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Answers for law firms
What is a client account?
A client account is the bank account a law firm keeps for money it holds for clients and third parties. The SRA Accounts Rules call that money “client money” and require the firm to pay it in promptly, keep it separate from the firm’s own money and take it out only for the purpose it is held for.
| Question | Answer |
|---|---|
| The rules | SRA Accounts Rules 2019 |
| Where it is held | At a bank or building society branch in England and Wales (rule 3.1) |
| Its name | Includes the firm’s name and the word “client” (rule 3.2) |
| What goes in | Money the firm holds for clients and third parties, paid in promptly (rules 2.1 and 2.3) |
| What it must not be | A banking facility for clients or anyone else (rule 3.3) |
| Checks | A reconciliation at least every five weeks, signed off by the COFA or a manager (rule 8.3) |
| Each year | An accountant’s report within six months of the period end, where rule 12 requires one |
Why does a firm need a separate account?
So money held for clients is never mixed up with, or used as, the firm’s own. Rule 4.1 requires the firm to keep it separate from the firm’s money. Rule 5.1 lets the firm withdraw it only for the purpose it is held for, on instructions, or with the SRA’s authorisation.
What is a pooled client account?
Most firms keep one general client account that pools the money held for many clients, with a ledger for each client and matter showing whose money is whose. A firm can also open a separate designated client account for one client, usually for a large sum held for a long time.
Do solicitors have to pay interest on a client account?
Yes. Rule 7.1 requires the firm to account for a fair sum of interest on money it holds for clients or third parties. The firm’s interest policy says how it works the sum out.
When must the money be returned?
Promptly, as soon as there is no longer any proper reason to hold it (rule 2.5). Money left on closed matters is a breach, not a convenience.
Does every firm need a client account?
No. Under rule 11 a firm can use a third-party managed account (TPMA) instead, so a payment firm authorised or registered by the FCA holds the money and the firm instructs it. See what a TPMA is.
Kord Pay Limited is a small payment institution registered with the FCA (FRN 929773) and provides third-party managed accounts. On Kord every matter gets its own account number on 04-10-26, the Legal Transaction Sort Code, so the firm instructs payments without holding the money. See how a Kord TPMA works.
More in Answers for law firms, including what a COFA does.
Questions firms ask
What is the difference between a client account and an office account?
The client account holds money belonging to clients and third parties. The office account holds the firm’s own money. Before moving money from client account to pay its fees, the firm gives the client a bill or written notice of the costs (rule 4.3).
Can a client account be used to hold money for a client’s convenience?
No. Rule 3.3 bars using it as a banking facility. Money should pass through it only when it relates to the legal work.
How often must a client account be reconciled?
At least every five weeks, for every client account, and the reconciliation must be signed off by the COFA or a manager (rule 8.3).
Who checks the client account?
The COFA oversees compliance with the Accounts Rules, and an accountant reports on the account each year where rule 12 requires it.
Is a TPMA the same as a client account?
No. With a TPMA the provider holds the money and the firm instructs it. With a client account the firm holds the money itself.