Solicitors reminded to pay up on squirreled away client funds. THE Law Society of Scotland has issued a warning to law firms that action could be taken against them if they fail to pay out any historic balances of client funds held within the next few months.
Law Society of Scotland practice rules which came into force on 1 November 2011 allowed two years for the clearing down of historical balances, up to 31 October 2013, but the Society's Financial Compliance team, which inspects solicitors' books for compliance with the accounts rules, has come across many firms which still hold historical client balances.
The Society believes that firms have had ample time to comply with the rules and has now contacted all firms to set a deadline of 31 October 2015 for completing the work required to disburse all client balances held following the conclusion of transactions. From that date, any ongoing rule breaches relating to these balances will be reported to the Guarantee Fund Subcommittee.
The practice rules require every practice unit to disburse client credit balances promptly following conclusion of transactions, and to remedy any breach of this rule promptly on discovery. The cashroom manager is responsible for securing compliance with these obligations, but it is possible that other solicitors in the practice could be deemed to have caused or knowingly permitted the practice unit not to comply with the rule, which would also permit action to be taken against them.
A release from the Law Society of Scotland said: We are now urging all firms to fully complete the work required to disburse all client balances held following conclusion of transactions by 31 October 2015.
From that date, any ongoing rule breaches relating to these balances will be reported to the Guarantee Fund Sub-Committee
The Law Society’s Financial Compliance inspection team have been working with many firms and monitoring progress being made with the required work. They have determined that an additional two years from the date of the rule requirement is ample time for this to be completed.
B6.11 Failure to disburse client credit balances following conclusion of transactions
Under the terms of the Law Society Practice Rules 2011, Rule B6.11 requires every practice unit to disburse client credit balances promptly following conclusion of transactions.
* Rule B6.4 requires a practice unit to remedy any breach of rule 6 promptly upon discovery.
* Rule B6.13 states that the cashroom manager is responsible for securing compliance by the practice unit with the obligations of rule 6.
* Rule B6.2.3(b) states that no regulated persons (solicitors) within the practice unit shall cause or knowingly permit the practice unit not to comply with any provision of rule 6, therefore it is possible that the Guarantee Fund Sub Committee will take the view that other solicitors within the practice unit are responsible, and action may also be taken against them.
If you have any questions, please do not hesitate to contact the Society's financial compliance team.