ACCA did not respond to the SRA’s consultation, which closed on 18 June 2014. The reasons for this decision included the uncertainty regarding the alternative procedures that the SRA would consider implementing, and the complexity of balancing the objective of reducing regulatory burdens with suitable protection of the public in light of such uncertainty.

ACCA works in the public interest, promoting principles-based approaches to regulation.  We strongly support the objectives of targeted, proportionate regulation, and welcome the removal of unnecessary regulatory burdens. ACCA’s programme of practice monitoring itself includes a risk-based approach which enables ACCA to target certificate holders identified as posing high risks.  Our monitoring procedures also focus on assisting firms to improve, in the interests of the clients and the public, rather than penalising them.

A blanket requirement for all firms holding client money to submit an accountant’s report annually probably gives rise to avoidable costs that are disproportionate to the benefits provided. However, we urge caution by the SRA in implementing change, as it is difficult to measure the deterrent effect of having regular independent reviews.  Of course, the current system should not be dismantled without having (and being seen to have) suitable safeguards in place.  We would welcome further engagement with the SRA in order to gain a better understanding of the proposals.

The requirement of an accountant’s report on an annual cycle may appear to many to be disproportionately onerous, and we would support a risk-based approach. The challenge is to replace the requirement for an annual accountant’s report with a system that is more cost effective, while retaining the benefits of independent oversight and appropriate accountability.  Different types of business performed by solicitors, and the amounts of clients’ money they hold are important risk factors. An effective risk-based approach may even facilitate a more robust approach in respect of some of those firms identified as high risk.

A risk-based approach to requiring accountants’ reports must be timely, and so will need to be largely based on the ‘current data sources’ referred to in paragraph 19 of the consultation, rather than observations or reports of historical failings.  We are currently unaware of the criteria within the SRA’s current data sources that the SRA may use to assess risk, and we would welcome more information in this respect.

The public will perceive a great difference between the level of assurance provided by an independent accountant’s report and that provided by certification by the firm’s COFA. Nevertheless, we would support annual declarations by a firm’s COFA in order to make them accountable during periods in which there is no independent scrutiny of the firm.

Transparent and proportionate regulation encourages trust in a profession.  Conversely, there is a risk that any consumer detriment from a substantial loss of client money following changes to the current system may be accompanied by reputational damage to, and loss of confidence in, the legal profession. This would, in turn, harm the public interest.

As already stated, ACCA is keen to engage with the SRA on this subject, with a view to gaining a better understanding of the proposed changes and offering the SRA the benefit of ACCA’s experience in monitoring compliance.