The new Solicitors Regulation Authority (SRA) Accounts Rules, which are set to go live from 25 November 2019, have been given the green light by the Legal Services Board (LSB).
Announcing the reforms last year, SRA chief executive Paul Philip said the changes – which include how client account breaches should be reported – will make it “easier” for solicitors to do business and meet the needs of those who require their services.
Under the new rules, solicitors and law firms must adopt an “early investigation” approach to accounts breaches, such as the misuse of client funds or suspect fraud.
This means a compliance officer must “report promptly to the SRA” any facts or matters that are reasonably believed to be capable of amounting to a serious breach of regulatory arrangements – even where the officer does not have “sufficient knowledge of the facts” to decide whether there had been a reportable breach.
According to rule 7.8, law firms will be required to “inform the SRA promptly of any facts or matters that you reasonably believe should be brought to its attention in order that it may investigate whether a serious breach of its regulatory arrangements has occurred or otherwise exercise its regulatory powers”.
The SRA said this would allow regulating bodies “to cover the scenario where a firm has not gained (or is not able to gain) sufficient knowledge of the facts to satisfy itself whether the matter is capable of comprising a serious breach of SRA regulatory arrangements (and is therefore reportable)”.
At the same time, however, accounting officers will be given greater freedom to apply “greater professional judgment” on what qualifies as a serious or minor breach of Accounts Rules and what can be remedied in-house without reporting the incident to the relevant authorities.
Commenting on the new rules, Mr Philip said: “Our reforms focus on what matters: the high professional standards that offer real public protection. We believe that the changes will make it easier for firms and solicitors to do business and to meet the needs of those who need their services.”
The changes, which will be introduced from November, also include the writing of separate codes of conduct for firms and solicitors, allowing solicitors to carry out ‘non-reserved’ legal work from within a business not regulated by a legal services regulator, and allowing solicitors to provide reserved legal services on a freelance basis.