An alternative approach to holding client money David Middleton Executive Director, Solicitors Regulation Authority November 2014

A taboo subject? Raised in 2008 Did not open up the issue: –Send a message of lack of trust in profession? –“Solicitors make money from holding client money” The issue, then and now: –Huge resource to police, investigate, prosecute and compensate –Significant cost to profession – and so to clients

The risks Detailed rules matter but don’t stop dishonesty Thefts in conveyancing are too easy Probate thefts are invisible Client accounts are abused: –Money laundering –Credibility to fraudulent or dubious schemes –Evading clients’ obligations eg Fuglers v SRA

What are the drivers? Incentives are of concern: –Make money from the interest –Banks offer reduced interest on overdrafts for high client balances? –Moral hazard for lenders in particular – law firms a cheap form of insurance? How necessary to consumers of legal services is it for lawyers to handle huge amounts of client money?

More rules? A ban would probably be too prescriptive, but… Is it necessary to hold client money when funds could go bank to bank? Could be exceptions for fees on account or probate/trust work (with more regulation?) Will the Law Society conveyancing portal change the risk? Is the French CARPA or the Bar’s BARCO model workable for solicitors?