Legal regulators are working on ways to stop solicitors from handling client money, it has been revealed. But the Law Society has urged caution, stressing that the number of problems is low and that the current system protects consumers.

Sir Michael Pitt (pictured), chairman of the oversight regulator the Legal Services Board, told a conference this morning that finding alternatives to client accounts is a priority for regulators.

Pitt said there is ‘particular interest’ in the French experience, where lawyers are prevented from holding client money, and the Bar Council’s Barco scheme for an escrow-type service.

Pitt told the Modern Law Conference in London that regulators will soon produce a document on promoting change.

He noted that in 2013, the last full year for which statistics are available, there were more than 140 reports of solicitors misusing client money or assets each month.

In total, more than 1,200 claims were made against the compensation fund, with a total value exceeding £29m – the majority of which related to misappropriation of client funds.

‘Misuse of client money is one of the biggest regulatory risks,’ he said. ‘It is a risk to clients and to the public’s confidence in the legal profession.’

Society president Andrew Caplen commented: ‘We would urge caution in making changes to a system which provides considerable protection for consumers.

‘Any system that involves one person holding money on behalf of another will have risks attached. However, each year solicitors hold money in a very large number of transactions yet the actual number of problems is low and the profession’s client protections mean that consumers do not lose out.

‘Any system is capable of improvement, but we have yet to see a solution proposed which will avoid all the difficulties of this complex and important area.’

Elsewhere in his speech, Pitt suggested that ‘sooner or later’ ministers will turn their attention to the weaknesses within the legal services sector and limitations of the Legal Services Act, although to replace the legislation would require a ‘major investment’ for which politicians have little appetite.

Pitt said the early findings of a study into the cost of legal services regulation, based on a survey of almost 1,000 providers, found attitudes varied on perceived value for money.

Single practitioners and entities with fewer than 50 employees tended to regard practising certificate fees as poor value for money, compared with those working for larger employers, who were less concerned.

A second research project has focused on the experiences of 180 couples petitioning for divorce.

Pitt said online divorces were likely to be more amicable and resolved more quickly than those using a face-to-face service. Half of online users would recommend the process to a friend or family member compared with 38% who had taken the traditional route.