Amendments to the Solicitors’ Accounts Rules (SARs) are due to be published in their final form on 6 October 2011 to coincide with the licensing of the first Alternative Business Structures Consultation has now closed and, assuming the drafts are implemented, the key proposed changes are as follows:-
Interest
The detailed and prescriptive rules are to be replaced by a requirement for the payment of a fair and reasonable amount of interest when it is fair and reasonable to do so. Firms will be required to provide a written policy on interest which must be drawn to the client’s attention at the outset. At this stage it is not clear whether interest on Designated Client Accounts will be client or office money.
Electronic Signature
Firms will be permitted to retain electronic copies of bank statements and electronic signatures for withdrawals from client account will be permitted. At this stage, it is not clear what form of electronic signature will be acceptable, i.e. whether it includes codes or passwords.
Authorised Signatures
The prescribed list of authorised signatures for withdrawals from client account set out in Rule 23, has been replaced by the requirement for firms to have appropriate systems and controls in place for withdrawals from client accounts, i.e. it is up to the firm to decide who is the appropriate person to sign such an authority.
Compliance Officer for Finance Administration (COFA)
Under the current Rule 6, the principals are responsible for ensuring compliance with the Rules, this is to be extended to include a COFA who must be appointed and will be responsible for reported breaches to the SRA, however, it is not clear whether this relates to all breaches or just “serious” breaches.
Damages under Conditional Fee Arrangements
New rules are included regarding the receipt of monies for damages and costs under Conditional Fee Arrangements paid into client account with the requirement that costs should be transferred out within 14 days.
Guidance Notes
Having made the guidance notes mandatory in the amendment to the Rules in March 2009, it is now proposed that the guidance notes will not form part of the Rules. This is on the basis that a number of the guidance notes are now incorporated into the Rules.
The Institute of Charged Accountants in England & Wales responded to the SRA consultation and raised a number of areas that they consider remain unaddressed by the amendments to the Rules, most importantly that they do not take into consideration changes in technology and modern banking methods. It remains to be seen whether the SRA take this on board when they issue their final version of the amendments.
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