Client money: Office manager misunderstood instructions
A solicitor who mistakenly transferred £10,000 of client money to his firm’s business account – and did not realise for six months – has been fined by the Solicitors Regulation Authority (SRA).
Prithiviraj Pem, owner of Pembridge Solicitors in Cheltenham, admitted his misconduct in a regulatory settlement agreement, which said he “demonstrated a reckless disregard of the risk of harm and lack of insight into his regulatory obligations as COFA of the firm”.
Mr Prem held both compliance officer roles, for legal practice (COLP) and finance and administration (COFA).
The client was a child and the transfer was made on 6 October 2022, even though the firm was not owed any costs and had not received instructions to make the transfer.
The £10,000 client account shortage was only replaced on 2 May 2023, 208 days later, as Mr Pem had not undertaken client account reconciliations until then.
The SRA investigation that followed then discovered that the firm’s accounts were not compliant with the accounts rules.
It failed to ensure there were descriptions on all client ledgers and to record receipts and payments on the business side of client ledgers.
Further, client account reconciliations were not being signed off by the COFA or a manager of the firm, and bank interest being incorrectly credited and retained in the client bank account.
Mr Pem said the shortage arose after he gave verbal instruction for £10,000 to be paid to the client for care costs but the firm’s office administrator misunderstood this to mean payment for the firm’s costs.
He said in mitigation that he has undertaken training course to improve his knowledge of the accounts rules and his responsibilities as COLP and COFA.
In deciding to fine him, the SRA said: “Members of the public entrust solicitors and law firms to keep their money safe and therefore, proper record keeping for holding client monies goes to the core of the SRA’s regulatory role and public interest purpose.
“The breaches had the potential to cause significant damage to the trust and confidence that the public places in the legal profession.”
As both COLP and COFA, “it is expected that he would have exercised better judgment, foresight and insight into the compliance of the SRA accounts rules and professional standards, at the material time.”
The SRA’s fining guidance led to a penalty of 32% of Mr Pem’s annual gross income, leading to a figure of £5,635.
A warning notice issued by the SRA in June said partners must dip into their own pockets to replace any shortages on client accounts immediately upon discovery.
This obligation applied whether the shortage was within or without the firm’s control, such as a cyber-attack.
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