Summary
Summary ULAW LPC, Solicitors Accounts Chapter Readings
- Module
- Solicitors Accounts (SAC)
- Institution
- University Of Law (ULaw)
ULAW LPC, Solicitors Accounts Chapter Readings
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Intro to PP – WS2 Solicitors Accounts TIFF LIAOChapter 18 – Third Party Managed Accounts Page 207
INTRODUCTION
Rule 11.1 allows firms to use a third party managed account (TPMA), rather than operating their own client account, to
receive and make payments of client money.
Money held in a TPMA DOES NOT fall under the definition of client money in the SRA Accounts Rules as it is NOT held
or received by the firm.
= As such, it DOES NOT have to be held in accordance with the SRA rules relating to the holding of client money.
However, Rule 11 DOES APPLY.
Rule 11.1 provides that a TPMA can only be used if:
(a) use of the account DOES NOT result in you receiving or holding the client’s money; AND
(b) you take reasonable steps to ensure, before accepting instructions, that the client is informed of and
understands:
(i) the terms of the contractual arrangements relating to the use of the third party managed
account, and in particular how any fees for use of the third party managed account will be paid
and who will bear them; AND
(ii) the client’s right to terminate the agreement and dispute payment requests made by you.
Rule 11.2 requires firms using TPMAs to obtain regular statements from the provider of the account and to ensure that
these accurately reflect all transactions on the account.
Guidance issued by the SRA, ‘Third party managed accounts’ (updated 25 November 2019), reminds firms using TPMAs
that they remain subject to other SRA regulatory requirements:
- Paragraph 4.2 of the SRA Code of Conduct for Solicitors , RELs and RFLs AND
- Paragraph 5.2 of the SRA Code of Conduct for Firms set out your obligation to protect client money and
assets.
These remain relevant to funds held in a TPMA. In order to meet these obligations, and Principle 7 - the obligation to
act in the best interests of each client, you will need to make sure that the decision to use a TPMA, and the TPMA
used, is appropriate in each individual case.
Reduce overall firm overheads = especially if the firm only occasionally holds client money.
e.g. outsourcing the holding of client money can reduce professional indemnity insurance premiums and
contributions to the Compensation Fund. Accountants’ reports do not need to be prepared.
TPMA’s could be ore secure way of handling client money = a Potential benefit beyond cost savings.
May also help address a firms money laundering risk.
SUMMARY
Firms can dispense with holding a client bank account by using a TPMA.
Money held in such accounts is OUTSIDE the definition of client money and so is NOT subject to the SRA Accounts
Rules 2019.
However, a firm which uses such accounts will be subject to the SRA Codes of Conduct.
The client must be fully informed of the arrangement.
The SRA expects to be informed when a firm decides to use or change a TPMA provider.
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TIFF LIAO
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