The new SRA Handbook – Version 12
There are a few KEY changes to the SRA Handbook this year. These changes will affect all law firms in the UK!
Key Change 1 – Rule 32 has altered stating that the SRA only requires qualified accountants reports to be delivered. This means that if no breaches are found during testing, an accountant’s report is not necessary.
We expect that accountants/auditors will therefore be extra rigorous in searching for breaches. We also believe that this is a prudent approach as mistakes do happen during the year and it is important to keep track of them.
Key Change 2 – Rule 32.1A has altered stating that fully legally aided firms are exempt from sending an accountant’s report to the SRA.
This change is equally as important as Key Change 1. Even though an accountants report is not now required, errors do occur throughout the year, especially with money from the Legal Aid Agency. Even if a firm is fully funded by the LAA, the systems governing compliance within the firm should still apply. Breach registers should still be kept and COFA reports should still be signed. If the SRA do visit, it is highly likely that they will want to look at the accounts procedures. If there are recurring material breaches due to a lack of coherent systems, the new rule will effectively be redundant.
Key Change 3 – Rule 20.2 has allowed an increase from £50.00 to £500.00 on residual client balances to be sent to charity or the Solicitor’s Benevolent Fund without written authorisation from the SRA.
Here is an extract from the handbook:
Rule 20.1 (a-k) can be found here: http://www.sra.org.uk/solicitors/handbook/accountsrules/part4/content.page
A withdrawal of client money under rule 20.1(j) above may be made only where the amount held does not exceed £500 in relation to any one individual client or trust matter and you:
(a) establish the identity of the owner of the money, or make reasonable attempts to do so;
(b) make adequate attempts to ascertain the proper destination of the money, and to return it to the rightful owner, unless the reasonable costs of doing so are likely to be excessive in relation to the amount held;
(c) pay the funds to a charity;
(d) record the steps taken in accordance with rule 20.2(a)-(c) above and retain those records, together with all relevant documentation (including receipts from the charity), in accordance with rule 29.16 and 29.17(a); and
(e) keep a central register in accordance with rule 29.22.
The most important element of this rule change is to make sure that every effort is made to return the money to the client before implementing it. It is imperative that a central register is kept stating the number of attempts made to contact the client and how they were made. If sufficient, documented effort is made to return the funds, then money of up to £500.00 per client can be sent to a charity without the written authorisation of the SRA. The withdrawal and payment to the charity must also be documented thoroughly.
We have noticed that although it seems like leeway being given by the SRA, these changes may be “wolves in sheep clothing”. They key point here is to make sure that adequate systems are in place for documenting breaches and residual client balances. If there is any complacency with regard to any of the key points above, it will not matter whether an accountants report is required if the SRA come to visit!
The new copy of the SRA Handbook can be found here: http://www.sra.org.uk/handbook/
Alex Simons
The Law Factory LLP
03/11/2014
