Law & Regulation
Solicitors Accounts Regulations by Eamonn Maguire
Solicitors Accounts Regulations
by Eamonn Maguire
The new Solicitors Accounts Regulations (S.I. No. 118/2023) came into operation on 1 July 2023. This new suite of regulations replaced the Solicitors Accounts Regulations 2014. The Law Society has a responsibility to: 1) protect the public, 2) protect clients’ interests, specifically clients’ moneys, 3) protect the reputation of the legal profession, 4) minimise claims on the Law Society’s Compensation Fund and 5) protect solicitors’ client accounts from becoming a gateway for proceeds of crime. As such, the accounts regulations need to be specific in their purpose and broad in their application.
The last fundamental review of the Solicitors Accounts Regulations took place in the late 90s and culminated in the adoption of the Solicitors Accounts Regulations 2001. The Solicitors Accounts Regulations 2014, which directly preceded the current regime, were a consolidation of the 2001 regulations and a number of amending statutory instruments issued during the intervening period.
Review of regulatory regime
In 2019, the Law Society’s Regulation of Practice Committee identified that the regulations required review and, where appropriate, would benefit from being updated.

A working group was established to identify amendments to the regulations which would copper-fasten the Law Society’s key responsibilities of protecting client moneys and the Law Society’s Compensation Fund. Such protections remain the primary purpose of all the accounting regulations mandated by the Solicitors Acts 1954 to 2015.

When approaching the task of updating the accounting regulations, the review group combined the insights gained from previous reviews with the lived, real world, experiences of the Law Society’s team of investigating accountants and its Regulation of Practice Committee. Through such an approach, specific regulations were identified as being either unclear or limited in their reach. In particular, it emerged that the following matters needed to be addressed:

  • inactive client ledger balances in solicitors’ client accounts
  • opening bank accounts in respect of estates
  • increased internal controls, such as regular client balancing statements, authorised signatories and a more active role for the Compliance Partner / Sole Practitioner in ensuring the regulations were complied with
  • practices leading to deficits such as round sum withdrawals and borrowing from clients
  • clarity around the definition of client moneys in relation to personal transactions and the use of client accounts when no legal service was provided
  • changes in recent legislation such as the Legal Services Regulation Act 2015, in particular in relation to solicitors’ duties regarding legal costs
  • reporting of deficits to the Law Society by solicitors and reporting accountants
  • earlier submission of accountants reports and transparency around the removal of reporting accountants
  • testing of transactions by reporting accountants
  • issues arising from Law Society’s inspections
Consultative Committee of Accountancy Bodies Ireland
It was also noted that a key component of the Solicitors Accounts Regulations was the involvement of reporting accountants in reporting breaches of the regulations to the Law Society. In drafting the amended regulations, detailed consultations were held with the Consultative Committee of Accountancy Bodies Ireland.
Key changes
Following such careful review and consultation, the Law Society welcomed the introduction of the new Solicitors Accounts Regulations in July 2023. The key changes to the Solicitors Accounts Regulations as they impact Solicitors, Reporting Accountants and Law Society investigations, are as follows:
  • it is no longer a requirement to open a separate bank account where a solicitor is acting as personal representative of an estate
  • balancing statements are to be prepared at quarterly intervals in respect of client account transactions
  • client ledger balances are to be reviewed for undue or unnecessary delays in discharging client moneys and immediate action taken to clear same, where appropriate
  • a listing of client ledger balances outstanding two years or more is to be prepared at the accounting date and furnished to the Law Society by the Reporting Accountant
  • clients are to be furnished with a statement of account in respect of each matter
  • client moneys are to be returned to clients when the legal service is completed
  • evidence of payments in cash is to include the witnessed signature of the recipient
  • transfers of funds from client to office account are to be related to specific clients
  • the Law Society is to be notified of a deficit that cannot be rectified within seven days of the deficit coming to the solicitor’s attention
  • cheque signatories or transaction authorisers on client account are to include a solicitor who is a partner or a sole practitioner with a current practicing certificate
  • register of undertakings and of funds held on joint deposit are to be maintained
  • a file of documents or record in respect of electronic transfers to be maintained
  • compliance partner is to provide specific confirmation to the Law Society, through the Form of Acknowledgement, of compliance with the regulations in respect of balancing statements, balances outstanding two years or more, review of client ledger balances for undue or unnecessary delays and back up of computerised accounting systems
  • client accounts are not to be used for the purpose of borrowing from, lending to, or organising loans between, clients
  • client accounts are not to be used to hold moneys other than in respect of legal services provided, or to be provided
  • client accounts are not to be used to hold, or to pass through, solicitors’ personal moneys
  • responsibility for breach of the regulations extends to the solicitor responsible for the actual breach, and not just the principal or partners of the firm
Reporting Accountants
  • reporting accountant’s reports are to be filed within 5 months of the accounting date
  • reporting accountant to test check postings before and after accounting date
  • reporting accounts to test check that withdrawals of fees are notified to the clients
  • reporting accountants may report, directly to the Law Society, an opinion or a suspicion of a deficit, rather than waiting to submit annual report
  • closing reporting accountant’s reports are to be filed within 3 months of cessation
  • reasons are to be provided for withdrawal of approval of a Reporting Accountant
Law Society Investigations
  • investigations may be carried out away from the solicitor’s practice
  • The Law Society may instruct an authorised person to communicate with such persons and seek such information and documentation as the Law Society considers necessary
Professional misconduct
The misappropriation and mismanagement of client monies has serious consequences for solicitors, including restrictions placed on, or suspension of, a solicitor’s practising certificate, and could potentially lead to a solicitor being struck-off the Roll of Solicitors.

The Law Society and its Regulation of Practice Committee treats all financial regulatory issues with the utmost seriousness. Any breach of the Solicitors Accounts Regulations is rigorously investigated, with the welfare of the client and the profession of paramount concern.

All areas of the professional services sector have had to respond to the imposition of increasingly onerous professional regulation and, with the Legal Services Regulatory Authority fully operational, the Society’s regulatory functions must reflect this changed regulatory landscape while remaining dynamic and robust. It was for this reason that an update to the Solicitors Accounts Regulations was undisputedly necessary for:

  1. maintaining and improving the quality of the Law Society’s systems for seeking to safeguard client money, thereby reducing risk to the Compensation Fund
  2. the protection of both clients of solicitors and the profession generally, and
  3. protecting the reputation of the profession

On the commencement of the new regulations, the President of the Law Society of Ireland, Maura Derivan, said: “adherence to these regulations not only increases protection for client moneys but also more clearly responds to the modern-day realities of running a practice”.

Please note, this article is not a statement of law. For a complete understanding of the updated Solicitors Accounts Regulations, it is important to read the regulations fully: (S.I. No. 118/2023)

Eamonn Maguire headshot
Eamonn Maguire
Regulatory Communications Manager (and secretary to the Guidance and Ethics Committee) Law Society of Ireland