The Law Society of England and Wales has hit back at the Solicitors Regulation Authority’s consultation on the future of law firms holding client. ‘Client money in legal services – safeguarding consumers and providing redress’ was published on Thursday 14th November 2024 to address what the SRA described a sharp rise in the ‘number and size of firms that we have had to intervene into to protect the public…with increasing detriment to clients from client money having gone missing or being unavailable when it was needed to complete a transaction’
Part 1 of the three part consultation considers the model of solicitors holding client money , asking the question of whether the regulator should be looking at ways to reduce the client money held by solicitors and reduce the associated risks. The Law Society have made clear their view that client accounts are ‘vital’ to firms and any move to change will add cost and delays. President Richard Atkinson said the Law Society will ensure members’ view are ‘fully and robustly communicated’ to the SRA;
“Firms should continue to be able to operate client accounts, as they are vital for the effective and efficient delivery of many legal services. There is a danger that radical change will add cost and delay for clients and simply transfer the same or even greater risk from the current client accounts system to any new one.”
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“Following the Legal Services Board’s decision to take enforcement action after its independent review into the SRA’s handling of the collapse of Axiom Ince, a key question that must be asked is how the SRA can improve its own monitoring and enforcement around these kinds of risks as part of its core regulatory function. Simply passing regulatory responsibility elsewhere is unlikely to be the answer. We look forward to working with our members to develop our response to this important consultation.”
Amongst ideas suggested for alternatives to client accounts are the use of Third Party Managed Accounts (TPMAs), synchronised settlement, and looking at other jurisdictions such as Caisses des Règlements Pécuniaires des Avocats (CARPA) in France.
Ahead of the consultation the SRA have already undertaken some consumer research into TPMAs. The results present a mixed picture with some respondents considering their use would ‘more secure, compared with money being held by a solicitor, and most were happy to pay a little more for legal services (if necessary) if their money would be better protected.’ Others felt that solicitors should continue to hold their money with concerns around complexity, transparency, additional costs, and delays.
The research did highlight consumers felt TPMA providers should be approved by the SRA.
The consultation can be reviewed in full on the SRA website, alongside extensive supporting information; it opened on 14th November and will remain open to respond to until 21st February 2025.
