Common breaches of the SRA Accounts Rules 2019
As would be expected with such a big change in rules and regulations, this past year we have identified more breaches than we would usually see as part of our work on the Solicitors Accounts Rules.
Some of the breaches that we have come across are similar to those we have seen in previous years. For example, funds not being transferred from the client account to the office account in good time (be this 14 days under the 2011 rules or in line with the firm’s procedures under the 2019 rules). However, we have also seen firms breaching the new rules due to slight differences in the wording.
One rule we have seen a number of breaches of is rule 8.3:
- "You complete at least every five weeks, for all client accounts held or operated by you, a reconciliation of the bank or building society statement balance with the cash book balance and the client ledger total, a record of which must be signed off by the COFA or a manager of the firm. You should promptly investigate and resolve any differences shown by the reconciliation."
Although firms are, on the whole, preparing bank reconciliations every 5 weeks, it is not always clear they have been signed off by the COFA or a manager of the firm. COFAs or managers need to ensure there is evidence they have reviewed the reconciliations and signed them off. An electronic signature would be perfectly acceptable.
Staying with bank reconciliations, another rule that we have seen breached multiple times is rule 10.1(b), which states that firms must prepare reconciliations for clients' own accounts. This was not a requirement under the 2011 rules (although it was still suggested as good practice). If firms run clients' own accounts, they need to ensure they are preparing bank reconciliations at least every 5 weeks and that these are being reviewed and signed by the COFA.
Although the changes in the rules are not drastic, it is important that team members, especially the COFA, have a good understanding of what they are required to do. As long as the firm’s policies and procedures are up to date and in line with the rules, then firms should be well prepared for these updated rules.