For some time there has been growing concern about solicitors operating their own client accounts. The usual reason is increasing cyber crime, and the fallibility of client accounts containing vast amounts of money with relatively unsophisticated controls. The firm’s COFA should lead on all this.
But there are other reasons, too. Misuse of the client account by those entrusted with its stewardship is one. Dishonest breaches of the SRA Accounts Rules is a common ground for SDT prosecutions: these include overt theft, and more subtle dishonesty, such as overcharging. The SRA also highlights lack of competence, and lack of supervision in running a client account. In 2014 the SRA paid out £24m from the Compensation Fund on client account claims.
But there is little analysis of the problems affecting client accounts: experience tends to be anecdotal, one-offs, or presented on an aggregated basis making it difficult to establish reliable evidence. The SRA included the possibility of third party operated client accounts in a 2015 consultation, but decided not to proceed pending further consultation this year. However, firms can still ask the SRA for permission: these are considered on a case-by-case basis.
The LSB has submitted a paper to Government on further deregulatory initiatives, including client account reform as a possibility.
So whilst there is much talk, there is no decision. The Law Society has entered the fray with its own consultation. It is inviting views by 31 May. The document is clear that the Law Society wishes to maintain the current arrangements, fearing that even the possibility of third party-operated client accounts will dilute client protections.
The implications are enormous. But what do you think? Has your COFA responded?
In part two, we’ll give our thoughts on the matter.