SRA consults on handling client money

The Solicitors Regulation Authority (SRA) has initiated a public consultation to explore potential changes to how client money is handled within the legal sector. This consultation is part of the SRA’s larger Consumer Protection Review and aims to strengthen protections for consumers by examining existing practices and exploring alternative methods for safeguarding client funds.

Paul Philip, CEO of the SRA, emphasised the significance of this undertaking, stating, “This has so far been one of our largest ever and most in-depth pre-consultation exercises. We are grateful to everyone in the public, profession, and elsewhere who took the time to share their views.” Philip highlighted the importance of consumer protection, noting that “safeguarding consumer’s money must be the priority” and acknowledging broad support for the SRA Compensation Fund, though future funding and sustainability questions remain.

Key issues addressed in the consultation include examining whether law firms should continue to hold client money in the current digital age or explore safer alternatives. Other proposed changes cover interest earned on client accounts, the duration firms may hold client money post-case, and enhancements to controls and oversight for managing client funds. Additionally, the SRA is reviewing funding for the Compensation Fund, suggesting adjustments to the current 50/50 contribution split between individuals and firms. New funding models under consideration include contributions based on firm size, legal areas, or other risk factors.

Feedback informing the consultation emerged from over 200 participants involved in various focus groups, roundtables, and direct conversations conducted after the SRA’s Consumer Protection Review discussion paper was published in February 2024. The SRA also drew insights from consumer research, including studies on attitudes toward client money management and compensation approaches in other jurisdictions.

This consultation will run for 14 weeks, ending on February 21, 2025, and is accompanied by a series of engagement events open to the public, legal professionals, and stakeholders. Other ongoing activities under the SRA’s Consumer Protection Review include issuing warnings on mergers and acquisitions, refining investigation processes, and using data analytics to identify risk patterns in client money handling.

For more details, visit the SRA’s consultation page: SRA Consultation on Holding Client Money.