On 21 September, the SRA released its long-awaited update following the consultation Client Money in Legal Services – Safeguarding Consumers and Providing Redress, some seven months after the consultation closed. The exercise attracted more than 450 responses, incorporating event feedback, consumer research and wide-ranging industry commentary.
SRA’s Response in Brief
The good news for many is that the regulator has opted not to launch immediate structural reform of how solicitors operate their client account. Instead, the emphasis is on strengthening safeguards under the existing framework, with the bigger questions reserved for a future phase and a progress report. Fresh consultation are planned later this year.
What the Industry Is Saying
Feedback from the profession has been robust. Respondents argued that forcing firms away from holding client money could increase costs, delay transactions and harm access to justice. The Law Society of England and Wales warned that proposals lacked robust evidence and would disproportionately burden conveyancing, probate and commercial practices.
Why This Matters for Law Firms
For firms involved in conveyancing, commercial, probate or other client-money-intensive work any change to the current regime would be disruptive in the short term and updates should be closely followed.
Regulatory Attention is Active:
Whilst structural change is on hold, we are seeing active attention from the regulator at the coal face including:
• Increased scrutiny of how firms hold, move and reconcile client funds.
• Expectation of quicker return of residual client balances when matters conclude.
• Attention on how firms account for interest on client account.
A sharper focus on how firms account for interest on client funds. The SRA is paying close attention to how fairly and transparently firms pass on interest earned in client accounts. Inconsistent or opaque approaches are drawing scrutiny, and the regulator has made clear that firms must have clear, compliant policies and accurate records in place.
Practical Steps for Firms
To stay ahead of change, firms should:
Review client-money processes: Ensure client accounts are reconciled regularly, money is returned promptly when matters end, and interest arrangements are transparent.
Prepare for the next-phase consultation: With structural questions deferred, stay engaged and ready for the SRA’s future proposals on the Compensation Fund and client-money model.
The debate around client money is far from over. The SRA’s latest response gives firms some breathing space, but further reform is still very much on the horizon.
To keep up with developments, subscribe to the SRA’s consultation alerts and for further reading of the consultation so far visit the SRA’s website.
Kate Burt is an experienced solicitor with over 25 years in the legal sector and the founder and CEO of HiveRisk, a boutique consultancy specialising in helping law firms and professional service businesses navigate risk and compliance challenges.