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Cheque Clearance and the SRA Accounts Rules

15 October 2013

Accepting a cheque from, or on behalf of, a client and drawing against that cheque before it has cleared can have disastrous consequences. However, often unwittingly, many solicitors take that risk every day due to a lack of awareness of the 2-4-6 system for cheque clearance.

During recent SRA Compliance Health Check visits, we have observed examples of firms getting into difficulty by accepting cheques from clients and making payments out from client bank account under the SRA Accounts Rules 2011 before those cheques had fully cleared.

As with all matters involving clients‘ money, the obligations of both traditional firms of solicitors and Alternative Business Structures (ABS) are contained within the SRA Accounts Rules 2011. Whilst not prohibited from doing so under the SRA Accounts Rules 2011, solicitors are advised to exercise discretion when drawing against a cheque received from or on behalf of a client before it has been cleared (Rule 20, Guidance Note [iii] [a]). The Solicitors Regulation Authority (SRA) warn that if the cheque is not met, other clients’ money will have been used to make the payment in breach of the SRA Accounts Rules 2011.

To avoid breaching the SRA Accounts Rules 2011, the majority of solicitors' firms have in place internal accounting controls designed to minimise the risk of making a payment from uncleared funds. Typically, this might include a policy of allowing a period or four or five days for any cheques received to clear before drawing against them. However, many are unaware that important changes were made to the way in which UK banks clear cheques in November 2007 meaning that four or five days is unlikely to be sufficient time to guarantee that a cheque will clear. The current procedure, commonly referred to as the 2-4-6 system, means that, in most cases, you must allow seven working days to be certain that a cheque paid in over the counter of your own bank will not bounce.

Legal Finance Professionals have produced an information sheet which explains in detail how the 2-4-6 system works.

2-4-6 Information Sheet

If you require advice on SRA Accounts Rules 2011 compliance issues or would like more information about our SRA Compliance Health Check service please call Richard Lane on 0845 6500 112.

If you would like us to keep you updated on the latest legal regulatory and compliance news, including the latest advice and guidance on complying with the SRA Accounts Rules 2011, sign up for our FREE newsletter.


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