Last December, the SRA released its consultation on ‘protecting client money’, with a closing date for responses of 20 February 2026. Last month, the SRA published the findings from the consultation, together with a list of changes that they plan to make, which includes the mandatory submission of Accountant’s Reports for all non-exempt firms holding client money, and separation of COLP and COFA roles from unilateral decision makers.
Our thoughts on the announcements
At the time the consultation was released, the SRA had already identified a notable level of non-compliance with the existing rules – around 10% of firms inspected had failed to obtain an Accountant’s Report. Against that backdrop, it is perhaps unsurprising that mandatory submission has now been introduced. More broadly, it reflects a shift towards greater visibility and earlier intervention, rather than relying on issues only coming to light when something has gone wrong.
One positive outcome is that the SRA has retained the current exemption thresholds. However, firms will now need to complete an annual declaration confirming whether they are exempt or have complied with the reporting requirements. While this is intended to strengthen accountability, it does introduce another administrative step, and the effectiveness of self-certification will depend on how robustly it is enforced in practice.
The requirement for reporting accountants to submit reports directly is another significant change. Although responsibility ultimately remains with the law firm, this does represent a shift in process. At Hazlewoods, we have always submitted reports on behalf of our clients, but the current mySRA process is far from straightforward. With many firms sharing common filing deadlines (typically September or October) this creates a bottleneck for larger accountancy firms handling multiple submissions, and equally a challenge for smaller firms that may be unfamiliar with the system.
In our consultation response, we highlighted the importance of making both the declaration and submission processes as simple and efficient as possible. Based on current systems, there is still some way to go.
The more debatable proposals relate to governance. The SRA is proceeding with the separation of COLP and COFA roles in higher-risk firms. We broadly supported this for larger practices where governance structures are morecomplex and the risks associated with concentration of responsibility are greater.
It is not entirely clear how or if the changes will impact firms. In a document published on the SRA’s website last month, the SRA noted that “Our proposals offer flexibility for firms to choose how they respond to the new rules. We do not propose to set prescriptive criteria around the types of individuals who could not hold compliance roles under the new rules. It is up to firms to determine the impact of the rules in their particular circumstances. Nor are we prescribing how firms comply with the new rules. Firms can decide the best arrangements to suit their business. They can choose to reassign the compliance roles, or to adjust their governance structure, to change their arrangements for decision making. That approach could mean existing role holders remain eligible under the new rules.
The SRA has decided to use a turnover threshold of £600,000. To put this into context, during the 2024-2025 practising certificate renewal reporting timeframe, 3,525 firms (39%) operated with an annual turnover of more than £600k. This threshold would exclude a significant proportion of single owner practices, but there are still many firms who will exceed this threshold and struggle to separate the roles effectively. The role of COFA, with the risk attached, is unlikely to be appealing to an employee and if an employee did accept the position, would they be willing and able to contradict their boss if necessary?
It is reassuring, however, that the client money threshold has been increased to £2 million. The original £500,000 proposal would have captured the majority of smaller firms. For example, an individual conveyancer operating in London, where the average house price in London is £559,000-£661,000, could exceed the original threshold with just one transaction, or a private client lawyer could exceed £500,000 with just a couple of ongoing clients. In those scenarios, the cost of appointing an external COFA, which is often in the region of £5,000 per month, could easily exceed the fees generated.
The changes may mean that we see a whole new tranche of COFAs in the near future who will need guidance and support. We’ll be offering it for our clients, but it will be interesting to see what (if any!) additional resources are going to be provided by the SRA.
