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Who must keep one or more client accounts?
What is the exception to this?
A solicitor who holds or receives client money (Rule 14(1))
Exceptions: all the client money is always dealt with outside any client account in accordance with rule 9, rule 10, rule 16 or rule 17
What is a client account?
An account of a practice held at a bank or building society for holding client money (Rule 14(2))
The name of the client account of a sole practitioner must be in whose name?
The name of the sole practitioner or the practice name (Rule 14(3)(a)) and it must include the word client (Rule 14)
The name of the client account of a partnership must be in whose name?
The firm name (Rule 14(3)(b)) and it must include the word client (Rule 14)
The name of the client account of an an incorporated practice must be in whose name?
The company or LLP name (Rule 14(3)(c)) and include the word client (Rule 14(3))
The name of the client account of an in house solicitors must be in whose name?
The name of the current principal solicitor or solicitors (Rule 14(3)(d)) and include the word client (Rule 14(3))
- Should include the names of all solicitors of the Supreme Court or registered European lawyers held out on the notepaper as principals.
- The names of other employees who are solicitors of the Supreme Court or registered European lawyers may also be included if so desired.
- Any person whose name is included will be subject to the full Compensation Fund contribution and his or her name will have to be included on the accountant's report. (Rule 14 - Note (ii))
The name of the client account of trustees, where all the trustees of a trust are managers and/or employees of the same recognised body must be in whose name?
Either in the name of the recognised body or in the name of the trustee(s) - Rule 14(3)(e) and must include the word client (Rule 14(3))
Where must a client account be? - 2 possibilities
1. A bank account at a branch/bank's head office in England or Wales (Rule 14(4)(a))
2. A building society at a branch/head office in England or Wales (Rule 14(4)(b))
What are the two types of client account and what is the difference?
- 1. A "separate designated client account" (Rule 14(5)(a)):
- - Money relates to a single client, other person or trust
- - Title includes reference to identity of that client/person/trust
- 2. A "General client account" (Rule 14(5)(b))
- - Any other client account
How many client accounts can a solicitors' firm have?
Any number of general or designated client accounts (Rule 14 - Note (iv))
Can the word client be abbreviated in the client account name?
No. Rule 14 - note (v)
What is the point of rules 14(1)-(4)
To ensure that clients, as well as the bank or building society, have the protection afforded by section 85 of the Solicitors Act 1974 (Rule 14, Note vi)
Finish this sentence.
Client money must be immediately...
...available. Even at the sacrifice of interest, unless the client otherwise instructs, or the circumstances clearly indicate otherwise (Rule 14, Note vii)
How quickly must client money be paid into a client account?
Without delay (Rule 15(1))
Where must client money be held?
What are the exceptions to this?
In a client account (Rule 15(1))
Exceptions: See rule 9, 10, 16, 17, 19, 21
What money can be paid into a client account?
What are the 7 exceptions to this general rule?
Normally only client money (Rule 15(2))
- 1) Amount of solicitor's own money required to OPEN the account (Rule 15(2)(a)). This will often be nothing and otherwise is likely to be a nominal sum (Rule 15 note v)
- 2) An advance from the solicitor to fund a payment on behalf of a client or trust in excess of funds held for that client or trust (Rule 15(2)(b))
- 3) Money to replace any sum which for any reason has been drawn from the account in breach of rule 22 (Rule 15(2)(c))
- 4) A sum in lieu of interest which is paid into a client account to enable the solicitor to make payment from the client account of all money owed to the client as an alternative to making separate payments from the office and client accounts (Rule 15(2)(d))
And in Rule 15, note iv:
- 5) under Rule 19(1)(c)) about the receipt and transfer of costs: A solicitor who receives money paid in full or part settlement of the solicitor's bill pay the entire sum into a client account (regardless of its composition), and transfer any office money out of the client account within 14 days of receipt
- 6) under Rule 20 (2)(b)) about the receipt of mixed payment: A "mixed payment" is one which includes client money as well as office money and can be split as appropriate between office and client accounts or paid into the client account without delay.
- 7) under Rule 21(2)(c)(ii). Transfer to client account of a sum for unpaid professional disbursements, where the solicitor receives regular payments from the Legal Services Commission.
When does an advance from the solicitor to fund a payment on behalf of a client or trust in excess of funds held for that client or trust become client money?
When it is paid into the client account (Rule 15(2)(b))
When does money to replace any sum which for any reason has been drawn from the account in breach of rule 22 become client money?
On payment into the client account (Rule 15(2)(c))
What must happen to client money once there is no proper reason to retain such funds?
As soon as this occurs, it must be returned to the client promptly (Rule 15 (3))
What must happen to payments received after the solicitor has already accounted to the client (e.g. by way of a refund)?
What about ongoing retainers?
They must be returned to the client promptly (Rule 15(3))
This rule does not apply to ongoing retainers, e.g. when, during the course of a retainer, the specific purpose for whichparticular funds were paid no longer exists, for example, the need to instruct counsel or a medical expert. The solicitor must act in the best interests of the client and may need to take instructions (Rule 15 note xi)
What must the solicitor do if any money is client money is retained at the end of a matter? (2 points)
How often must this be done?
1. Inform the client (or other person for whom the money is held) in writing (Rule 15(4))
2. Give reasons for its retention (Rule 15(4))
This must be done in writing at least ONCE EVEY TWELVE MONTHS thereafter for as long as the solicitor holds this money (Rule 15(4)).
When is it acceptable for a bank to aggregate the sums held in a number of client accounts, including one or more separate designated client accounts, in order to maximise the interest payable? (3 conditions)
- 1. Each client account remains a separate account
- 2. The rate of interest applied by the bank is the same for each client account
- 3. The bank credits the total amount of the interest earned in respect of each separate designated client account to that account (see rule 24(1)), and credits the interest earned on any general client account to the office account (see note (xi)(b) to rule 13).
a) What facilities should solicitors not provide through a client account? Why?
b) When may solicitors s lose their exemption under the Financial Services and Markets Act 2000?
a) Banking facilities (Rule 15, note ix)
It is not proper part of a solicitor’s everyday business or practice to operate a banking facility for third parties, whether they are clients of the firm or not (Wood v Burdett).
b) If a deposit is taken in circumstances which do not form part of a solicitor’s practice
What does "promptly" mean?
It should be given its natural meaning.
For some transactions money may still be needed later for tax liabilities or outstanding conveyancing payments.
Rule 15 note x
When may client money be held outside a client account?
Where MAY it be held if not in the client account under rule 16?
If the client instructs the solicitor to that effect for the client's own convenience and these instructions are given in writing, or are given by other means and confirmed by the solicitor to the client in writing (Rule 16(1))
A payment on account of costs received from a person who is funding all or part of the solicitor's fees as long as there are written instructions (Rule 16, note vi)
If in any category under Rule 17
It may be held in the solicitor's safe in the form of cash, or placing it in an account in the solicitor's name which is not a client account (Rule 16(1)(a)) or an account at a bank, building society or other financial institution opened in the name of the client or of a person designated by the client (Rule 16(1)(b))
Complete the sentence. It is improper to, through standard terms or otherwise, seek blanket agreements to...
...hold client money outside a client account (Rule 16(2))
What must be done if a client instructs the solicitor to hold part only of a payment in accordance with rule 16(1)(a) or (b)?
The entire payment must be paid into the client account. The relevant part can then be transferred out and dealt with as per the client's instructions (Rule 16 note ii)
Is money witheld from a client account and held by the solicitor outside a client account by, for example, retaining it in the solicitor's safe in the form of cash, or placing it in an account in the solicitor's name which is not a client account, such as an account outside England and Wales, client money or office money?
Client money (Rule 16, note iii)
How long must the client's instructions under 16(1) be kept?
For at least 6 years (Rule 16, note v)
What are the 8 categories of client money that may be withheld from a client account?
- 1. Cash received and without delay paid in cash in the ordinary course of business to the client or, on the client's behalf, to a third party, or paid in cash in the execution of a trust to a beneficiary or third party (Rule 17 (a))
- 2. A cheque or draft received and endorsed over (by signature or any other method - Rule 17 note iii) in the ordinary course of business to the client or, on the client's behalf, to a third party, or without delay endorsed over in the execution of a trust to a beneficiary or third party (Rule 17(b))
- 3. Money covered by Rule 16(1) - Rule 17(c))
- 4. Money which, in accordance with a trustee's powers, is paid into or retained in an account of the trustee which is not a client account (for example, an account outside England and Wales), or properly retained in cash in the performance of the trustee's duties (Rule 17(ca))
- 5. Unpaid professional disbursements included in a payment of costs dealt with under rule 19(1)(b) - Rule 17(d))
- 6. Advance payments from the Legal Services Commission withheld from client account - Rule 17(e)(i)
- 7. Unpaid professional disbursements included in a payment of costs from the Legal Services Commission - Rule 17(e)(ii)
- 8. Money withheld from a client account on the written authorisation of the SRA. The SRA may impose a condition that the solicitor pay the money to a charity which gives an indemnity against any legitimate claim subsequently made for the sum received - rule 17(f)
For which 4 of the 8 categories of client money that may be withheld from a client account must a written record of the receipt of the money be kept and be included in the monthly reconciliations?
- 1. Money under Rule 16(1) - Rule 16 note v
- 2. Money under Rule 17(a) - Rule 17 note ii
- 3. Money under Rule 17(b) - Rule 17 note ii
- 4. Money under Rule 17(ca) - Rule 17 note iia