The Solicitors Regulation Authority (SRA) is launching a public consultation on potential changes to how and when law firms handle client money.

The regulator said it will look at whether changes are needed in terms of the “controls, checks and balances firms are obliged to have in place to protect money held in client accounts”.

One of the most striking findings mentioned by the SRA was the issue of whether it was “still necessary or desirable for firms to hold client money as widely as currently the case, or at all”.

Other areas which the consultation will cover, the SRA said, include contributions toward the body’s compensation fund— such as potentially changing the 50/50 split between individuals and firms funding the scheme to a 70/30 ratio.

The SRA added that longer term, it will also ask questions such as whether contributions should be varied based on considerations such as size of firm, areas of law or other risk factors.

The SRA launched a consumer protection review in February 2024—and has so far held focus groups, roundtables, events and direct conversations, involving more than 200 members of the public, profession and wider groups.

Paul Philip, the SRA’s CEO, commented: “We are grateful to everyone in the public, profession and elsewhere who took the time to share their views.”

He added: “What we heard has confirmed that safeguarding consumer’s money must be the priority. There was also widespread support for the vital role played by the SRA Compensation Fund, while identifying questions about how the scheme should be funded in the future and how we can make sure of its overall sustainability.”

The issue of law firms holding client money has been in the spotlight partly as a result of Axiom Ince’s collapse last year, after a £66 million hole was discovered in the firm's client account.

Last month, the U.K.'s Legal Services Board initiated 'enforcement action' against the SRA over its handling of the matter.

The LSB concluded that the SRA "did not act adequately, effectively and efficiently" in the lead-up to Axiom Ince's demise, following which approximately 1,400 people lost their jobs.