The Solicitors Regulation Authority (SRA) has launched a consultation outlining potential changes to the SRA Accounts Rules. The updates build on proposals to better safeguard client money which the SRA put forward in November 2024. The deadline for comment is 20 February 2026.

Strengthening the accountants’ reports regime

The accountant’s report is a key component of how the SRA monitors the compliance of law firms with the Accounts Rules and identifies those firms placing client money at risk.

ICAEW’s Technical Release 01/21 AAF, which will shortly be updated, provides guidance to members involved in the preparation of accountants’ reports (ie the reporting accountants).

Unless they meet the exemption criteria under rule 12.2, law firms holding client money must obtain an annual report from an independent accountant providing the accountant’s conclusions on the firm’s compliance with the Rules.

At present, only qualified reports – those identifying significant breaches and/or weaknesses in systems and controls which put client money at risk – are required to be submitted to the SRA.

The SRA has concerns that not all law firms are acting in accordance with these requirements and that it lacks some of the key information it needs to monitor compliance effectively. The SRA therefore intends to strengthen the report regime.

Below is a summary of the relevant proposals, and how they differ from current practice:

The SRA is also seeking views on:

• a proposal to include within its guidance an expectation for reporting accountants to routinely obtain bank confirmations regarding firms’ client accounts.
• its proposal to use fixed financial penalties for clearly defined failures to comply with procedural and administrative requirements relating to the submission of reports and declarations (penalties will not apply to reporting accountants).

The SRA specifically invites reporting accountants to provide insights into the aspects of the proposals that will directly affect their role, processes, and professional obligations.

Other areas

The SRA is also looking to address the risks arising if significant management decisions are made under the control of a single individual at a firm (concentration of roles).

It, is proposing changes for law firms with an annual turnover of £600,000 and above and/or holding a client account balance of £500,000 or higher at any point in the most recent reporting period. In these firms, any individual who can unilaterally determine or direct significant management decisions will not also be able to hold compliance roles, such as the Compliance Officer for Legal Practice (COLP) and the Compliance Officer for Finance and Administration (COFA).

An exemption would apply to sole owner-manager firms in certain circumstances.

The SRA is also proposing to amend Account Rule 2.1(d) to provide that firms can only transfer client money to the office account once a bill or written notification has been produced for costs incurred.

This differs from the existing rule which permits firms to issue bills in advance of work being carried out for anticipated disbursements, and to then transfer money from the client account to the office account for their fees.

Proposed revisions to Rules 4.3, 4.3(a), 4.3(c) and the addition of Rule 4.4 will clarify that firms do not need to deliver a bill or written notification to the client before reimbursing themselves where it relates to expenses incurred on behalf of the client.

Get involved

Responses can be submitted via the SRA’s online questionnaire.

The deadline for submission of responses is 12:00 on Friday, 20 February 2026.