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Improper use of client account as a banking facility
SRA Case Study: Aggregated funds
Scenario
A law firm is acting for the seller (a private equity house) which is taking a leading role on the sale of a target on behalf of several other sellers. The firm collates all the funds due from the buyer on completion and holds these in its client account. Following completion, the firm pays the money to their client (the seller) and to the other represented or unrepresented sellers (subject to carrying out due diligence checks).
SRA's View
The funds received on behalf of, and paid out to, the client for which the law firm is acting (the lead seller) would not breach rule 14.5. The funds belong to that client and are received in connection with a transaction on which the firm is advising.
However, receiving money into client account, from or on behalf of, and to be paid to the other sellers does raise risks of a breach of rule 14.5. The law firm will need to be satisfied that there is a proper reason for these funds to be received into client account (for example, to facilitate completion of the sale and purchase of the assets, and that would not be feasible if the firm could not act in this way).