data centrally, making transitions smoother and compliant.
How can firms evidence client consent?
Consent must be informed and documented. Lawsyst stores signed documents digitally against each matter, with timestamps for verification.
How do firms monitor workload and capacity?
The SRA expects firms to ensure clients are not prejudiced by overstretched lawyers. Lawsyst dashboards provide real-time workload data, enabling fair distribution.
How can firms prevent missed deadlines?
Missing court deadlines is a serious compliance risk. Lawsyst’s case management tools include deadline tracking and automated reminders, reducing the chance of oversight.
What about transparency in pricing?
The SRA transparency rules require certain pricing information to be published online. Lawsyst produces accurate cost estimates linked to matter types, ensuring compliance.
How should firms handle client money in joint accounts?
Joint accounts must be managed carefully, with client consent and clear records. Lawsyst maintains full audit trails of such arrangements.
Are firms obliged to assess suppliers for cybersecurity risk?
Yes, firms must ensure suppliers protect client data. Lawsyst is hosted securely with encryption, and the system records supplier due diligence.
What happens if the SRA visits unannounced?
Firms must be able to demonstrate compliance immediately. Lawsyst’s audit-ready reporting means firms can produce reconciliations, breach logs, and client files instantly.
How can smaller firms keep up with compliance demands?
Smaller practices often lack dedicated compliance teams. Lawsyst levels the playing field by automating routine compliance tasks, giving sole practitioners and small firms the same level of oversight as larger practices.