The Solicitors Regulation Authority (SRA) has today launched a consultation on proposed new notification requirements for law firms, designed to help the regulator identify potential risks earlier and ‘strengthen protections for client money’.
Law firms may have to pre-warn the regulator they are planning a merger as part of the new rules around early detection of potential issues in fast-growing firms.
The consultation forms part of a wider programme of regulatory reform focused on improving transparency, enhancing oversight and enabling earlier intervention where there may be a risk of consumer harm.
Under the proposals, firms would be required to notify the SRA when they begin holding or receiving client money, as well as when they merge with, or acquire, another law firm.
The regulator says the changes would provide greater visibility of developments that could indicate an increased risk to clients, enabling it to take a more proactive approach to supervision and risk management.
Aileen Armstrong, Executive Director of Strategy and Policy at the SRA, said:
“Our focus is on gaining earlier visibility of potential risk. Having the right information at the right time is important to help us to proactively identify risks earlier and, if necessary, act on them to prevent harm, including the loss of client money.
“The proposed new notification requirements will help set the foundation for this. We are initially targeting two areas where stakeholders agree there should be greater visibility of changes in real time: law firms acquiring other firms and firms starting to hold client money. We urge stakeholders to engage with us on our proposals for achieving this.”
The consultation follows the introduction of new rules announced earlier this month requiring all firms that hold client money to submit accountants’ reports to the SRA. The regulator has also introduced measures preventing individuals who are responsible for significant management decisions within a firm from simultaneously acting as Compliance Officer for Legal Practice (COLP) and Compliance Officer for Finance and Administration (COFA).
The SRA says recent high-profile cases involving firms including PM Law and Axiom Ince have highlighted the importance of identifying emerging risks earlier, particularly in relation to merger and acquisition activity and the handling of client funds.
The proposals also align with the regulator’s wider ambition to develop a more intelligence-led approach to regulation. In its draft 2026/27 business plan, the SRA outlines plans to strengthen its ability to identify and respond to emerging risks, while continuing to review whether existing arrangements for firms holding client money provide sufficient protection for consumers.
The regulator has also indicated it will consider whether senior leaders within firms should carry clearer personal responsibility for safeguarding client money and managing associated risks.
The consultation is open until 17 August 2026.
The SRA is encouraging law firms, legal professionals and other stakeholders to respond to the consultation and help shape the proposed approach. Click here for more details and to respond.
