The current rules are described as lengthy and complex, and as a result many firms find themselves in technical breach of the Accounts Rules in circumstances where there are no real risks to client money.

The proposals set out plans to:

Simplify the Accounts Rules: by focusing on key principles and requirements for keeping client money safe, including:

• keeping client money separate from firm money;
• ensuring client money is returned promptly at the end of a matter;
• using client money only for its intended purpose; and
• proportionate requirements for firms to obtain an annual accountant's report.

This will put the focus on what is important and allow firms greater flexibility to manage their business. The Accounts Rules will also be simpler and easier to understand - increasing compliance and reducing compliance costs. A draft of the proposed Accounts Rules is provided at Annex 1.1 of the consultation document.

The Accounts Rules will be supported by an online toolkit which will comprise of guidance and case studies to aid compliance.

Change the definition of client money: to allow money paid for all fees and disbursements for which the solicitor is liable (ie, counsel fees) to be treated as the firm's money.

Money held for payments for which the client is liable, such as stamp duty land tax (SDLT), will continue to be treated as client money and therefore required to be held in client account.

The impact of the proposed change in definition is expected to remove the need to have a client account for some firms and therefore reduce the associated compliance costs.

The changes may also reduce the number of firms required to obtain an accountant's report through the subsequent reduction in the client account balance.

Provide an alternative to the holding of client money: through the introduction of clear and consistent safeguards around the use of third party managed accounts (TPMA) as a mechanism for managing payments and transactions.

For the first time, the SRA is proposing two separate codes - a Code of Conduct for Solicitors and a Code of Conduct for Firms. These replace detailed and prescriptive requirements with a framework for competent and ethical practice.

‘Every solicitor will be absolutely clear about their personal obligations and responsibility to maintain the highest professional standards. Firms will have clarity about the systems and controls they need to provide good legal services for consumers and the public’, the SRA consultation states.

The deadline for feedback to the consultation is 21 September 2016.

The Solicitors Regulation Authority Looking to the Future: Accounts Rules review is available here