SRA Accounts Rules 2011 – written policies you should have in place

Outcomes-focused regulation places a greater emphasis on firms setting their own written policies and procedures to achieve the desired outcomes set out in the SRA Handbook. So, what written policies should you have in place and what should they include?

Authorising withdrawals from client account

Firms should decide who is an “appropriate person” to authorise client money withdrawals. Consider whether they are sufficiently senior. It is unlikely that it will be appropriate in many circumstances to allow accounts staff to authorise withdrawals without approval from a partner or equivalent. It is also advisable to offer your FD or accounts staff the safety net of a partner signature in the case of large money transfers.

Electronic transfers (without written authorisation) are permissible subject to appropriate safeguards and these should be documented in the policy:

• Is there appropriate segregation of duties between those preparing payments and the manager authorising?

• Is there a clear and unalterable

• record of this authorisation (effectively an audit trail)?

• Where electronic passwords are used, are these unique to each user and changed regularly?

Billing (when choosing to adopt electronic billing)

Under guidance note 17(ix) of the Accounts Rules 2011, electronic billing is permissible where the client has agreed that bills can be delivered electronically (e.g. stated in the retainer). This provides firms with an opportunity to streamline procedures and speed up their working capital cycle. The firm’s written policy needs to state that the preferred method of billing is electronic and a central record of bills and other notification of costs must be maintained under Rule 29.15.

In a departure from the prescriptive £20 de minimis limit under SAR 1998 for commissions received, this is now client money (Rule 12.2(f)) unless the firm can justify keeping it and has communicated this in advance to the client. A written policy should consider fairness to the client especially if the firm intends to keep any portion of the money.

Firms are required to set their own “fair and reasonable” policy on the payment of interest on client funds. This should be written and communicated to clients (e.g. retainer letter). Points to include are:

• The rate of interest used

• Whether it is based on an instant access account (or tied to base rate etc)

• Whether there will be a de minimis limit and on what this is based

• How interest will be calculated (e.g. at the end of the month?)

• On what the interest will be calculated (e.g. on linked or individual matters?)

Firms should also consider how their policy will stand up to scrutiny from the SRA and clients:

• How will the firm justify any change from the current £20 de minimis limit to existing clients?

• Should all client money be put in a general client account unless a client has specifically requested a designated deposit account (i.e. now that there is no distinction in the Accounts Rules between designated and general client accounts)?

Note that Reporting Accountants will need to consider the adequacy of the interest policy – another reason to put this in writing!

Interest

Financial benefits received (e.g. commissions received)