The Solicitors Accounts Rules
The current Solicitors Accounts Rules are the SRA Accounts Rules 2011.
In Law Society –v- Weston Lord Bingham said, “The Accounts Rules existed to afford the public the maximum protection against the improper and unauthorised use of their money and that because of the importance attached to affording that protection and assuring the public that such protection was afforded an onerous obligation is placed on solicitors to ensure that those rules are observed. That was duty which bound solicitors, quite apart from a duty to act honestly. It is important to appreciate that in speaking of “trustworthiness” in that passage (from Bolton) the court had in mind, of course, honesty, but also had in mind the duty of anyone holding anyone else’s money to exercise a proper stewardship in relation to it. That was violated if one solicitor with a duty to see that the rules were observed failed to do so”.
The SDT and the Court has made clear that client account is sacrosanct and should not be touched other than in accordance with the Accounts Rules, that there must be proper systems and controls to ensure compliance with the Accounts Rules, and that it is for the firms principals to ensure that proper systems are in place.
It is the obligation of all principals in a firm to ensure compliance with the Accounts Rules; see Rule 6 of the SRA Accounts Rules 2011.
Rule 6 imposes a strict liability for breaches of the Accounts Rules on all Principals. Lack of knowledge of a breach or delegation of responsibilities to a partner are not defences to an allegation that there has been a breach of the Accounts Rules.
Whilst there is strict liability for breaches to the Accounts Rules, the SDT, and the SRA, may draw a distinction between equity and salaried partners when assessing culpability for the breaches. However, the culpability of any partner will depend on the facts of the case.
If an employee steals money from client account, the partners are liable to make good the shortfall to client account and are also liable for the breaches of the Accounts Rules arising from the shortfall.
The extent of the partners culpability for the breaches of the Accounts Rules will often depend on the extent to which they ensure that proper accounting systems and procedures were in place and that employees were properly supervised.
It is important that any solicitor facing an SRA investigation for breaches of the Accounts Rules should keep in mind the concept of strict liability when answering questions relating to the breaches. I am able to assist solicitors in relation to SRA investigations and SDT proceedings involving allegations of breaches of the Accounts Rules and to provide solicitors with assistance at SRA interviews and advice on issues as to liability and mitigation.