Our response to the key elements of the latest SRA consultation

The latest SRA consultation on protecting client money has now closed. It primarily focused on the Accountants’ Report regime and oversight from the segregation of the COFA and COLP compliance roles. Full details of the consultation can be found here.

Overall, we are supportive of the proposals. In particular, we welcome those that reinforce accountability and transparency while addressing weaknesses introduced by the 2014 reforms.

Re‑establishing robust AR1 reporting oversight

It is difficult not to say we told you so on the previous reforms which in the view of many, weakened the oversight in ensuring applicable firms appropriately completed an Accountants’ Report. We are supportive of the proposal to require all Accountants’ Reports (qualified and unqualified) to be submitted to the SRA. Reverting to this approach closes gaps that allowed a minority of firms to avoid scrutiny and aligns with stronger consumer protection. We also see merit in reinforcing the role of the Reporting Accountant by requiring direct submission of reports, while maintaining the law firm’s ultimate responsibility for compliance.

Annual declarations: Proportionate oversight

Mandatory annual declarations from all SRA‑regulated firms, to include those firms that are exempt from requiring an Accountants’ Report, would provide essential oversight. This ensures the regulator has visibility over both client‑money‑holding firms and those claiming exemptions. It helps to deter non‑compliance without creating unnecessary burden for the majority.

Penalties, but with fair safeguards under the SRA consultation

We recognise the potential need for fixed financial penalties to address repeated or deliberate non‑compliance for completion of the Accountants’ Report. However, this must be balanced with a fair appeals process or the reintroduction of filing extensions for genuine, exceptional circumstances. A measured approach avoids penalising an otherwise compliant firm.

Separation of compliance roles: One size doesn’t fit all

While we support the principle of separating the key COFA and COLP compliance roles, we caution against fixed thresholds based solely on turnover or client money balances. Smaller firms, particularly those with limited principals, may struggle to comply in practice. A more nuanced, risk‑based approach, reflecting firm size, structure and work types undertaken, would better protect consumers without unintended consequences.

What the SRA consultation means going forward

Done well, these reforms can strengthen confidence in how client money is protected. The key will be proportionality targeting higher‑risk scenarios in terms of the segregation of duties aspects, while recognising the operational realities of smaller firms.

Our full response to the latest SRA consultation can be provided upon request. Further updates will naturally be provided once the outcome of the consultation has been published and approved by the Legal Services Board (LSB).