In March 2014 the Solicitors Regulation Authority (SRA) published a consultation seeking views on proposals to amend the SRA Account Rules 2011 (SAR) relating to how practitioners deal with client money they are unable to return to clients at the end of a matter (residual client balances), including the processes surrounding the withdrawal of such funds and the basis for distribution to charities.
View the full SRA consultation (at the time of preparing this response)
The JLD, in principle, supports initiatives which are designed to reduce unnecessary regulatory burdens, increase charitable donations from the legal profession, and increase funds for access to justice.
We therefore agree with the proposal to increase the level at which practitioners can self-certify transfers of client balances from £50-£500.
The SRA should restrict the charities to which funds can be diverted, in order to prevent abuse of the rules (including inadvertent abuse). Residual balances should only be paid to a charity registered in England and Wales with the Charity Commission. We would also support an SRA recommendation that all funds diverted should be to a charity that relates to access to justice (or a percentage of funds diverted). We believe any further restrictions or prescriptions would unnecessarily increase the regulatory burden - which goes against the reasoning behind this consultation.
We note for completeness that it is essential that the SRA continues to ensure that firms:
(i) establish the identity of the owner of the money, or make reasonable attempts to do so
(ii) make 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
(iii) record the steps taken and retain those records, together with all relevant documentation
(iv) keep a central register of all withdrawals made, detailing the name of the client, other person or trust on whose behalf the money is held (if known), the amount, the name of the recipient charity and the date of the payment.