Chancery Lane condemns SRA’s client-account proposals

The Law Society has added its voice to a chorus of professional disapproval of the Solicitors Regulation Authority’s proposal to move away from client accounts to third-party managed accounts. In a strongly worded statement this morning, 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.'

Defending current arrangements for the compensation fund, Atkinson said: '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.'

The Society was responding to the SRA’s consultation on client money in legal services, opened following the 2023 collapse of law firm 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.

Atkinson said 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,' he said. 'Solicitors would still need to conduct extensive money laundering checks under AML regulations and could face criminal prosecution for failing to do so.'

In its response the Society urges the SRA to 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 its authorisation processes, and increase its scrutiny of non-legal personnel.

Chancery Lane 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,' Atkinson said.