The Accounts Rules have been changed which bring in specific obligations for the prompt return of surplus client funds and reporting to clients if funds are retained. They also permit solicitors to deal with the withdrawal of smaller residual client balances themselves, without recourse to the SRA. The later will certainly be welcomed news for most practices, especially their bookkeepers!

A summary of the changes are:

1. Rule 15(3) ensures that monies held at the end of a matter (‘as soon as there is no longer any proper reason to retain the funds’)are ‘promptly’ returned to the client;
2. Rule 15(4) requires a solicitor to inform a client promptly of the amount of any funds retained at the end of a matter, and the reason for that retention. This rule also introduces an obligation to report in writing to the client on at least an annual basis if funds continue to be retained, with an explanation for the ongoing retention;
3. Rule 22 (2a) provides solicitors with an option to withdraw from client account left over balances of £50 or less without prior SRA authorisation, subject to paying the balances to a charity and complying with the other safeguards set out in a new rule which are:
   
   a) establishes the identity of the owner of the money, or makes reasonable attempts to do so.
   
   b) makes adequate attempts to ascertain the proper destination of the money, and to return it to the rightful owner, unless the reasonable costs of doing so are likely to be excessive in relation to the amount held;
   
   c) pays the funds to a charity;
   
   d) records the steps taken in accordance with paragraphs (a)-(c) above and retains those records, together with all relevant documentation (including receipts from the charity), in accordance with rule 32(8A) and (9)(a); and
   
   e) keeps a central register in accordance with rule 32(13A).

One further item to note in respect of the amended Rule 22 is that under Rule 13, a central register of all withdrawals made under rule 22(1)(ga) and 22(2)(ga) must be kept, detailing the name of the client, controlled trust or other person on whose behalf the money is held (if known), the amount, the name of the recipient charity and the date of the payment.

Changes to the ‘SRA GUIDELINES – ACCOUNTING PROCEDURES AND SYSTEMS’ have also been made to account for the changes in Rule 15, in that...

“4.6 The firm should establish policies and operate systems for the timely closure of files and the prompt accounting for surplus balances in accordance with rule 15(3).

4.7 The firm should establish systems in accordance with rule 15(4) to keep clients (or other people on whose behalf money is held) regularly informed when funds are retained for a specified reason at the end of a matter or the substantial conclusion of a matter.”

Immediate action therefore needs to be taken...