SRA seeks to enhance client money safeguards

The Solicitors Regulation Authority (SRA) has initiated a consultation to explore new proposals designed to strengthen the financial safeguards in place for client money held by law firms. This consultation is part of a broader review focusing on consumer protection within the legal sector, a subject that has garnered significant attention following incidents where client funds were at risk.

Aileen Armstrong, the SRA's Executive Director - Strategy, Innovation and External Affairs, emphasised the importance of these changes by stating that "the vast majority of firms act responsibly" but acknowledged that "we have seen issues in the market - as well as cases where client money has been lost." She affirmed the aim of the proposals is to "deliver effective regulation whilst protecting consumers and supporting a dynamic market for legal services."

The proposed changes to the existing regulatory framework are informed by a combination of feedback from legal professionals, the public, and the SRA’s own research. This latest consultation highlights potential modifications to firms' obligations regarding accountants' reports and the delineation of regulatory roles within legal practices.

The consultation outlines measures that could include a mandatory annual declaration for firms, requiring all accountants' reports, both qualified and unqualified, to be submitted directly to the SRA. Armstrong noted that this approach would facilitate enhanced oversight without imposing unnecessary burdens on law firms. In a bid to ensure compliance, fixed financial penalties may also be introduced for late or incomplete reports.

Moreover, the SRA is addressing risks associated with key individuals in firms holding substantial power while also serving crucial regulatory roles. To mitigate this, the proposals suggest implementing risk-based thresholds for firms and an exemption for sole practitioners, recognising the different capacities of practice sizes.

The consultation process commenced on 11 December 2025 and will span ten weeks, concluding at noon on 20 February 2026. During this period, the SRA plans to host various engagement events to gather insights and foster dialogue.

Armstrong expressed the SRA’s commitment to ongoing collaboration, stating that "the valuable feedback that we received in the first consultation has influenced our thinking and allowed us to refine our proposals." Following the consultation, the Board will evaluate all feedback to make any necessary adjustments before submitting proposed rule changes to the Legal Services Board for approval. The upcoming consultation promises to be a critical step towards bolstering the protections surrounding client money within the legal sector and ensuring robust regulatory measures are in place.