Legal firms given deadline to clear historic client balances

Solicitors' practices in Scotland have been warned 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.

Any solicitor with questions on this matter should contact the Society's Financial Compliance team.