SRA plans stricter controls and accountability measures to reduce consumer harm
The Solicitors Regulation Authority (SRA) has announced a package of reforms aimed at strengthening protections around client money and improving oversight of law firms holding client funds. The measures, published on 2 June 2026, follow a consultation carried out between December 2025 and February 2026 and form part of the regulator’s wider review of how client money is managed within the legal sector.
The SRA said the reforms are intended to improve compliance, increase accountability within firms and help identify risks before consumer harm occurs. The regulator is also continuing broader work examining whether the current model allowing firms to hold client money remains appropriate in the long term. As part of that review, the SRA is considering whether senior individuals within firms should carry clearer personal responsibility for safeguarding client funds and managing financial risks.
SRA Chief Executive Sarah Rapson, chief executive of the SRA, said protecting client money remains one of the regulator’s “most important responsibilities”. She said the changes would help the SRA identify risks earlier, strengthen accountability and reduce the likelihood of harm to consumers arising from weak governance or financial controls within firms.
Under the proposed reforms, all law firms holding client money will be required to submit annual accountants’ reports directly to the SRA alongside additional declarations containing key compliance information. Where firms rely on exemptions from the reporting requirements, they will also need to provide information explaining their exemption status.
The SRA said the changes are designed to improve visibility over firms’ handling of client money and help identify problems before they escalate. The regulator also plans to extend fixed financial penalties to firms that fail to submit accountants’ reports on time or fail to submit them altogether.
A second major reform concerns the separation of senior management and compliance functions within higher-risk firms. Under the proposals, firms with annual turnover exceeding £600,000 or holding more than £2 million in client money will no longer be permitted to have the same individual acting both as a senior decision-maker and as compliance officer for legal practice or finance and administration.
The SRA said separating those roles would strengthen checks and balances inside firms and reduce the risk of weak internal oversight, allowing problems to go undetected. A partial exemption will apply to smaller sole-owner firms where separating the positions may not be practical.
The proposed rule changes have now been submitted to the Legal Services Board for approval. Subject to approval, the reforms are expected to take effect early next year. The changes form part of increasing regulatory focus on governance, financial controls and consumer protection within the legal services sector.