Rule 1 Application
1.1 These rules apply to authorised bodies, their managers and employees.
1.2 The authorised body's managers are jointly and severally responsible for compliance by the authorised
body, its managers and employees with these rules.
Rule 2 Client money
2.1 "Client money" is money held or received by you:
(a) relating to regulated services delivered by you to a client;
(b) on behalf of a third-party e.g. as agent or stakeholder or held to order;
(d)in respect of your fees and any unpaid disbursements if held or received prior to delivery of a bill for the
same.
2.1d – Any money received in respect of fees/disbursements not yet paid (client money) until bill has been sent
Rule 4 Client money must be kept separate
4.1 You keep client money separate from money belonging to the authorised body
4.2 You ensure that you allocate promptly any funds from mixed payments you receive to the correct client
account or business account.
Rule 3 Client (bank) Account
3.1 You only maintain a client account at a branch (or the head office) of a bank or a building society in
England and Wales.
3.2 You ensure that the name of any client account includes:
(a) the name of the authorised body; and
(b) the word "client" to distinguish it from any other type of account held or operated by the authorised body.
3.3 YOU MUST NOT USE A CLIENT ACCOUNT TO PROVIDE BANKING FACILITIES TO CLIENTS OR
THIRD PARTIES. Payments into, and transfers or withdrawals from a client account must be in respect of the
delivery by you of regulated services. Must not provide banking facilities for services you are providing.
Rule 2 Client money
2.3 You ensure that client money is paid promptly into a client account (with some exceptions). See 9.7 -p97
2.4 You ensure that client money is available on demand unless alternative agreed in writing.
2.5 You ensure that client money is returned promptly to the client, or the third party for whom the money is
held, as soon as there is no longer any proper reason to hold those funds
Rule 5 Withdrawals from client account
5.1 You only withdraw client money from a client account:
(a) for the purpose for which it is being held; or
(b) following receipt of instructions from the client;
5.3 You only withdraw client money from a client account if sufficient funds are held on behalf of that specific
client or third party to make the payment.
Paying the firm’s fees from client money – Rule 4.3
Where you are holding client money and some or all of that money will be used to pay your costs:
(a) you must give a bill of costs, or other written notification of the costs incurred, to the client or the paying
party;
(b) this must be done before you transfer any client money from a client account to make the payment; and
(c) any such payment must be for the specific sum identified in the bill of costs, or other written notification of
the costs incurred, and covered by the amount held for the particular client or third party
Rule 6 – Duty to correct breaches upon discovery
You correct any breaches of these rules promptly upon discovery. Any money improperly withheld or
withdrawn from a client account must be immediately paid into the account or replaced as appropriate
Rule 7:Payment of Interest
7.1 You account to clients or third parties for a fair sum of interest on any client money held by you on their
behalf.
7.2 With client’s informed consent, you may come to another arrangement regarding interest to be paid.
Client accounting systems and controls – Rule 8.1
(a) Keep a record of each client’s ledger, showing:
Payments and receipts of client money, on the client side of the client ledger;
All receipts and payments which are not client money, and bills of costs, on the business side of the client
ledger.
Client accounting systems and controls – Rule 8.1
Keep records to:
(b) maintain a list of all the balances shown by the client ledger accounts of the liabilities to clients; running
balance.
(c) provide a cash book showing a running total of all transactions through client accounts held or operated by
you
Recording receipts of money
When making an entry first decide whether or not it is a receipt of client money, rule 2.1
Next make debit and credit entries (next slide)
Recording receipts of money
Receipts of non-client money :-
DR – CASH ACCOUNT
Business side of ledger
CR – CLIENT LEDGER
Receipts of client money :-
DR – CASH ACCOUNT
Client side of ledger
CR – CLIENT LEDGER
Recording payments of money
Payment from Business A/C or Client A/C?
Payments of non-client money
CR - CASH ACCOUNT
Business side of ledger
DR - CLIENT LEDGER
Payments of client money
CR - CASH ACCOUNT
Client side of ledger
DR - CLIENT LEDGER
Profit Costs
When the firm sends a bill to the client, record fee charged and VAT separately:
DR - CLIENT LEDGER(Amount of fee) – Business side
CR - PROFIT COSTS ACCOUNT (Amount of fee)
2. DR - CLIENT LEDGER(Amount of VAT)– Business side
CR - VAT ACCOUNT (HMRC) (Amount of VAT)
