The SRA has now published its consultation response on ‘protecting the client money that solicitors hold’, marking the latest step in its wider consumer protection review.

Having actively engaged with the consultation process through direct feedback to the SRA (see our full response to the SRA here) and ongoing dialogue with our clients, we set out below the key developments and their practical implications for law firms.

The SRA has confirmed that its immediate priority is to strengthen the current framework for safeguarding client money, rather than introduce fundamental structural change. While some longer-term reforms remain under consideration, the regulator is focused on delivering targeted, practical improvements in the near term. This pragmatic approach aligns with feedback from across the profession and our views that there are short term changes that can be implemented to improve consumer protection relatively quickly. Their confirmed changes can be split into two main categories.

1. Accountants’ report regime

One of the most impactful areas of change relates to the accountants’ report framework, which remains central to the SRA’s supervision of client money risks.

The SRA intends to introduce:

Submission of all accountants’ reports for non-exempt firms (not just qualified reports), giving the SRA a more complete view of compliance across firms.

Mandatory annual declarations by firms, confirming their status and key information related to the accountants’ report.

Fixed financial penalties for breaching requirements e.g. late/ non-submission

These changes are designed to address identified gaps in compliance, including instances where firms failed to obtain reports or submitted them late. Broadly speaking, the accountants’ report regime changes are in line with our own response, particularly surrounding improving visibility without creating a disproportionate burden.

For firms, this signals a move toward greater transparency and regulatory visibility.

2. Governance and internal controls

Alongside reporting reforms, the SRA is reinforcing the importance of robust internal governance. The proposals seek to enhance accountability of Compliance Officers for Finance and Administration (COFAs) by introducing safeguards where significant decision-making power is concentrated on a single individual and strengthening checks and balances within firms more broadly.

The SRA intends to introduce:

New criteria restricting owners or managers from holding one/ both key compliance roles exceeding certain thresholds (for example where annual turnover exceeds £600k and/ or the client money balance exceeds £2m at any point in the previous accounting period).

Partial exemption for sole owner-manager firms which meet the client money threshold, who will be prevented from holding the COFA role, only. There will be exemptions for firms exceeding the client money threshold due to abnormal non-representative transactions.

Support packages for compliance officers are being developed.

These measures reflect the SRA’s continued focus on culture, oversight and early risk identification, particularly in light of recent high-profile firm failures.

What this means for firms

Taken together, the SRA’s response signals a clear direction: increased oversight, enhanced reporting, and stronger accountability, without fundamentally altering the current client account model in the short term.

A phased transition is expected, with the changes being implemented in early 2027. Firms should begin preparing by:

• Reviewing their accountants’ report processes and timetables
• Ensuring systems can support timely and accurate reporting
• Assessing governance structures, particularly COFA responsibilities

The SRA are continuing to examine, and will consult on, risk profile changes of firms, and potential notification requirements in respect of structural changes such as mergers and acquisitions. They also continue to consider the model for holding client money.

Our perspective

As a firm specialising in professional practices and SRA reporting, we have been engaging directly with the SRA and working with clients to anticipate and prepare for potential changes.

While many of the final proposals confirmed at this stage align with expectations, the increased regulatory scrutiny, particularly around accountants’ reports, represents a meaningful shift in compliance requirements. Early preparation will be key to ensuring a smooth transition.

We will continue to monitor developments and provide further insight as the SRA moves toward implementation.

If you would like to discuss how these developments may affect your firm, or review your current accountants’ report and governance arrangements, our specialist professional services team would be pleased to help. Get in touch with us today.

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