SRA Update on Client Money: What It Means for Law Firms

A few weeks ago, the Solicitors Regulation Authority (SRA) issued its long-awaited update following the consultation on Client Money in Legal Services. With over 450 responses, including event feedback and consumer research, the announcement clarified the regulator’s immediate priorities and the approach they intend to take moving forward. 

The update comes amid ongoing scrutiny of how law firms manage client funds, as the SRA seeks to balance robust client protection with operational practicality for firms of all sizes. Understanding these changes is crucial for legal finance teams, compliance officers and firm leaders alike.  

 

Focus on Strengthening Current Safeguards 

Rather than implementing structural reform straight away, the SRA will focus on enhancing protections under the existing system. Fundamental questions about the model for holding client money and the Compensation Fund will be revisited later, once improvements to the current framework are fully embedded. A progress report and a fresh consultation are expected later this year. 

Chair Anna Bradley commented on their recent meeting: 

“We consider there is a strong case to properly explore the long-term transformation of the model of holding client money and how the compensation fund is funded. However, our immediate focus is on making changes to better protect and safeguard client money under the current system. So we plan to consult later this year on these changes. We then plan to return to those bigger, longer term questions after we have made changes to the current system when we can give them the robust consideration they need.”

 

Industry Reaction 

The response has been broadly welcomed by legal finance professionals. Reflecting on the update, Chris O’Day, CEO of Cashroom, commented: 

“The SRA’s measured approach is encouraging. While no immediate structural changes are being made, firms should remain cautious about what may come next. At Cashroom, we will continue to provide the tools and expertise to manage client money securely today, while helping firms prepare for potential future changes.” 

 This measured approach demonstrates the SRA’s commitment to strengthening existing processes before considering broader reform, giving firms and service providers a clearer roadmap for the near term. 

 

Practical Implications for Law Firms 

Even without immediate structural change, the SRA update reinforces the need for robust client money management practices. Practical measures may include: 

• Conducting regular internal audits and reconciliations 

• Ensuring all staff are trained on client money rules 

• Establishing clear escalation procedures for anomalies or errors 

• Adopting technology solutions for real-time tracking and monitoring 

• Integrating client money oversight into firm governance structures 

For example, a mid-sized firm might implement dual-signatory controls on all client fund transfers, while a larger multi-office firm could focus on system integration to monitor client accounts across offices in real time. Scenario planning and clear reporting lines are also essential to respond effectively to discrepancies. 

 

Preparing for Future Regulatory Change 

The SRA has indicated that longer-term reforms may follow later this year. Firms can use this period to review current practices, strengthen controls, and identify areas for improvement. This proactive approach ensures that firms remain compliant today while being prepared for any future changes to client money regulations. 

Practical steps firms can take include: 

• Conducting a full process review: Map out how client money is received, held, and disbursed. Identify any inefficiencies, gaps, or manual processes that could be prone to error. 

• Enhancing governance and oversight: Ensure senior management regularly reviews client money processes, exception reports, and reconciliation results. 

• Staff training and accountability: Provide refresher sessions on SRA client money rules and clarify responsibilities for each team member handling client funds. 

• Technology adoption: Consider tools that allow real-time monitoring of client accounts, automated reconciliation, and alerts for unusual transactions. 

• Scenario planning: Develop clear escalation procedures for anomalies, errors, or potential breaches, so the firm can respond quickly and effectively. 

• Documentation and audit readiness: Maintain detailed records of reconciliations, approvals, and internal audits to demonstrate compliance if required. 

By embedding these practices now, firms not only mitigate current operational risk but also position themselves to adapt smoothly to any future regulatory reforms. Preparing in advance provides confidence that client funds are managed securely, and that the firm is resilient in the face of evolving regulatory expectations. 

 

How Cashroom Supports Firms 

Cashroom support firms with a team of qualified experts combined with a secure Cashroom Portal, which helps firms to stay compliant while safeguarding client funds. Our approach includes: 

• Experienced oversight: Our team provides guidance on client money rules, reconciliations, and internal controls. 

• Clear processes: We implement robust procedures for handling client funds, ensuring accuracy and consistency. 

• Open Banking and Confirmation of Payee checks: Adds an extra layer of security for client fund transfers. 

• Tailored support: Services are adapted to the size and complexity of each firm, whether small, medium, or large. 

• Audit readiness: Detailed records and regular reviews help firms maintain transparency and demonstrate compliance. 

This combination of expertise and structured processes ensures firms are prepared for current regulatory expectations while staying ready for any upcoming SRA changes. It allows legal finance teams to maintain client trust, mitigate operational risk, and focus on strategic priorities. 

 

Looking Ahead 

While structural reforms are on hold, law firms should continue to prioritise accuracy, transparency, and efficiency in client money management. Embedding strong operational controls, investing in staff training and utilising modern solutions helps firms manage risk and maintain confidence among clients and positions them for a smooth transition when the SRA revisits longer-term reforms. 

Combining technology with expert oversight remains the most effective way to safeguard client money and prepare for the future.