The move follows a consultation concluded earlier this year after the Solicitors Regulation Authority (SRA) was forced to take urgent action after a string of major law firms went bust resulting in multimillion losses of client deposits held by Axiom Ince and PM Law.

Now the regulator is taking action with a major change to the SRA Accounts Rules 2019 to require all law firms to file accountants’ reports annually. This is seen as a way to improve protection of client money, strengthen oversight and accountability, and ensure better compliance.

Under the new rules, due to come into effect in early 2027, law firms will have to comply with the accountants’ reports regime, identify risks to client money earlier and take action before problems escalate.