Law Society slams SRA proposals to remove client accounts

Law Society slams SRA proposals to remove client accounts

The Law Society of England and Wales has today warned against the Solicitors Regulation Authority’s (SRA) proposal to move away from client accounts to third-party managed accounts. This forms part of the Law Society’s response to the SRA’s consultation on client money in legal services, which was launched following the collapse of the firm of Axiom Ince.

The consultation is in three parts and considers possible changes to how solicitors hold client money, how client money is handled, and issues surrounding the SRA Compensation Fund.

Law Society president Richard Atkinson said: “Our members remain strongly opposed to any changes to client accounts which have been used for decades by law firms with millions of successful transactions conducted each year.

“They are fundamental to the efficient and effective delivery of most legal services. Both the client account and Compensation Fund are crucial safeguards for the consumer whose losses might otherwise go unaddressed. Furthermore, the Compensation Fund is unique to solicitors, differentiating the profession from unregulated providers of legal services.

“Proportionate safeguards might mitigate risks to consumers, however, restricting or banning law firms’ ability to hold client funds would significantly damage the quality of services provided to the public.

“Removing client accounts may have huge ramifications for the quality of legal services including higher costs, delays and reduced access to justice.

“The SRA’s analysis of the perceived problems lacks evidence to support the radical reforms that the consultation proposes, and the changes suggested fail to address key practical difficulties.

“Shifting to third-party managed accounts would not eliminate the risk of fraud or cybercrime. Solicitors would still need to conduct extensive money laundering checks under AML regulations and could face criminal prosecution for failing to do so.”

The Law Society urged the SRA to instead focus on improving its processes for identifying, monitoring and managing potential risks to consumers. It has also recommended the SRA reintroduce mandatory annual accountant’s reports, strengthen their authorisation processes, and increase their scrutiny of non-legal personnel.

Law Society president Richard Atkinson rejected the SRA’s proposed change to the Compensation Fund contributions from a 50:50 split to 70:30 for individuals and firms respectively in 2025-26.

“The existing arrangements for the Compensation Fund, imperfect as they may be, should be maintained until the SRA has properly considered the alternatives and has evidence to demonstrate that they would be better than the status quo.”

Notes to editor