Client money & the Accounts Rules
The SRA Accounts Rules exist to keep client money safe. They apply whenever a firm holds or receives money belonging to clients or third parties.
What "Client money & the Accounts Rules" covers
- Client money is money you hold or receive that relates to regulated services, that you hold on behalf of a third party, that you hold as trustee or office-holder, or that you receive for your fees and unpaid disbursements before delivering a bill: rule 2.1.
- You must keep client money separate from money belonging to the firm (business money): rule 4.1.
- You must not use one client's money to fund another client's matter.
- You must return client money promptly as soon as there is no longer any proper reason to hold it: rule 2.5.
- You must not use a client account to provide banking facilities; payments in and out must relate to the delivery of your regulated services: rule 3.3.
- The COLP and COFA carry responsibility for the firm's compliance, and the COFA has specific responsibility for the Accounts Rules.
- As an alternative to holding client money, a firm may use a third-party managed account (TPMA): rule 11.
Key cases & statutes
The authorities and provisions most likely to matter for this subtopic:
How it's tested in SQE1
SQE1 uses single best answer questions: a short factual scenario, one precise question, and five options of which only one is the best answer on the law applied to the facts. For client money & the accounts rules, expect to be asked what the correct legal position is, what a party may or must do, or which outcome follows — with more than one option looking arguable. Reading the facts carefully and eliminating the near-misses is the skill that earns the mark.
Where candidates lose marks
- Overlooking that advance payments for fees and unpaid disbursements are client money.
- Using the client account to provide banking facilities unconnected to legal services.
- Delaying the return of client money once there is no reason to retain it.
Learn this subtopic in the course
A video lesson, notes and exam-style practice on client money & the accounts rules.
FAQ
Is client money & the accounts rules tested on SQE1?
Yes — client money & the accounts rules is part of the SQE1 Solicitors Accounts syllabus (FLK2) and can appear in single best answer questions.
How is client money & the accounts rules examined in SQE1?
SQE1 tests it by application: you're given a realistic scenario and choose the single best answer from five options. The focus is on using the law correctly, not reciting it — knowing the leading authorities (SRA Accounts Rules 2019, rule 2.1 (client money)) helps.