A partner at an international firm who created improper scenarios to clear residual client balances has been suspended for three months.
The Solicitors Disciplinary Tribunal heard that Charles Smith, former partner at Clyde & Co, had only recently been made risk partner but was immediately required to deal with more than 100 residual client account balances.
Smith, 39 this year and a solicitor for 13 years, was a member of the firm until 3 November 2015 and had previously been working at Clyde’s Guildford office in the marine and international trade department.
He admitted instructing and/permitting the improper transfer of money from the firm’s client account to the firm’s office account on five matters.
The tribunal heard that the Solicitors Regulation Authority had raised concerns with Clyde & Co about how it was dealing with residual client account balances and in May 2013 the firm circulated a written policy to all UK partners.
Two months later the firm identified more than 2,000 matters where it held money in the client account where there had been no movement on the client account ledger for at least one year. The value of these matters came to more than £15m, around half of which related to inactive cases.
Smith, appointed risk partner in March 2014, was informed of the existence of more than 100 residual client account balances and the deadlines agreed with the SRA to clear them. The tribunal heard that Smith was kept aware of the numbers of cases where balances needed to be cleared.
He admitted the approach he took was improper: on one occasion he arranged for an invoice for almost £13,000 to be raised and transferred from client to office account. This created a cash shortage in the client bank account which had to be rectified later.
The tribunal judgment described his approach as ‘cavalier’ and said he should have done more checks on accounts rules.
The SRA identified three further occasions where Smith had recorded his own time on inactive matters in order to transfer the matters from client to office account.
In mitigation, Smith pointed out he had co-operated fully with the SRA investigation and had a previously unblemished record.
He admitted the mechanism to transfer the money was improper but he genuinely believed all the money was payable to the firm, and cash shortages in the client bank account were rectified by October 2015. After his demotion to consultant he was no longer permitted to handle client money. Smith has now left the firm.
When he returns from suspension he will be subject to conditions limiting his position for a further two years. He must also pay £17,898 in costs.
Following the publication of the judgment, a Clyde & Co spokesperson said: “We are aware of the Solicitors Disciplinary Tribunal judgment in relation to Charles Smith, a former junior partner and former consultant at the firm.
'Charles was asked to stand down from the partnership by the firm when the matter came to light in 2015. At the time we were working with the Solicitors Regulation Authority to improve our processes in relation to aged residual client balances. As a firm we hold ourselves to the highest professional and ethical standards and expect all of our people to uphold our code of conduct and client service standards.'