The misuse of client money is an ever-present risk, as identified in the recent SRA Risk Outlook [LINK]. In 2014, the SRA claims an average of 118 reports of misuse of money and assets each month (!!), a figure consistent with the the year before.
The misuse of client money can be a result of:
– dishonesty
– failure to act ethically or with integrity
– a lack of competence
– inadequate supervision of individuals with access to client money
Misuse of monies can have a number of effects, notably:
– significant distress
– financial loss
– diminished respect for solicitors
– use of regulatory resources (including Compensation Funds)
What can you do?
Firms need to manage risks and should put systems and controls in place to protect client money. You should also:
– ensure those entrusted with access to client money act with integrity
– ensure those who have access to client money are appropriately trained
– ensure those who have access to client money are appropriately supervised
The SRA are keen to take steps to control this risk and are looking at alternatives to the ways in which firms hold client funds, notably the possibility of getting a third party to hold the funds.
The SRA hopes that both firms and clients have more flexibility in future to manage such risks.
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