Regulator abandons drastic client account changes, focusing on safeguards within current system
The Solicitors Regulation Authority (SRA) has confirmed it will not pursue sweeping changes to the way solicitors manage client money, easing fears that law firms could be stripped of control over client accounts.
The regulator closed a consultation in February that examined options for safeguarding consumers, including the possibility of reducing the sums solicitors hold on behalf of clients. Proposals outlined in that process raised questions about whether third parties could take over responsibility for client funds, a suggestion that drew strong resistance across the profession.
Following a board meeting last week, SRA chair Anna Bradley said the regulator had listened to concerns and was not planning an immediate overhaul. “We heard some appetite for change to address the root causes of risk to client money but these are complex issues that cannot be solved with quick fixes,” she said.
Bradley explained that while there is “a strong case” to explore a long-term transformation of how client money is held and how the compensation fund is structured, the regulator’s immediate focus will be on strengthening safeguards within the existing framework. “We plan to consult later this year on these changes,” she confirmed. “We then plan to return to those bigger, longer term questions after we have made changes to the current system when we can give them the robust consideration they need.”
Embed from Getty ImagesThe consultation had flagged particular concerns around the financial benefit some firms gain from holding client funds. The SRA noted that interest accruing on client accounts may incentivise unethical behaviour, with firms profiting at clients’ expense. It reiterated that clients should receive any interest generated and that firms should recover the cost of holding money transparently through their fees.
In the longer term, the regulator said it would continue to examine other models, including third-party managed accounts and approaches used abroad. It highlighted the French system, under which lawyers cannot access client money because all funds are centralised through a mandatory structure.
Resistance to removing client accounts has been strong. The Law Society criticised the idea as disproportionate and unsupported by evidence. It argued that the profession is highly trained, tightly regulated and trusted to handle client funds responsibly, with only “an exceptional few” abusing their position. Chancery Lane said dismantling the current system would undermine confidence without delivering proven benefits.
Concerns were also raised by accountants advising firms. Some warned that removing access to client accounts would destabilise businesses and add unnecessary costs, with the impact falling hardest on smaller practices. They said solicitors’ ability to hold funds on behalf of clients is fundamental to the solicitor-client relationship.
The SRA has now sought to reassure practitioners that while longer-term questions remain on the table, no immediate disruption will take place. Instead, reforms in the coming year will focus on measures that can be implemented within the current system, such as tighter rules on transparency, clearer guidance on interest, and enhanced monitoring to prevent misuse.
By stepping back from radical reform, the regulator has sought to balance the demand for greater protection with the need for stability. The message from Bradley and the SRA board is that client money remains safe in solicitors’ hands for now, though the debate over its long-term future is far from over.