Handling client monies 1 October 2013

The speaker Chris Beanland Solicitor Associate Professor at the University of Law

Why have rules on client monies? Your regulator says so! You are fiduciaries (and monies need to be ringfenced) To protect clients in the event of insolvency

Key points Basic principles Client and office money The client bank account Money received to pay bills Deposit interest

Basic principles Client money to be kept separate from firm’s money Client money to be identifiable and kept in a separate bank account Client money only to be used for client matters

Basic principles Establish and maintain proper accounting systems to comply with your obligations Establish proper internal controls over systems and provide training

Application of principles in practice Your regulator will not prescribe specific rules on how you are to meet your obligations It is up to you to determine how you are to comply with your obligations on a day to day basis.

What is client money? Money you hold/receive for a client, e.g. money on account of your own costs Money you hold/receive as payment for costs (‘disbursements’) Not usually money received as payment for costs (which have been invoiced) All other money which is not office money

What is office money? Money that belongs to the firm Interest on client money (subject to terms and conditions) Money received in respect of a bill Money received to pay disbursements already paid Money received to pay disbursements where the liability has been incurred but not yet paid?

The client bank account There should be at least one separate client bank account It is best if the name includes the word ‘client’

The client bank account What should you do if you receive a payment of mixed money? You must not overdraw a client account

When can you withdraw money from client account? To make a payment authorised by the client To pay a disbursement If money had been improperly paid in (e.g. office money by mistake) Left over balances with a de minimis provision. Possibly pay to charity? To pay costs when a bill has been issued and delivered Office part of an unsplit cheque/payment

Deposit interest You need a clear policy as to when you will account for interest to a client and the amount of interest you will account for Usually firms have a de minimis policy