Background
The Solicitors Regulation Authority (SRA) ran a webinar on Thursday 11 December 2025 as an update on its review of consumer protection measures. That webinar launched its latest consultation on protecting client monies which is due to run from 11 December 2025 until 20 February 2026. This consultation focuses on strengthening safeguards in three key areas: the reporting accountant regime, checks and balances within law firms, and improving oversight of firms whose profiles change significantly. The third area (oversight of changing firm profiles) will not be included in this consultation but is scheduled for later in 2026.
Reporting Accountant Regime
The SRA has is consulting on three different possibilities:
- Requiring all reports to be submitted, not just qualified ones,
- Introducing an annual declaration from the reporting accountant (including accountants submitting reports directly to the SRA, rather than via the firm)
- Firms themselves could also be required to make a mandatory annual declaration confirming compliance.
The SRA further noted that they had conducted spot checks on around 600 firms back in January 2025. During that check they found a number of firms had either not obtained a report on client funds when one was required, had submitted the report late or had not submitted qualified reports.
The SRA is proposing to also look at what support they are providing reporting accountants. They will look at additional guidance, which may include the requirement to obtain bank letters to verify client balances and confirm what client accounts are open.
The consultation also suggests introducing fixed financial penalties for late or incomplete declarations.
The SRA has confirmed it will not proceed with removing exemptions for firms who hold lower levels of client money or undertake purely Legal Aid work, nor are they looking to introduce mandatory rotation of reporting accountants at this time.
Checks and Balances in Law Firms
The SRA has expressed concern about unilateral decision-making in firms where one individual holds both the Compliance Officer for Finance and Administration (COFA) and Compliance Officer for Legal Practice (COLP) roles. To address this, the consultation proposes a threshold for separating these roles for firms with turnover exceeding £600,000 and client money over £500,000.
For sole practitioners that fall below the turnover threshold but exceed the client money threshold, the proposal allows them to be the COLP but prohibits them from holding the COFA role.
While the SRA does not yet have a formal framework for monitoring compliance with these requirements, it notes that these officers are authorised individuals, so checks could be carried out using existing data.
Improving Oversight of Firms Changing Profile
The SRA plans to consult in late 2026 on measures to improve oversight when firms undergo significant changes, such as mergers, acquisitions, or large-scale transfers of staff and matters. The aim is to develop a systematic approach to collecting and acting on data, without necessarily intervening in every case.
Future proposals are expected to include initial risk indicators, notification requirements for firms, and risk-based scrutiny arrangements. This reflects the SRA’s growing concern about firm closures and the need to manage risks when systems, people, and client matters are transferred.
Further Consultations
The webinar also made reference to potential future discussions arising from the Ministry of Justice’s roundtable on using client interest as a levy to support access to justice but confirmed it isn’t something they’re considering at this time.
We would strongly encourage all firms to interact with the ILFM, their reporting accountants, or the SRA directly with respect to responding to this consultation.
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