A contract lawyer business has been unveiled as the first Solicitors Regulation Authority-regulated law firm to sign up to the Bar Council’s escrow account BARCO.
The Legal Director, which provides in-house lawyers to businesses on a part-time or flexible basis, secured a waiver from the SRA to sign up to BARCO, which allows the firm to handle client cash without it needing to be held in a dedicated client account.
Client funds are pooled into a ring-fenced Barclays account and not released from the BARCO account until they have completed the work for their client. All interest on the funds is returned to the client.
James Mallender, director at The Legal Director, said of BARCO, which started operating in January 2013 and currently holds £8m in funds: “Using BARCO is a no-brainer for us because much of our work is in-house advisory. Our clients can now use us for their financial transactions and, as we’re not handling their money, they have the peace of mind that their funds are completely secure. BARCO is good for business too. It broadens our service offering and keeps our costs low because the regulatory burden of maintaining a dedicated client account was complicated and expensive.”
Chantal-Aimée Doerries QC, chairman of the Bar, said: “BARCO was originally set up for barristers who do direct access work – those that are qualified to take instructions directly from clients – and for barristers instructed by international clients and international law firms. However, in recent months it has become clear there is an appetite for BARCO within solicitors’ firms too. The Legal Director is the first of those firms to see the benefits of BARCO, not only for them, but for their clients.”
There is normally a charge for lawyers to use the service, which starts at 2% of the total cost of legal fees, and not 2% of the amount held in the account, and it decreases on a sliding scale as the fees increase, dropping to 1.75%, 1.5%, 1.25%, 1.00% then 0.75%. However, the SRA had previously agreed that it would waive requests from solicitors to use the BARCO service on a case-by-case basis.
The escrow account allows clients to pay a barrister without breaching rules that prohibit barristers from handling client money. However, because BARCO is a third party, secure escrow account, it is at lower risk of misappropriation than traditional law firm client accounts.