SRA bids to lighten burden on firms of residual client money and on non-practising solicitors
Passmore: committed to reducing regulatory burdens
Solicitors will be able to close down thousands of client accounts with residual balances of up to £500 and donate the money to charity under plans unveiled yesterday by the Solicitors Regulation Authority (SRA).
The regulator is also planning to end the annual exercise in which 27,000 solicitors without practising certificates have to confirm their wish to stay on the roll and pay £20 for the privilege.
At the moment solicitors are only allowed to donate residual client balances – where the client cannot be traced – to charity without authorisation from the SRA if the sum is £50 is less.
In 2013, the SRA received 1,179 applications from practitioners to donate balances totalling just over £3.5m (firms typically accumulate a number of client balances and deal with them in one application), with the number of applications growing each year.
Error, group does not exist! Check your syntax! (ID: 14)
The SRA said that over two-thirds of applications were for the withdrawal of balances up to £500, representing approximately 5,000 individual client balances a year.
A consultation issued yesterday proposed raising the limit that solicitors can redistribute without applying for permission to £500. It would represent “a significant reduction on the administrative burden currently placed upon SRA-authorised firms and the SRA”.
The regulator said the burden will be on COFAs to ensure that their firms have taken sufficient steps to reunite the funds to their rightful owner before donating them.
The consultation also asked how prescriptive the SRA should be on who receives the money, such as only to a registered charity in England and Wales, or more narrowly that the charity should relate to access to justice issues, such as the Access to Justice Foundation.
It said: “We can see the force of argument for such a prescription. Residual balances are client monies and do not form part of any monies due to a firm or office generally. As such, it is arguable that the money should support consumer access to legal services.
“Furthermore, it is clearly arguable that the sum total of residual balances could have a material or visible impact in a way that small dispersed payments to charities might not. Similarly we considered if the significant range of issues covered by UK charities was in any way incompatible with our regulatory objectives.
“Our view, on balance, is that there is not a strong enough case for the SRA to intervene and prescribe what is in many ways a legitimate choice. However, we are open to the views of a wide range of consumers, SRA-authorised firms and other interested parties.”
On the annual keeping of the roll exercise, the SRA said the process takes “several weeks to complete, is time-consuming and incurs cost both for the applicant and the SRA”; however, its regulatory value is “low”.
The change, again subject to consultation, would mean that from 2015, solicitors without PCs would remain on the roll without the need for an annual application. However, in order to keep the roll up-to-date, the SRA would retain the power to carry out the process at such times as it may decide in the future.
Crispin Passmore, SRA executive director for policy, said: “We are committed to reducing regulatory burdens wherever we can, and these consultations are a further part of that commitment. On balance, the amount of time and associated cost for solicitors and ourselves involved in these two areas of work do not add any real regulatory value.”
The consultations last for eight weeks and close on 26 May. They can be found here.
The SRA also announced last week that to reduce the regulatory burden on sole practitioner firms, it is moving to treat them like all other practices by only having to be authorised once and receiving a ‘lifetime licence’, rather than applying for their status to be recognised every year, as is currently the case.
Leave a comment
* Denotes required field