News release
SRA consults on new proposals to strengthen safeguards for client money
11 December 2025
As part of our ongoing review of consumer protection arrangements in the legal sector, we are consulting on further proposals to strengthen protections for the money consumers deposit with law firms.
The proposals focus on key potential changes to the existing regulatory regime. These have been informed by feedback received from the legal profession, public and wider stakeholders, as well as our own work.
In particular, the consultation outlines potential changes to approaches to firms' obligations around accountants reports and the division of regulatory roles within firms.
Aileen Armstrong, the SRA's Executive Director - Strategy, Innovation and External Affairs, said: 'We know that the vast majority of firms act responsibly. At the same time, we have seen issues in the market - as well as cases where client money has been lost - which highlight that we all need to take further action to strengthen the safeguards for clients and their money.
'Our aim is to deliver effective regulation whilst protecting consumers and supporting a dynamic market for legal services.
'The valuable feedback that we received in the first consultation has influenced our thinking and allowed us to refine our proposals. For example, we have listened to concerns regarding the potential cost and burden of some options, and have taken a risk-based approach that acknowledges differences in firms, both in terms of the amount of client money held and the impact that wider failures can have.
'We're keen for this collaboration to continue as we consult on detailed proposals over the next ten weeks.'
We have also set out our thinking on how to deal with the risks related to significant changes in a firm's profile, for example, following a sale, merger or acquisition. We are currently developing proposals to identify and monitor firms that may present greater risks, based on stakeholder feedback and insights from our own investigations and research.
Beyond these changes, we will explore fundamental, long-term questions about whether the current model of solicitors holding client money, and our approach to funding our compensation scheme, remain fit for purpose. This is as well looking at wider issues about how the regulatory compliance framework operates.
It will consider these issues further after the issues covered in the current consultation have been addressed.
Proposed changes to the rules on accountants' reports
The information provided in accountants' reports can help to identify firms that are placing client money at risk, allowing the regulator to take appropriate action. Our recent spot-check exercise identified significant non-compliance with our rules on accountants' reports. The proposals in the latest consultation are designed to enhance oversight without placing unnecessary burden on firms. They include:
- the introduction of a mandatory annual declaration that all firms must complete, to provide a record of compliance
- a requirement to submit all accountants' reports, both qualified and unqualified, providing us with improved data, which will assist us in identifying issues and allow us to tailor our future approach to data collection
- a requirement that reporting accountants submit reports directly to us in future, to give increased assurance
- the introduction of fixed financial penalties to firms who submit late or provide incomplete declarations, to drive compliance.
Proposed changes to compliance officer arrangements
We are proposing changes to address risks relating to a single individual with significant power and control within a firm also occupying the key regulatory compliance roles. A situation which can potentially negate the safeguarding, checks and balances that the compliance roles are designed to deliver.
Proposals on this issue have been refined to make sure while strengthening safeguards they are proportionate, based on feedback from law firms during the earlier round of consultation. To this end, we are proposing risk-based thresholds for all firms, an exemption for some sole practitioners, and giving them time to make the changes.
Alongside the consultation, we have also published the findings from two recent thematic reviews. The first looks at the role of compliance officers, and the second why law firms might adopt certain growth strategies, how they are executed in practice and challenges that my result in harmful outcomes if not addressed effectively.
The consultation opens on Thursday 11 December 2025 and runs for 10 weeks, closing at 12.00 on Friday 20 February 2026. We will be holding a range of engagement events throughout the consultation period, which began with a live webinar on 11 December.
When the consultation has ended, our Board will consider all feedback before deciding on any final decisions or changes. Any changes to rules will then be subject to an application to the Legal Services Board.