SRA Accounts Rules to the CLC Code. Understanding the accounts rule changes when switching regulator!

Conveyancing companies in England and Wales now have the choice as to whether they stay with the SRA or move to the CLC (Council of Legal Conveyancers). Let’s compare the SRA Accounts Rules to the CLC Code!

Link to the CLC Code:

For starters it goes without saying that this only focuses on the CLC code and is therefore only applicable to licenced conveyancers.

We can see immediately that the CLC code is now much more detailed that the SRA Accounts Rules which come into effect next year. See the TLF Article “From a book to a pamphlet. SRA Accounts Rules 2018 & what is client money?” at for more information. The SRA Accounts Rules for 2018 is a mere 7 pages covering all areas of law in comparison to the CLC Code which is 10 pages covering just conveyancing. The main reason for this is because all other areas of law are irrelevant and the CLC can focus on key points and scenarios which surround just conveyancing, making things very clear for its members.

The CLC is very open with its code of conduct which appears at the very front of their Accounts Code. It states explicitly how it expects its members to operate, ensuring that “Each Client’s best interests are served”. This front page sets up perfectly the tone of the rest of the code.

The specific requirements over client money and the payment of client money into a client account are almost identical to those of the SRA only the CLC has gone into more specific detail. The founding principals are the same. Only client money should be placed in a client account and therefore kept separate from office money, only pay money into and withdraw from client account for provision of services regulated by the CLC, ensure that not debit balance occurs on the client side and rectify breaches immediately etc.

There are a couple of items regarding withdrawals from client account which differ slightly. The SRA’s previous 14-day rule for the withdrawal of funds earmarked for costs and billed disbursements is a 28-day rule under the CLC. This will certainly ease the pressure on accounts departments, however strict processes must be in place to avoid slipping beyond the 28 days. It also states that round sums are not permitted for transfers from client to office and that they must be specific. This indicates that like the SRA’s new rules the CLC would expect all costs and disbursements due to office, invoiced and sent to the client before transfer. One entry which also appears is 12.2.6 “Where the CLC has given written authority for a specific payment to be made to a nominated payee or where the CLC has approved a scheme for automated payments direct from client account”. It is very rare to see any automated payments leaving client account, however more and more providers are offering a direct debit scheme for items like searches and land registry. This could streamline the processes for conveyancers as money would not need to be moved to office account to cover them. This does however present a larger risk to client money as the withdrawal will be taken automatically. A clear process of systemised earmarking for automated payments would need to be implemented beforehand.

The next element is that of an “Approved Person”. The CLC clearly recognises that a licenced conveyancing practice can be a partnership, a corporation and an ABS and therefore restricting banking authority to a solicitor/partner of the company could be problematic. The CLC has its own version of the SRA’s COFA role and calls it “Approved Person”. The person in this role has the right to authorise electronic payments and sign cheques. This can allow accounts departments more flexibility and ensure dual authority e-signatures happen on all electronic payments. Approved persons are taken through the licencing department at the CLC and registered with them. Upon an audit therefore, the CLC will check to ensure that only approved persons authorise payments out of the client account. There can be more than one approved person within each organisation as necessary.

The CLC has also specified that the accounting records must be fully updated at least once per week. This means that at any given time an accurate ledger and matter listing can be generated which will be a maximum of one week out of date. The code requires the weekly entries to cover all areas of the firm’s client ledger accounting including the office side. It also specifies that there must be enough narrative on each entry, again to ensure clarity.

Ensuring that the accounts are fully updated at least once per week means that the reconciliation rules are much easier to abide by. The CLC Code has stuck to the SRA’s five-week rule for reconciliations, whereby they must be done within five weeks of the previous one. Surprisingly, it doesn’t specifically state that they must be signed, but the implication is that an Approved Person would sign and retain them as this is “best practice”.

The Code has specifically stated that all reconciliations and accounting records must be retained on a “durable medium”. Whilst most would think that this implies the use of paper, it doesn’t. The FCA states a durable medium is “any instrument which enables the recipient to store information addressed personally to him in a way accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored.” This therefore includes emails and PDF’s. The necessity to use paper is no longer there and some may argue that with cloud computing and hosted solutions that digital formats are safer. The standard six-year requirement for retention also applied under the CLC Code.

The biggest difference between the SRA Accounts Rules and the CLC Code is the rule which dictates the “Misappropriation of Client Money”. The SRA judges whether a breach is material or non-material, reportable or non-reportable however the CLC explicitly states that; “upon discovery of any misappropriation of Client Money you notify the CLC without delay.” A record of each breach must be kept and the CLC notified at the time of the error being discovered. They will then judge for themselves the severity. This means that even stricter systems and processes must be adopted by the firm to ensure no compliance mishaps.

The CLC also run audits under their CLC Monitoring Programme. The audits run every three years, however if the CLC feels it necessary they will visit and review within the three-year period. Usually this is down to the CLC viewing elements of a firm a risk to client money, in part based on the record of client money misappropriation. The CLC can and will intervene if it feels it necessary to do so and can strike off licenced conveyancers from its membership. The CLC also has the power to notify the SRA of any misgivings it has over solicitors who are also licenced conveyancers registered with them. It appears therefore that a move from the SRA to the CLC will mean more focused regulation over client monies specifically for conveyancing, but the penalties will be just as harsh for not following the regulations.

The accountants report will be delivered in a similar way to the SRA AR1 however there are no exceptions if the firm has held client monies. “16.1 If you have at any time during an Accounting Period held or received Client Money you procure the delivery by the Reporting Accountant to the CLC of an Accountant’s Report for that period.” There is no dispensation for having a lower amount move through client account and no dispensation regarding non-qualified reports. If the firm has held client monies, it must have an accountant’s report. As with the SRA, this must be delivered within six months of the period end.

I think the main difference between the SRA Accounts Rules and the CLC Code is specificity. The code is so focused on conveyancing that it can be much more specific on key areas, making it clear to its members how to conduct themselves and operate a client account compliantly. In doing so, the CLC is also very strict with how client money is handled and as a strict regulator wants to ensure that firms do not slip up, hence the reportable misappropriation of client monies element and the three-year audits. Solicitors practising conveyancing who want to move to the CLC need to ensure that their systems and processes are comprehensive enough to satisfy all the specific rules within the CLC Code.

Alex Simons – Outsourced Accounts & New Business Manager
The Law Factory LLP


Back to the top ↑