Late filing or non-submission will attract fixed financial penalties.
The SRA wants clearer separation of roles so ‘no single individual can both run a firm and oversee its compliance, including with client money rules. This will reduce the risk that conflict, or weak internal challenge, will allow problems to go undetected and unreported’. Consequently, ‘higher risk firms’ with a turnover of more than £600,000 or holding more than £2m of client money must ensure individuals who make significant decisions about running the firm cannot also be the compliance officers for legal practice and finance and administration. There will be a partial exemption for small solo owner-manager firms.
The SRA’s proposed rules, which it consulted on earlier this year, will come into force by early next year, subject to Legal Services Board approval. The regulator came under fire for its slowness in responding to Axiom Ince, which collapsed in 2023 with more than £60m client money missing.
SRA chief executive Sarah Rapson said: ‘As we outlined in our draft business plan, we are taking a broader look at whether firms should continue to hold client money in the way they do today. In the meantime, these reforms are an important step to mitigate risks within the current framework.’
However, Law Society president Mark Evans said: ‘We remain concerned.
‘We are disappointed that the turnover threshold has not been increased, and the figure was arrived at by the SRA without any risk-based analysis or modelling, which we consider essential.
‘Small and medium sized firms would be unfairly impacted by increasing costs which are likely to be passed on to consumers and adversely affect access to justice.’
