Hello. My name is Robert Blech. I make full of flight accounts and has a law degree, and I specialize in the solicitor's accounts rules? I do have a lot of matters relating to regulate Cherie and disciplinary, where full clients who have issues with the s all right. And look for an accountant, as many of them relate to financial issues. Some of these are in the matters off accounts, and some of these are in relation. Two breaches of this misters accounts, rules. So what we're going to have a look at today is climbing residual balances as the S. R. A are very much in focus on risk and compliance. At the moment, one of the issues they have identified is that of residual client balances. So we're going to have a look at those and the issues on the resolutions of how to rectify those. So the SRE have identified this as a major issue, and it's important not to full faneuil of these rules. As an accountant, residual climb balances maybe a reportable breach of the accountants roles. This may result in the issue off your reporting accounts and giving you a qualified report which in turn, may result in a visit by the S. All right, there we are. Under the current rules, which are the 2011 cease to recount enrolled, These are due to be replaced Has been issue this week with the 2019 roles which are coming into effect on the 25th off November 2000 and 19. And it's important to emphasize that residual balances are still play a major part in the new rules which around later this year. So what we're going to learn and understand today Festival. What is the definition of a residual balance? I'm understanding them were no residual client balance occurs. And why the Yes, sir, I can see that residual balances in this year. If you understand that, then you can look at what to do about them and ensuring that they don't occur in the future. Then we shall have a quick look at the role of the SL ray and how they get involved with the discovery off car residual pregnancies and then how to clearly residual balances. So once you've identified the residual balance, what you need to do in order to declare that balance? Um And in order to clear that balance, you're right need to. So I decline. We will need to find the client, then the efforts you need to put into trying to find the time on. Then I'm the definition of the S r. A. Look at about the quantity or visit your balances. So at the moment, under the current rules, there's the benchmark of £500. And if the residual balance is less than £500 what you need to do, I left a residual balances more than £500. What? What? The steps. In order to repay the monies on, then we should just have a quick look at reasonable steps. So the s r a. Identify reasonable steps in locating a climb. And this is something that we're just going to touch on. So, for example, if you've got a very small amount, a small amount of pence, even or a few pounds, what efforts are considered reasonable steps in trying to identify the client in all this? To repay that money and then stemming from that is what happens if you call, find the kind you gone to your reasonable steps and you can I find a climb? And then all of these are under the current account rules. So we're just going to look at quickly differences under the new account rules which come out later this year, and whether that should change. I'm the process off the residual balances and the steps that one undertakes under the current rules. Andan Finally, we're just going to look at avoiding residual balances in the future. So you've undertaken all the steps that we've spoken about. How did you make sure that it doesn't occur in the future? Okay, so the first point is a definition of residual balances. Visit your balances on money which remain on the kind ledger, and therefore they remain in the client bank account because what's in the climb bank account should reconcile back to the total off the individual kind letters once that matter is finished. So you finish the matter? Um, you paid out all the fees made out the dispersement, and there is a small amount or a large amount of money sitting on the point that you, um ondas we've touched him on their own. They made the value of those may not be that much so you could have, you know, £2 here, £3.10 pounds, 20 paise. OTP 40. But if you were a reasonable size practice or even a small practice when you're adul, those residual kind balances out. They come to a figure which is could be quite substantial. Don't forget, though, that you could have a lot of residual balance. We speak about small residual variances because they are more common. But you could have a large residual Bannon sitting there as well. And that is part of as we've touched on previously, seeing with the balance of all the £500 or less than £500. Um, once the case is finished, any monies which remaining on the ledge belong to decline and should therefore be returned to climb. I see you as possible. So if you're doing a convincing matter divorce once everything is finished, any money remaining should be assumes possible. Return to the climb. Now, there is, um, some gray area in determining what is as soon as possible. Um, really A reconciliation needs to be done under the current rules every five weeks. So when um, solicitor, the Cofer is going through the clinic and reconciliations, and they see money in in the client of town, Um, when a case is finished, that should trigger the effect off that money being repaid to the time. But that's not to say that is always the case. Um, there may be checks that happen less frequently than that, but a lot of kind account. Residual balances remain on the ledger for months and years and years, and that's when that really causes a concern on possibly reportable breach in the accountant's report. So under the current rules, it's Rule 14.3 and what Rule 14.4, which covers Reason. Your balances. We're just gonna have a great look at what rule 14.3 and 14.4 sided. So Rule 40.3 says the client money must be returned to the color him as soon as there is no longer any reason to retain their funds. That is an important issue to point out, because if there is no reason to retain their funds, in other words, the matter is finished. Those funds should be returned to the crime payments received after you have counted for the Colin for example by Ray of a refund must be paid to the client from. So that is what Rule 14.3 says Room 14.4 says that she must promptly inform a crying or person other in the Colin who's on whose behalf. The money is held in writing of the amount of any client money retained at the end of the matter. On the reason for that retention, you must inform the client in writing at least once every 12 months thereafter, of the amount of client money that is still held in the card account and the reason for the retention of that money. That is quite important. And there's a shift, as we shall look at shortly in how the new rules look at this. But if you do have a, um, residual talents in the climate camp, you need to inform the climb of this at least once every 12 months on the reason. Beholding so, it's not just good enough to say to the climb. Um, I'm holding £500 for you, a za little cat that is considered a serious breach of the rules. There's no reason to hold on the money that you can hold the money and you have to write to the client. But you also have to tell them why you are holding the money. You can't just hold the money for the sake of holding. So no, we've looked at the definition of residual abandoned. Let's just have a pretty look off Ren residual balances a car. It is common for them to recurring property firms a za result of a mistake in the computation off the completion statement. So, for example, a completion statement. And so well, the values disbursements, fees. Um, we know Lazo over paid ill and the deputy to call in a camp at the end of it that it is. There's a small balance because there's a slight computation difference or, for example, the payment for searches. Another this persons that were not needed but have been paid as part of the client funds coming in and this is quite common to say, particularly in property and conveyance matters. However, it has to be established whether there is residual balance actually occurring. So, for example, there may be fees that have been paid. You know, violence from a client is really deposit to the client account. Um, Andi, That work was never undertaken. And in that money, um, is due back to the college. However, if the bill has not been posted of raised on the ledger I'm initiative legitimately had been, then there's no residual balance there because the solicitor can quite correctly raise a bill. I'm post that bill, which then causes of death repellents on the office, the king and transfer that money over recent illuminates a balance in the climate camp. So if an invoice hasn't been posted and it's purely your bookkeeping ever and it's quite a legitimate first, listen to raise a bill and to get rid of the client monies on the balance in Sitting in Decline a camp. Also, it's important to remember that when we talk about resist, your pregnancies were talking about residual balances from a specific kind. So really assist Klein suspense account exists. This is not residual Maddin's and should not be treated as such. Um, in terms of trying to pay the money to a charity is a look at later. But the first step should always be to identify who that client is, Um rather than just saying It's a suspense account, and therefore it's residual balance. That is not correct. So Mexico is gonna have a quick look at whiny. Yes, All right. Consider the residual balance is to be an issue. So funds that are not returned to the client show bad bookkeeping and record maintenance. Um, so at the moment, the S I very much focus on risk and internal controls on and if there is is your valence sees because a law firm and the solicitor of the Cofer has not gone through looked at all the abandoned season, repaid him back to the car. It shows bad practice. And, yes, I really may take the view. This is the case with regard to residual balances, and there's not a proper control over them. What other areas of compliance they know control the either, So it could possibly be a lead into other areas on that show. Bad maintenance, High risk onda lack of internal control. Under the current rules, a 2000 different account rules Rule 1.2 e establishes that a firm must establish and maintain proper accounting systems on proper internal controls over those systems to ensure compliance with the rules. I'm not dealing appropriately with residual climb funds. At the end of a matter, it could be argued that there is a lack of internal control over the account system. The next issue which is really one of the big matters which the s are air focusing on Andi is a huge compliance matter Is solicitors acting as bankers, and this is covered by Rule 14.5. You must not prevalent banking facilities to recline can payments into and transfers and withdrawals from a client account must be in respect of instructions relating to an underlying transaction, all to a service forming part of your normal regulated activities. The S already believes that continuing to hold on to these client monies may fall into the category of acting as bankers where the underlying transaction is finished on dure. No longer acting for that client because a sale has gone through. Our divorce is complete. There is no reason for you to hold the client money. So you were there for writing effectively as a banker. There's also a huge focus at the moment on money laundering. Nes ira on def. Your continuing toehold client money. A question maybe elsewhere. Why every new transferred wise in the climate added chance of that money over to the client? Is there a reason why he doesn't want that money or she doesn't want that money to put in their name? But while the holding in the solicitor's name. So it's really important that one of the key issues off not keeping hold of current visit your balances is because off the banking issue in Rule 14.5, another issue is teeming and lading, or what's known is teaming allayed. When you hold small amounts of applying money, as we've looked at just before, they can add up to potentially a substantial sum. I'm since. So, in effect the SRE are concerned about is that a solicitor may use a residual balances to effectively pratap a deficit on the norm related client matter. So if you have one ledger where there's a shortfall on that ledger for particular, son and money has to be paid out in respect that ledger in the monies and on that ledger, because there's a short for if you have lots of residual balances, which adds up to a tidy sum, potentially, they could be used to offset against that short for one another client on if you have a on a mountain or constant amount of residual balance is really in your total client ledger that effectively could be split and spread around any short falls in the kind ledger in order to ensure that, um, that is no identify. So it's important not to keep a pool of money to offset against other climb balances whenever just gonna talk ruefully about the role of the s alright and just discussed that, um, it's important to remember what the job of the S r A is the job are there s our raise to regulate solicitors in their practices. Um, allay. Therefore, one to be noted off any residual balances because if there is a problem that they may decide they want to inquire into direct Or are you investing? Um, so I think the first thing that we need to establish is if there is a residual balance. How did the s already for a dance about? Because obviously a solicitor's practice is not necessarily just going to say, hold on a minute. I've got residual balance. Although that is one of the ways which they could find out about it. Because if a solicitor does have a residual balance and I haven't, don't they? Uh, then they may be under a duty to self report this to the S. All right. I'm such the principles of the firm. The Cofer and partners believe that it's a reportable breach on they reported as a self report. Then that is one way in which the S r. A will find out about it. The the other way is maybe this is probably the main way is through the accountant's report. So myself is an accountant. If I deem that the residual balances is a material bridge, I will therefore report it, put it in the accountants, we pull on, that goes to the S. All right, now this point, it may be worth mentioning about accountant's reports. Andi, how the s are a team that accountants would pull should be investigated or in quiet into or no prior to November 2000 and 15. Any accountant's report with any breach? I don't know. In my instance, there would be 90% off accountant's reports. We should be sent to the s all right, because at that point, any report which was qualified or unqualified, would go into the S. All right, I'm They stopped that in November 2015 because there was no material. Reality said so any balance, a residual balance, which is a bridge, would go into the accounts into the hall from November 2000. 15 years ago, I took the view that only qualified reports need to be sent to them. So if the report is unqualified, it then doesn't need to be sent to the S. All right, So if the accountant deans at a a residual balance is material in nature and therefore it's a piece of the report needs to be qualified. Then it goes to the S. All right, if he's unqualified and a residual balances are not dean material enough, there's one minute to three on dealing with it, then on the accountant's report does not go to the S. All right. I think this point just needs to be explored slightly because if the SRE receive a copy of the recall now, they look at them in much more scrutiny than they were before, because they forget that before they were getting every single re pool, qualified or unqualified and out of those qualified reports because the nature off the qualification was different. His nail. So it didn't matter whether any breach with material or no, they would be less selective with the the qualification on. Therefore, whether they would go into that firm and investigate. Hold on. Now, with the the current regime, if a report is no qualified, he doesn't go to the SRF benefits qualifying. It means it must be material breaches in the accountants eyes on. Therefore, it gets sent to the yes are A. This means that after the reports they get, they can be more selective with which firms they go in on a inquire into. Therefore, if a report goes in qualified due to residual balances, it must mean or we should mean that the accounts, um, has deemed the days residual balance sees are materially nature to that, the S R A. Should be made away with them. Now, this is there for up to the account of the mission, the whole other work, you know whether they think the breaches are material. No, But if the account does deem that residual balances on material due to the maybe the amount. So, as I was saying before, it was only 23 or four, they may say, Well, that as long as you do with those in the forthcoming year and they're not there next year, we won't right this as a material preach. But if there are tens twenties, thirties, 40 of them, then potentially there's more of a say we saw previously. A control issue on a May deem that that report needs to be qualified. So this is something which, if it's on the accountant's report, is really an issue that needs to be addressed on could cause concern. So this is probably the main reason what? How the SRE will find out about a material residual balance. They will find out about it on the accountant's report. Thea Other reason that on the SRE may find out about it is violate client themselves. So, for example, we saw before about situations where there may be a balance due to convey in seeing or divorced names names in them out there that the Cali and realizes that they're deposited a certain amount of money into the carpet cam. The case is finished all the fees dispersement. So whatever have been accounted for on a there therefore realize that there is a balance that is due to them. They themselves contact the solicitors and they don't We pay the money back to them. They made them feel that they should, as the regulator contact the s r A and say, hold on a minute re instructive X and Co LTD solicitors to conduct a matter. Um, at the end of it, there was to £300 whatever the valances left. But we've contacted this solicitor's firm and they haven't returned that money to us. They have the s ever made contact the solicitor firms. They had a complaint from from this client because the case that you've been working on this finished and you haven't returned the money back to these to the time and they ready for that for stopping inquiry on that basis, Um, the the other by every t s already, um, may find out about these balances is that they made starting Qari on the totally separate brooch, or matter or reason. Andi, Andi! During that investigation, which has nothing to do whatever with residual balances, they may come across these visit. Your balance is now the way they may do that is whenever the s already begin an inquiry, they normally ask for a kind account reconciliation at a particular day. No one else. For that reconciliation they expect to be provided a form matter listing off that particular month. So on they would have the bank account the cash book on the matter listing on a lot of systems. And what are you good? Can't system or dairies? When you have that particular matter, it will put someone call them when the last movement or the last activity waas on that matter Now if we hear reality 2000 and 19 and yes, sorry. Looking at something completely different. Eso you hold on a minute. There's a lot of balances here where it says have been no activity since 14 4015 16 17 or even further back Andi, they would say, Well, hold on. There's all these balances there. Nothing has been done. No work is being carried out and yet the money is still sitting incline account and therefore there is obviously a residual balance problem which needs addressing and the SRE may then ask further questions now the other way, which the S are able Find out about this. He's via what's called the application of charities, where it very there is a residual balance, which we will see shortly on bits over £500. The firm has Idan apply to the S r. A in order to be allowed to pay that money to charity. So obviously, in that situation, the S r A will be aware over the Vance. So next we didn't have to say OK, we've established that there is a client residual balance. How does the firm deal? We're clearing that, Um firstly, as I alluded to your own, I have to be established that that actually is a residual balance. Um on. And just as I said, if a bill could be legitimately raise and that should be done, But it should be remembered under the current rules that real 17.2 has to be adhered to in that role says that in order to transfer that man he a bill notification of cost is provided to decline. So the senators, the phone can't just say, Well, hold on a minute here. There's money there. There's £1000 I'm plus that £1200 sitting in the climate camp. Um, we know that we should have raised a bill to their serving. A chance for the money. You can't do that. You have to do, um, provide a notification of costs. Now the S. I raise that you have to provide the notification, of course, under rule 17.2. But hmrc war obviously have something to say about that as well. You can't just take money over sickness. You take the money over and it becomes the firm's money you office money and that there is a problem there if the bill has been range because there's potentially V 80 issues, income tax or corporation tax math issues as well. So it's important that if there is money that desiring to the firm and its not residual balance that that money is dealt with in the end the bills are raising the appropriate. So the first thing to say about the most obvious thing is about redid your balances. If that money is oh to the client and give that money back to the client Onda, how do you do that you would contact the client either by telephone by letter email, Um, and and you will returning that money back Teoh to the kind. How do you return that? Money can be in a variety of ways. You may write to the Italian Andi, send the check, Onda, or you may agree to pay the parent the balance directly to the clients. Um, bank, you can sending a check if you're not sure where the coin is away after Klein is still at the address they are can cause potentially some issues. Because, um, what can happen is if you send a load of checks out to the kind without making enquiries first. Andi, that kind no longer is at that address, you could end up with loads of reconcile ing back balances on your client bank. Camp Onda next could roll on, roll on, roll along because you got those reconcile ing checks which have never been cashed. So you've got a difference in your bank account. Your bank account trees are higher amount in your cash book because you've got lots of unreconciled check to residual balances that have not been banked by the kind. Um, it should be remembered that this is an important issue to the coming back to the banking issue. Rule 14 for five of the current rules were true looked at before that if the kind instructs the solicitor toe hold that money and says that I know the matters finished, but hang on to that money, it is not allow than its it. I don't apologize for repeating this. It's important that the decline is the solicitors are it is not allowed to hold money, even if the Colin says to do so has to be an underlying transaction. And if there is no underlying transaction in that balance and that money must be returned to recline. Okay, um, the serious sister should know take instructions going back to the the the banking issue to pay that money to 1/3 party. So if the you found out the client service defends up the client and says, Okay, is this £2000 do back to the the battalion? Um, this £2000 you back to you, Can I return it? Then they say, No. Can you pay it? Teoh. You know my my child's school or to another quality, the answer is no There the client, they're the ones who have been engaged with them. The money is coming back to you and I can't read it right. Going back to the money laundering matters which we looked at before. I can't reiterate how important that is. You can't just giving the money back to 1/3 party. You must return the money to the crime where the amount of the money is really small. Maybe less than three or £4. It could be appropriate. Teoh, pay the climb back in postage stamps to the most recent address held by the client so that his because a bit. So now again, have a quick look at finding the client. If the amount of residual balance is this, then £500 safety event of the balance is less than five. Found your eyes going. Rule 20.1 j becomes effective on this Allows a federal funds one kind up to £500 if rule 20.2 is compliant with. So therefore we didn't have to look at what this rule 2041 a 20.1 says redrew from the kind account in respect of client money. Under rule 20.1, subsection J may be made only where the amount held does not exceed £500 in relation to any one individual kind or trust matter on. And and this is subsection 20.2 a. You come on, I'm establish the identity identity of the owner of the money or might resemble the steps to do so, which is subsection a subjection, be of Rule 20.2 states that you make adequate attempts to ascertain a proper destination of the money and return it to the rightful owner unless the reasonable cost of doing so. I like to be excessive in relation to the amounts held and we've looked at that, um, previously see says, pay the funds to charity and that he's come on my, um, doing your residual balances where the client cannot be found or located on deeds of world 20.2 states that you have to record the steps taken in respect of rule 20.2 subsections eight to see which we have looked at just now on retain those records together with all relevant documentation, including receipts from a charity where applicable in accordance with rules 29.16 and 29.178 of the solicitor accounts Rules 2011 needs All the current rules on subsection e of 20.2 says they have to be percent a central register what you have done in a 14 through 29 point to to So if you're a residual Valentin under £500 you don't have the opportunity to pay to charity. If the reasonable attempts have been made Teoh Transplant find we will look shortly about what reason? By the times are in order to like a if you're residual balances over £500 Rule 20.1 cave. The current rules allows practitioners to redraw residual kind balances about £500 from the client account and donate the money to a charity on the Ritz and, um, authorization of the solicitor's regulation Re authority to the S. All right to the vanities. Over £500 you have to get permission from the S. R. A. In order to pay the money to charity. No money. There is off this room. Be a letter. There's a form where you were deployed to the s r a for the money to be. I paid to charity, and they grant the sophisticated law, not permission. The balances of us stayed under £500. The system may arresting any indemnity from the charity. Um, Andi, I would devise personally that whatever the amount on this is really a small amount on indemnity is got from the charity because the client then come back and say hello. Yeah, I know. You've been trying to contact me up in them. Ah, wait for a year traveling abroad. But I want my money back now. When you say I hope sorry, I paid the money to charity. If you want identity from the charity, neighbor will pay the money back to you. And then you can pay that money back to the kind of the quiet late, sir. Turns up the balance is always a slice under count. Try find your pounds s already make may anyway require an indemnity to be made from from the charity. But it is over £500. You know, it would be stupid melting an indemnity from the charity anyway. But but the S very many require in the divinity any right. One other point is ready with the residual balance is not going to charity but is being transferred to enough this account and it is a residual balance. The firm still has to make an application to the S. All right, so when the money is not being made to the charity A charity, Um, but it's going to the S all right, as it is over £500. Did your bandits on application to the S. R. A. Still needs to be made on this. Guidance is stated in the S R. A. Ethics guidance, withdrawal of residual balances, which was published on the 31st of October 2014. It is a few years old now, but it really does you on good details. On what Guidance? Yes, All right. Consider appropriate withdrawal balances to redraw with your vanities. So it's worth Googling SRE ethics. Guidant ritual of residual kind balances October 2000 and 40 on that will set out a lot of in bullet points. The issues that we have discussed in terms of, um redrawing client balances residual kind balances how to reap any them and house of Kate, right? And what to do if you can't call it so discussed this before, and I know it's looking a little more detail about reasonable attempts to identify the time. So what reasonable attempts do you have to do with the law firm? Solicit toe? Have to Do you know the to identify? Climb and again in the solicitor's code of contact guidance on the jeweler Climb Balances. They set out three things that may He's annoyed, you know, exhausted this but three things that they suggest that may help to establish reasonable attempts or whether reasonable attempts have been made reasonable steps to find a climb. They include the amount of the residual balance held, the client details that are available in respect of a balance on a cost. Associate it with, um, particular tracing method on. We will have a look at those No. So the SRE consider the following framework for locating a climb. And again, this is from there on guidance on the ritual of residual client latency, and they 0.0, they point to seven um seven. Matters which should be considered seven points should be concluded when whether you have taken reasonable steps to try and find the time. Firstly, the client's file now the client files should be Andi kept for a number of years, the six years after a matters finished. And that may be a climb file, depending on how long ago that matters. Finish will be either in the other, in the client's office or in the all cars. Andi, by looking at the client file, should have details of their address. Obviously, a client care letter is written, so the clients that should have their address contact, details, telephone number, email, address all those and that is the most basic place to start would be declined. Five. Secondly, an Internet search. Googling new client Sing with Deacon. Finding that way Third, maybe slightly more fashion and Googling and director enquiries on phoning up directory enquiries. Seeing or using directions in crop is online is, and maybe a Google, such as number two would be trying to find a client that way. Four. Maybe looking the electoral register, I'm trying Teoh find a client why they should already start seeing what they last knowing address. WAAS five is directory, so Department of Work and Pensions trying to contact the Department of Work and pensions, and they have a letter forwarding service so you can contact the department of work and French in saying I tried to contact this cry and, um, last known address the hive got There's no, they're not living there. Did I have a letter forwarding service on Do no Client will be used to listen to clients. You have used that in order to contact their their own clients. Um, six is companies house you can call you could look at the beater Services is now free service on companies house online. You can such offices of the company, so you can type in the name, see if you can find the client that way. Lastly, seven never after may have never seen this being used before is a newspaper advert Isman, who were using a tracing agent. Now, obviously the male of the residual red have to be quite considerable for the costs to be worth the whole of, you know, plating newspaper advertisement or using a tracing engine. As I said, I've never seen this before and everything and I break in a favor saying wanted client residual balance are being please contact X limited to this sitters who were holding your money and we will return to you. But that is well, I've considered the seven of the seven steps. Um, yes. Alright, Use this girl Agents, um on and so going on from this and all of these seven points and I reiterated again the costs and lightly success of these methods should be considered. So if the likelihood of success of putting a newspaper advert Isman is going to be registered Lee small than don't duri it's silly to Derek, um on it should be made clear at this point as well that solicitors have no authority to take out of pocket expenses from the from the client account. So you can't say whether is gonna cost me £200 Teoh to place an advert in the newspaper. I'm gonna take me out of the money which is sitting as because of your credit card account. You cannot do on DSO if expenses are deducted the system. The solicitor remains responsible to the client for accounting notes. An important issue. Two very mine. So everything was spoken about. Up to this point has been on the current rules. The sister Camels 2000 and 11. Um, but there are new rules coming in, and it's just being this confirmed in the last week. A law speak of filming this webinar riches in March 2019 that the news Mrs Accountable 2000 and 19 air coming out on the 25th of November 2019. So from the train tickets in November this year, your account's rules come into effect. And they replace the current account rules on the current account rules quite lengthy by prescriptive and have been in for a number of years. And the new rules are coming out much shorter. Has any 30 in a rolls, so it's needs to be established. What the situation is as far as residual balances are concerned. Under the new rules, Andi, considering there are only 13 rules the fact that residual balances are mentioned I'm is an indication of hell. Seriously, the s already consider Is it your balances? So under the new rules, which you can again find online and rule 2.5 of the new rules states the following you ensure that client money is returned promptly to the client or third polity, for whom the money is held as soon as there is no longer any proper reason, toehold those funds. So the key phrase within that is therefore proper reason. How their individual firms know whether there is a proper reason to still hold kind funds. Um, again, that there will be common tria and see My God, it's on this book. But from what I would say is that as long as you are for the advice that we've been through so far in this weapon about, you know, trying to an underlying transaction, there's no underlying transaction and the reason to continues to hold the client money. Then that money should be returned and you take a reasonable steps to return. That is then I would say that you you are complying with the new roles in terms of religion balances and and that as long as there isn't a proper reason for holding the money in the money he's returned in protecting the solicitor will. The phone has an issue, but with a lot of the things in the new rules, the the terms that are used or less prescriptive, less detailed, and so it leaves a lot more subjectivity, which is understand young mother the aim of the rules to have a lot more self governance for solicitor firms. Um, then that then the result with current rules. But I think if you are doing everything we spoken about within this member now, you should the following. But there are a couple of differences, which I just want Teoh raise Now, under the current account, rules on Rule 14.4 states that if you're holding client money a positional client money, um, you have to notify the clients at least once every 12 months. I'm until then the reason why you are holding the money under the current under the new rules. Sorry, and there's no such go ahead. And so roles. So it's no included it'll. So basically what he's saying is you should be holding the client money. Residual balance or no, you can just write to the kindness. I'm holding this money because so if the money is not needed and it shouldn't be there, it should be returned to the client. There's none of this writing to the climb. 123 12 months, and it's important established that is now no longer, um, included in your rope. Also, there were no mention or there is no mention in the new rules of charities. There was no mention of charities, so everything was she spoken about before with vanities over £500 under £500 paying the money to charity. There was no and definition explanation of any of the under under the New World. So my advice, Azat said before, is to do what you're doing under the current rules in regard to that, because it's specific, Um, notification off that under the under the new rules. Um, So what I would envisage happening is an approach very similar to to to one that is happening. At the moment, perhaps each row may have some kind of policy of written policy or an explanation how they're teething with did your balances. So there is a firm my policy to say, OK, you might have about £500. You made this L A. That now you're going to pay every charity back. So every residual balance back to the client and you're gonna take steps. 12345 In order to do that, if you call, then, um, locate the client Using those particular steps, we may use a seven step on seven ways of taking reasonable steps to find a condom. Just spoken about. If you can't, then you pay the money. Charity in your hand down was a written policy, and I don't think he s away Would have any objections. So they're making your reason for the state steps to find a climb. You've got the internal controls. You've got the risk assessment all in place. I think that that is fine. And but as I say, there may be further, um, s sorry guidance on this, but certainly if you are undertaking the current URLs regime, which we spent the majority of free but now going through you should be fine, um, subject to, as I say, Rule 40 point for which is not detailed a toll in the new goals, having their proper reason hold the funds on writing time every 12 months. So we're coming towards the end now. We're just gonna have a look. You've done everything. You've explained everything. So how do you make sure that you do have the using residual balances and you're going to all the steps? It's spoken about today. How do you make sure you don't get into same position again? Um, firstly, ensure that there were proper return controls in place for checking residual bad agencies to make sure Readiness ready. As I said before you doing your reconciliations and you see how all the balances or partners or co furs, whoever the financing going through all the matters. Looking to see that there is it. Abandon Cesaire, making sure that there's some kind of trigger assumed as a matter he's finished that money gets straight back play to the client and therefore this no way of residual balances occurring. Um, a za first form of defense. Ondas a second former defense, if you know, is it your balances there? Making sure time scan of that religion bands being paid back to the line is minimal. That's really important. So, as I said, checking when you're doing your reconciliations that we did, your balances don't occur so we can come into the next month that with your band is still not sitting. I am, thirdly, ensuring no balances related to Rafa's monies. If it Rebalances there on its do, it does relate to reveal raise that bill Comply Middle 17.2 of the existing rules by sending a notification of costs. Contacting Nicolien. Repairing the money assumes the matter finished. Andi, therefore, with initial efforts to contact the kind, fail making all reasonable attempts, making a reasonable steps to try and contact the client. We have gone through those in quite a lot of detail during this weapon. So if the client cannot be located, remember they started this. The amount of individual balance under the current rules is less than more or less than £500. All their £500 of testing £500 paid the money to charity. If you can't find the climb, you made attempts to do so on accurately record the steps taken, um, recall the details in the Central Register under Rule 29 point to to it's a balance is over £500 sure authorization from the S. R. A is received before making a payment to charity. It's really important to make sure that you do that. I'm ensure that an indemnity to see by the charity the normal charity that yes, already like him the funds to go to use this list of benevolent planned doesn't necessarily have to be the case that your during that you send it to that charity. A charity of your choice. Um, most importantly, as I say in every ribbon intellectual seminar, the key to compliance through a solicitor Berry's record keeping, having Nicorette recordkeeping, internal controls and risk management. If you have that, then you won't fail with us. Always having a breach of the residual balances is concerned because you were complied. We would have complied with it because if you go to a proper internal controls on the proper checks, the the proper um Island's checks will be there to make sure that the actual foul of the rules I'm ensure you keep up today with the new SRH rules and guidance on Yes, sorry will probably beating out in November. There'll be a lot of commentary, a lot of guidance coming on the new rule, especially as they are much, much shorter than Ignace. And the reason for that is, as I have said, and this is a separate wrapping on the side. Andi itself, you know, self review. Um, you know, some things in this. It's a much more subject to I'm self governance, Andi, As long as the solicitor in the firm of being sensible in their approach. Um, I deal with everything we discussed today. Mission. True foul of residual about bridge. So in conclusion, just don't mention the Southern Michelle called too. Okay? So if there are any issues that, um and that you feel that's, um, come to light on dure not sure about or this something rich, you know, 100% sure, whether these a residual balances Nor is it your balance what to do with the best. The best point of contact is the SRE ethics help. I'm on a number for them. ISO 370606 to 577 He's over 370606 to 577 and they will answer your phone. You don't give advice. Tell me they get they don't give advice on matters or subjective matters on law, but they will give you some guidance as to what the rule states. They won't advise you on what to do, but they will state and advise on what the the actual rules saying they will point you to the specific rule in question or sister that they are. They are that they only existence from nine o'clock to fire because on Mondays to Friday
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