Upcoming changes to Solicitors’ Accounts Rules (SAR)

A number of changes to the SAR are set to take effect from 6 October 2011. In summary, these are as follows:

• Rule 1 – the key principles will more emphatically state the importance of proper governance and keeping clients’ money safe; the overarching aim of the SAR.
• Rule 2(1) – currently all notes to the SAR are mandatory. In the re-write the notes accompanying the SAR will clearly distinguish those that are binding from those that are purely explanatory. 
• Rules 15 – greater emphasis has been placed on the requirement that a solicitor must not provide an everyday banking facility through the client account. 
• Rules 19 – the re-write will include guidance on the electronic signing of authorities for withdrawals from client account and for the signing and delivery of bills electronically. 
• Rule 23 – currently this sets out who can authorise a withdrawal from client account. It will be replaced by a more outcome-focused approach where firms will need to have appropriate systems and controls in place for withdrawals from client account. 
• Rules 23 and 32 – these are being updated to allow firms to obtain and retain electronic copies of bank statements rather than having to rely on paper statements. 
• Rules 24 to 27 – currently these set out where and how interest should be paid. In the re-write the emphasis will be on having a policy which ensures payment of a fair and reasonable amount of interest where it is fair and reasonable to do so. 
• Rule 32 – currently the solicitor is obliged to perform 14-weekly reconciliations on all passbook-operated designated client accounts. In the re-write these will need to be performed every 5 weeks as is currently the requirement in all other cases. 

In addition to these main changes, the re-write will also recognise Multi Disciplinary Practices (MDPs) and will emphasise that the rules will only apply to activities for which the MDP is regulated by the Solicitors Regulation Authority (SRA). At present, it is a little unclear what guidance, if any, will be given in relation to money that is held outside the scope of the SRA.