The Solicitors Regulation Authority (“SRA”) have recently announced a number of rule changes designed to reduce the administrative burden on legal firms by addressing old client balances and speeding up the return of client funds. These changes will come into force from 14 July 2008 and cover the following areas:

Rule 15(3) Returning surplus client money

Once a matter concludes, solicitors are obliged to promptly return client money unless there is a valid reason to retain the funds. There is no definition of “promptly” but a note to the new rule explains it should be given its natural meaning to the particular circumstances.

Rule 15(4) Reporting to clients

Where there is a valid reason for client funds to be retained by a solicitor when a matter concludes, the solicitor must inform the client in writing of the reason for doing so. There is also an obligation to write to the client at least every 12 months with an explanation if funds continue to be retained.

Rule 22(2A) Left over balances

One of the most significant rule changes in recent years removes the pre-approval process for withdrawing small residual client balances of £50 or less. There are some restrictions on the procedures a solicitor must follow and the existing rules requiring SRA authorisation still exist for balances exceeding £50.

Rule 32(8A) has been added to cover the record keeping and documentation of withdrawals of residual client balances and the reporting accountant must make test examinations of the process being followed.

Procedures and systems

To accompany the above rule changes, the Guidelines for Accounting Procedures and Systems have also been updated. These essentially require new policies and systems to ensure compliance with the rule changes mentioned above.

Details of all amendments to the rules can be downloaded from the SRA website.