An SRA investigation is one of the most disruptive events a solicitor or law firm can face. It can freeze operations, damage client trust, and lead to fines, conditions on your practising certificate, or even closure. Understanding the common causes of SRA investigations is the first step to avoiding them.

In 2026, the SRA continues to focus on core regulatory risks: client money protection, compliance officer effectiveness, and timely reporting of reportable matters. This article breaks down the top triggers, with real examples and practical steps to keep your firm safe.

Client Money Breaches: The Number One Trigger

Client money issues remain the single most common cause of SRA investigations. The SRA Accounts Rules are strict, and even minor errors can escalate quickly if not corrected promptly.

Common Client Money Breaches

  • Mixing client and office money. Rule 2.1 requires client money to be held in a separate client account. Any inadvertent transfer of office funds into the client account, or vice versa, is a breach.
  • Failure to reconcile within five weeks. Rule 8.3 mandates a reconciliation of the client account at least every five weeks. Miss this deadline, and you have a reportable breach.
  • Incorrectly identifying client money. Some firms treat disbursements paid from office account as client money, or fail to identify client money held on behalf of a third party.
  • Late or incorrect transfers. When a matter concludes, client money must be returned promptly. Delays of more than a few days can trigger a complaint and an investigation.
  • Interest on client money. The SRA expects firms to pay interest when it is "fair" to do so. Retaining interest on large sums held for long periods without a clear policy is a common breach.

For example, a small conveyancing firm in the Midlands was investigated after a client complained that their deposit of £50,000 was held for six weeks post-completion without interest being paid. The firm had no written interest policy. The SRA found a breach of Rule 7.1 and imposed a £5,000 fine plus costs.

If you are a COFA, you should review your client account reconciliation process and interest policy at least quarterly. Our SRA Accounts Rules compliance service can help you identify gaps before the SRA does.

COLP and COFA Failures

Every SRA-regulated firm must have a Compliance Officer for Legal Practice (COLP) and a Compliance Officer for Finance and Administration (COFA). These roles are not ceremonial. The SRA expects them to be active, informed, and effective.

What Constitutes a COLP or COFA Failure?

  • Failure to report reportable matters. The COLP must report any material breach of the SRA Principles or regulatory requirements to the SRA within a reasonable time. Delaying or failing to report is itself a breach.
  • Inadequate oversight. A COFA who does not review client account reconciliations, does not understand the firm's financial controls, or delegates all compliance work to junior staff without supervision is at risk.
  • Lack of training. The COLP and COFA must ensure all staff understand their obligations under the SRA Accounts Rules and Code of Conduct. A firm where fee-earners do not know the difference between client and office money is a firm heading for trouble.
  • Conflict of interest. If the COLP or COFA is also a fee-earner with significant billable targets, there is a risk that compliance takes a back seat. The SRA expects these roles to have sufficient authority and independence.

In one case, a three-partner firm in Manchester had a COFA who was also the senior partner. He signed off reconciliations without reviewing them. When an audit revealed a £200,000 shortfall in the client account, the SRA investigated both the firm and the COFA personally. The COFA was fined £10,000 and had conditions placed on his practising certificate.

If you are a COFA or COLP, consider our COFA compliance support service for a structured review of your firm's controls and reporting obligations.

Failure to Report Reportable Matters

The SRA expects firms to self-report reportable matters. These include any breach of the SRA Accounts Rules, any serious misconduct by a solicitor or employee, and any event that could give rise to a claim against the firm.

What Counts as a Reportable Matter?

  • Client account breaches. Any breach of the SRA Accounts Rules, even if corrected, must be reported. The SRA distinguishes between minor breaches (e.g., a one-day delay in reconciliation) and serious breaches (e.g., a shortfall).
  • Fraud or dishonesty. If you suspect a colleague or employee of stealing client money or falsifying records, you must report it to the SRA immediately.
  • Professional indemnity claims. Any claim or potential claim against the firm must be reported to the SRA, even if it is covered by insurance.
  • Regulatory breaches. Breaches of the Money Laundering Regulations, data protection rules, or the SRA Code of Conduct are all reportable.

The SRA takes a dim view of firms that try to "manage" a breach internally without reporting. In 2024, a firm in London discovered a £15,000 client account shortfall caused by a bookkeeping error. The COFA decided to correct it from office funds and not report it, believing it was minor. The SRA found out via a whistleblower and fined the firm £25,000 for failure to report a reportable matter.

If you are unsure whether something is reportable, err on the side of caution. Our SRA Accounts Rules essentials guide includes a checklist for reportable matters.

Inadequate Financial Controls

Even without a specific client money breach, the SRA can investigate a firm if its financial controls are weak. This often emerges during an accountant's report or a routine SRA inspection.

Red Flags for the SRA

  • No written policies. Firms without a written client money policy, interest policy, or complaints procedure are at higher risk.
  • Poor record-keeping. Missing bank statements, incomplete ledgers, or inconsistent naming conventions for client matters.
  • Lack of segregation of duties. The same person handling client money and reconciling the account is a control weakness.
  • Overdrawn client accounts. Any negative balance on the client account is a serious breach and must be reported.

A sole practitioner conveyancer in Essex was investigated after an accountant's report flagged that the firm had no written client money policy and had not reconciled the client account for three months. The SRA imposed a condition requiring the firm to engage an external compliance consultant for 12 months.

If you are a partner in a small firm, our resources for partners include templates for financial control policies.

Complaints from Clients or Third Parties

Many SRA investigations start with a complaint. A dissatisfied client, a lender, or even a competitor can trigger an investigation.

Common Complaint Triggers

  • Delay in returning client money. A client who waits weeks for their refund is likely to complain.
  • Unexpected fees. If a client believes they were overcharged or not given proper cost information, they may complain to the SRA.
  • Poor communication. Failure to respond to emails or keep the client informed can lead to a complaint.
  • Conflict of interest. Acting for both sides in a transaction without proper disclosure is a common complaint in conveyancing.

The SRA will not investigate every complaint, but a pattern of complaints or a single serious allegation can trigger a full investigation. In 2025, a firm in Bristol faced an investigation after three clients complained about delays in returning deposits. The SRA found that the firm had a systemic issue with its client account processes.

If you receive a complaint, handle it promptly and professionally. Our free firm health check can help you identify areas where complaints are more likely.

How to Reduce Your Risk of an SRA Investigation

Prevention is better than cure. Here are practical steps every solicitor and COFA should take:

  • Conduct regular internal audits. Review your client account reconciliations, policies, and staff training at least quarterly.
  • Train all staff. Every fee-earner and accounts staff member should understand the SRA Accounts Rules and their obligations.
  • Report promptly. If you discover a breach, report it to the SRA immediately. Honesty and transparency are valued.
  • Engage a specialist accountant. A legal-sector accountant can spot issues before they become reportable matters.
  • Review your COLP and COFA arrangements. Ensure these roles have the time, authority, and resources to do their job properly.

If you are concerned about your firm's compliance position, speak to a legal-sector-specialist accountant. We can review your controls, help you prepare for an SRA inspection, and advise on reportable matters. Contact us today for a confidential discussion.