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Orphaned Monies

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I have been asked to make some comments about the ‘new’ procedures relating to client’s monies that so many of us call orphaned. Well the first comment I have is that we should not have any, sounds like I work for the SRA doesn’t it? But in reality if files are run commercially then they should have been closed at the end of the matter and it is difficult to see then how we arrive at a situation like this.

Closing files promptly is essential to any firms risk management procedures and should be part of the monthly ‘housekeeping’ procedures. When files are billed promptly there should always be a statement of account when clients monies have been used and when the file is closed with a letter to the client ending the retainer it is hoped that no balances need to be retained SAR 15(3). Readers should also be aware that if monies have been held for sometime interest will undoubtedly be payable.

However some firms have a legacy of small balances that need to be cleared and disposed off. The very existence of them is a breach of the SAR and under the new rule 15(4) it is likely that no reason has been given to the client[i].

  • Whilst I have no intention of rewriting the guidance already issued by the SRA[ii] I think it is worth making the following observations.
  • You must take reasonable steps to make sure that you have tried to identify the client who owns the money and;
  • That you have recorded those steps in a central register.
  • You must of course pay the monies to a charity and;
  • You must record all of those payments to the charity. I would go so far as to say you should record in your central record the charity registration and the intended use of those monies.

In addition to the above which is adequately laid out in 22(2A) you should consider the monies that you have that exceed £50. These monies should be fully investigated and whilst we have the opportunity to plead that it is not commercially viable to investigate some matters 22(2A)b you will be asked for evidence of this when applying to the SRA for permission to pay the monies to a charity.

I also have seen some firms’ client accounts records where they have tidied these orphaned monies into suspense accounts as though it were good housekeeping. On the basis that you originally new the client identity and who the monies belonged to in the original ledger the use of suspense accounts in this way is inappropriate.

Finally when looking at monies you hold in client accounts that have a ‘finished’ matter you must comply with rule 15(4) in that you must report to you client, where the money arose after the 14 July 2008, on an annual basis. Make sure that you have accounted correctly to your client for interest whilst you hold this money. You should also consider Rule 2 as well because if your retainer continues then you may have to report to your client in relation to costs as well.

[i] It may not be appropriate if the monies were retained before 14 July 2008.



Written by Andrew Hodges

May 3, 2009 at 1:29 pm

Posted in Compliance

Tagged with , ,

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