Rachel Craig

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New SRA Notice Warns Against Funds Missing From Client Account

Audit, Legal Compliance, Regulatory Compliance /

The SRA has published its new Warning Notice (21 June) warns against funds missing from a firm’s client account. The SRA has made it clear shortages will not be tolerated.

Whilst the SRA hasn’t reported any sanctions decisions relating to this issue in particular recently, the warning notice outlines the risks of firms failing to quickly address a shortage.

Firms will note the relatively recent closure of Axiom Ince last year, where the SRA reported the largest shortage in client account funds of £64m.

SRA's Warnings

The SRA’s warnings are as follows:

  • Firms have an obligation to replace immediately any money missing from a client account
  • Replacement of funds is to be carried out regardless of the underlying reasons – even where there’s been circumstances beyond the firm’s control for example by way of a cyber-attack, or administrative errors or, dishonest acts by employees
  • There’s a clear duty in the accounts rules to replace a deficiency, and managers of a firm are jointly responsible for doing so
  • Firms that continue to transact with a shortfall on their client account risk using other clients’ funds to facilitate those transactions

Employee Behaviour

The SRA provides indicators when identifying behaviour amongst employees that may indicate a problem. This includes failure to deliver bills or a written notification of costs, any suggestion of over-charging, and a sweeping up of residual balances.

Steps To Take

Paul Philip, chief executive at the SRA has said: “Caselaw is very clear that the client account is sacrosanct. However, firms do report shortages on the client account for a variety of reasons. Our rules are also very clear – you must make good on any deficit promptly. A shortage on the client account presents a risk to all clients for whom you hold money.”

  • Managers are advised to immediately investigate and take action against any member of staff who may have acted dishonestly regarding the client account, and to take regular steps to monitor, review and manage risks
  • If you identify that money is missing, you have a duty to take steps to ensure it’s replaced, in full, immediately
  • If you’re a manager of the firm, you have a duty to replace missing client money from your own resources. It may be necessary for you to obtain a loan to do this. It’s irrelevant that fault may not lie with you personally
  • You need to notify your insurer. You may be able to make a claim on your professional indemnity insurance. The obligation to remedy a breach of the SRA Accounts Rules 2011 is treated as civil liability for the purposes of clause 1 of the Minimum Terms and Conditions
  • If you identify a shortage, you should report the matter to the SRA in line with your obligations under paragraph 7.7 of the Code of Conduct for Solicitors, RELs and RFLs and paragraph 3.9 of the Code of Conduct for Firms

Enforcement Action

On enforcement action, the SRA warns that failing to replace client money will usually lead to an intervention. Even if money has been replaced, it may be that an intervention is necessary to deal with what caused the problem, such as dishonesty, in order to protect the clients and the public.

Firm Closures

The SRA has also addressed the issue in the context of firms heading for closure, given this can’t happen if there are client balances remaining in a firm’s account.

The SRA has advised any firms seeking to close that they should send all client money to clients, pay counsel fees and bill for outstanding costs.

The notice adds: “If your client account has a shortage, you cannot undertake any of these actions and therefore you cannot close your firm until the shortage is replaced.”

Get in touch

At Teal, we’re here to support your journey towards compliance that works.

We understand that compliance can be a daunting word, but it’s also the key to unlocking your firm’s full potential.

Our experts at Teal Compliance are here to help. Get in touch today to explore tailored solutions and ensure your firm stays ahead of regulatory requirements.

Get in touch

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Is your law firm’s website compliant with the SRA Price Transparency Rules?

Audit, Legal Compliance, Regulatory Compliance /

If you’re involved in managing compliance at a UK law firm, you’re probably no stranger to the SRA Price Transparency Rules. But just how compliant is your website? In this blog post, we dive into what you need to know and how you can ensure your firm meets the requirements.

Understanding the SRA Price Transparency Rules

The SRA Transparency Rules, which came into force in December 2018, marked a significant shift in how law firms should communicate pricing and service details to their clients. Instructed by the Solicitors Regulation Authority (SRA), these rules aim to improve transparency within the legal sector enabling clients to make informed decisions about their legal matters.

Covering a range of practice areas, law firms must disclose price and service information in a clear and accessible manner.  These areas include:

  • Residential conveyancing
  • Probate (uncontested)
  • Motoring offences (summary offences)
  • Immigration (excluding asylum)
  • Employment tribunals (unfair/ wrongful dismissal)
  • Debt recovery (up to £100,000)
  • Licensing applications (business premises)

Also, it’s crucial to note that even if your firm doesn’t have an online presence through a website, you’re still required to provide this information upon request in alternative formats. This ensures that regardless of the means of communication, clients have access to transparent pricing information.

What the SRA Price Transparency Rules entail

The SRA Price Transparency Rules include a multifaceted approach to transparency and accountability within the legal sector. Beyond the disclosure of pricing and service information, firms have to adhere to additional requirements to enhance clarity and trust. Alongside publishing price and service details, firms must prominently display the SRA’s digital logo on their website, serving as a visual indicator of compliance. This badge reassures clients that the firm operates within regulatory guidelines, instilling confidence in the transparency of legal fees and services offered.

Additionally, the Rules also require firms to publish details of their complaints procedure on their website. This includes comprehensive information on how and when a complaint can be lodged, both to the Legal Ombudsman and directly to the SRA. By offering clear guidance on the complaints process, firms prove a commitment to accountability and client satisfaction.

Teal’s new compliance culture services partnership

As well as ensuring such a damaging and toxic environment doesn’t exist, how can we further test and measure the true culture we have in our workplace?  

At Teal we have always believed culture to be the bedrock of sound firm management and compliance. That’s why it’s the biggest, first, and most vital cog in our six Cs of compliance. Without a good culture, the others ‘Cs’ simply won’t work. It’s the foundation from which thriving firms are possible.

That’s why Teal is delighted to be launching its partnership with Gemma Ellison and the team at Heart Leadership.

Gemma said “I started Heart Leadership after spending 15 years in legal practice and so it is a profession I understand and deeply care about. I am committed to helping organisations create healthy and inspiring working environments, which I know, in turn, leads to enhanced wellbeing and higher performing teams. Often, as we move through the ranks of our industry, we are rarely told to fully consider culture and the fundamental impact it has on the working environment of our people. I want to help change that.” 

Insights from the Year Three Evaluation

The Year Three Evaluation of the SRA Transparency Rules shed light on the full adoption of the rules. While progress has been made, there are still significant challenges that law firms must address to meet the requirements effectively.

The compliance landscape

According to the evaluation, a majority of firms reported compliance with various aspects of the transparency rules:

  • 75% claimed to provide price and service information
  • 88% displayed the SRA clickable logo
  • 88% published complaints procedures
  • 76% detailed how to complain to the SRA/ Legal Ombudsman

However, when it comes to price and service information specifically, only 42% of firms stated they published all required details. This highlights a significant gap in compliance, with more than half of firms falling short in this crucial area alone.

The reality of compliance

In 2021, the SRA took proactive steps by requiring all law firms with websites to complete a mandatory declaration confirming compliance with the transparency rules. Despite these declarations, spot checks conducted by the SRA revealed a different reality.

Common areas of non-compliance identified during spot checks include:

  • Partial compliance with certain aspects of the rules, such as publishing price and service information while omitting complaint information
  • Selective compliance with rules for specific service areas, particularly among firms with multiple websites or sections dedicated to different areas of law
  • Incomplete publication of information regarding how services will be delivered and by whom
  • Improper display of the SRA clickable logo, hindering the dynamic link to firm information on the SRA website

Ensuring compliance

Ensuring compliance with SRA Price Transparency Rules is essential for law firms to maintain trust and transparency with their clients, as well as meet their regulatory requirements.

So, how can your law firm ensure compliance with the transparency rules?

1. Review your website regularly

Regularly review your website to ensure all required information is up-to-date, accurate, and easily accessible to visitors. Keeping a vigilant eye on your online presence ensures that potential clients can find the information they need without any hassle.

2. Utilise SRA templates

Take advantage of the SRA’s provided templates for suggested text. These templates can be invaluable in identifying any missing information on your website, helping you align with the requirements of the Transparency Rules more effectively.

3. Consider user experience

Prioritise the user experience on your website to ensure that clients can easily navigate and find the necessary information. Whether through specific webpages, intuitive online quote tools, or seamless connections to price comparison sites, prioritising accessibility enhances client satisfaction.  

4. Get expert help

If you’re unsure about compliance or need assistance, Teal Compliance offers website audit services. We can provide guidance and help you navigate any non-compliance issues, ensuring your firm remains aligned with regulatory standards.

Moving forward

The findings highlight the importance of ongoing vigilance and proactive measures to achieve full compliance with the SRA Transparency Rules. Law firms must not only ensure that they are meeting the minimum requirements but also strive for transparency and clarity across all aspects of their online presence.

As regulatory scrutiny intensifies and expectations evolve, firms need to review their compliance strategies, address identified gaps, and embrace best practices to uphold the principles of transparency and accountability.

Get in touch

At Teal, we’re here to support your journey towards compliance that works.

We understand that compliance can be a daunting word, but it’s also the key to unlocking your firm’s full potential.

Our experts at Teal Compliance are here to help. Get in touch today to explore tailored solutions and ensure your firm stays ahead of regulatory requirements.

Get in touch

Is your law firm’s website compliant with the SRA Price Transparency Rules? Read More »