4.3 The firm should have a system for checking the balances on client ledger accounts to ensure no debit balances occur. Where payments are to be made other than out of cleared funds, clear policies and procedures must be in place to ensure that adequate risk assessment is applied.
in breach of the rules, and full replacement of the shortfall will be required under rule 7. See also rule 22, notes (v) and (vi).N.B. If incoming payments are ultimately dishonoured, a debit balance will arise,
4.4 The firm should establish systems for the transfer of costs from client account to office account in accordance with rule 19(2) and (3). Normally transfers should be made only on the basis of rendering a bill or written notification. The payment from the client account should be by way of a cheque or transfer in favour of the firm or sole principal – see rule 23(3)).
4.5 The firm should establish policies and operate systems to control and record accurately any transfers between clients of the firm. Where these arise as a result of loans between clients, the written authority of both the lender and borrower must be obtained in accordance with rule 30(2).
5. Overall control of client accounts
5.1 The firm should maintain control of all its bank and building society accounts opened for the purpose of holding client money and controlled trust money. In the case of a joint account, a suitable degree of control should be exercised.
5.2 Central records or central registers must be kept in respect of:
(1) accounts held for client money, or controlled trust money, which are not client accounts (rules 16(1)(a), 18(c) and 32(11));
(2) practice as a liquidator, trustee in bankruptcy, Court of Protection receiver or trustee of an occupational pension scheme (rules 9 and 32(12));
(3) joint accounts (rules 10 and 32(13));
(4) dividend payments received by a recognised body as nominee (rules 31(2) and 32(14)); and
(5) clients’ own accounts (rules 11, 16(1)(b) and 33(2)).
5.3 In addition, there should be a master list of all:
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general client accounts;
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separate designated client accounts;
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accounts held in respect of 5.2 above; and
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office accounts.
The master list should show the current status of each account; e.g. currently in operation or closed with date of closure.
5.4 The firm should operate a system to ensure that accurate reconciliations of the client accounts, whether comprising client and/or controlled trust money, are carried out at least every five weeks or, in the case of passbook-operated separate designated client accounts for controlled trust money, every 14 weeks. In particular it should ensure that:
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