- Publication Date
- 2024-02-02
The Solicitors Regulation Authority (SRA) conducted an audit of a law firm which culminated in a regulatory settlement.
The SRA highlighted that the Firm received Qualified Accountant’s Reports (QAR) for periods ending in May 2021 and May 2022. Both QARs noted that the law firm held numerous client balances with no activity for over 12 months. As of February 2023, the firm held 393 inactive client balances totaling £596,706.79, with amounts ranging from £78,846.61 to £0.01. These balances dated back to 1995.
The firm had justified that the inactive balances resulted from focusing on current client matters while neglecting historic ones. The client balances were often left unreturned due to difficulties in locating or identifying the clients. Subsequently, the firm implemented new policies and procedures aimed at preventing future breaches and addressing outstanding client balances.
The SRA accepted the firm's admissions regarding several breaches. The firm failed to return money to clients promptly upon the conclusion of their matters and did not take sufficient steps to address high residual client balances after receiving the QAR in June 2021. They also failed to notify clients about the money due back to them.
The conduct spanned from 1995 to 2023 and included breaches of the Solicitors Accounts Rules of 1998 and 2011, specifically failing to return client funds promptly and not informing clients about retained funds. Further, the 2019 Accounts Rules required that client money be returned or accounted for promptly, which the firm failed to ensure.
The SRA and the firm agreed that the misconduct was serious due to the pattern of breaches and their continuance despite being recognized as improper. The SRA's guidance indicated a more severe nature of misconduct, and the impact was considered medium because some beneficiaries could not be located and might have suffered loss or inconvenience.
Considering the mitigating factors, including the firm's remedial actions and cooperation, the SRA determined an appropriate basic penalty. There was no evidence of financial gain or other benefits accrued by the firm due to this misconduct.
Subsequently, the agreed outcome included a fine of £5,899 for the firm's regulatory breaches, reflecting a 10% reduction from the basic penalty, and the agreement to pay the SRA's investigative costs.
The firm accepted the SRA's decision and agreed not to contradict this agreement.