Rule 14.5 - prohibition on providing bank facilities through client account
Hopefully you will all have seen the much awaited and much needed guidance on rule 14.5 published recently by the SRA?
If not, take a look now.
It’s fair to say that rule 14.5 is the rule that generates the most questions and concerns. It’s certainly the one that raises the most queries on the training courses that I run – both by the reporting accountants (RAs) and the law firms themselves. It’s little wonder as a) it’s a relatively new rule; b) the rule isn’t 100% categorical about what constitutes providing banking facilities; and c) there are some services firms have provided for many years that they tend to assume must still therefore be acceptable.
The guidance is therefore very welcome for both the RAs and the law firms. That said, it is clear that things aren’t always completely clear!
In some situations the fact that the rule has been breached and such facilities have been provided is straight forward. If a firm is dealing with a conveyancing matter which involves a standard sale of a residential property, using proceeds to pay off unconnected expenses of the client (such as school fees) is a breach.
However, as the guidance demonstrates, things may be less straightforward. The issue is predominantly dealt with through a number of case studies and what is key is whether or not the firm can demonstrate that the funds they hold or the payments they make from those firms are properly part of legal services provided. The accountant will need to form a judgement on the evidence provided and clearly document their own decisions regarding compliance or otherwise.
That said, areas such as holding commercial rent deposits and acting under Lasting Power of Attorney, among other examples, have certainly been made clearer in the guidance.
No doubt this is an area that we will need to revisit in the Roadshows later this year.