The new SRA Accounts Rules are now fully operational, with a dramatic reduction in document size taking the rules from a book to 7-pages. There have been some quite significant changes in the new “simplified” SRA Accounts Rules ranging from a reduction of Rule 20 to the introduction of Third-Party Managed Accounts (TPMA’s). In this article however, I shall be looking at one part of the rules which every cashier has questioned:  the meaning of the word “promptly” which appears several times across the new rules.

The new Rule 4 states “you ensure that you allocate promptly any funds from mixed payments you receive to the correct client account or business account”. The question is what is deemed as “prompt”?

Upon first look, it may appear that the SRA is being more lenient and allowing firms more time to act upon fund allocation. However, we need to see what has been omitted from the rules and replaced with the above statement.

• Firstly, the requirement that monies received from clients must be banked on the day or the day after has been removed.
• Secondly, and perhaps most significantly, the 14-day rule for the transfer of costs into office account has been omitted.
• Both of these time frames have been replaced with the word “promptly” which means that the only way firms will be able to comply is to revert back to the introduction of the rules where it states “firms will need to have systems and controls in place to ensure compliance”. The onus is also on the firm to put those systems and controls into policy and abide by them.

In addition to the “promptly” theme of Rule 4 there are some other elements that will need to be considered when devising and implementing systems and controls; one of the main ones being the payment of costs and disbursements: Rule 4.3c states that “any such payment must be for the specific sum identified in the bill of costs or other written notification of the costs incurred, and covered by the amount held for the particular client or third party”. In essence all transfers to office account from client account for costs and/or disbursements must have a bill raised for them in advance of the transfer. This means that when determining the policy for client to office transfer deadlines, the firm must take account of the time it will take for a costs bill to be drawn and sent to the client.

So, is the SRA being more lenient here or is it simply changing the rules to shift the responsibility of policy onto the law firm? I believe it to be the latter.

The SRA is aware that legal practises now utilise digital banking over and above cheques. They are also aware that sending bills of costs to clients via their case management systems speeds the process up too, meaning everything is happening faster across the board. There is therefore no reason for the SRA to wish to increase the time it takes for monies to be transferred into office account or disbursements to be paid.

I would argue that in fact the word “promptly” means handling these transactions faster than in the previous rules.

Considering that the SRA is looking for firms’ accounts to be up to date at all times, and using digital banking, there should be no reason why transfers, paying in and disbursement payments could not be done almost immediately they fall due. The firm therefore needs to ascertain whether its systems and controls are strong enough to accommodate this and whether its policy over the term “promptly” is realistic.

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