Client money

jamesm96

Hi guys,

A client (called John) of accountancy Firm PTD has a family member who owes him some money (Jane). Firm PTD acts for both John and Jane's personal affairs, although in reality John is the main point of contact for both; Jane is pretty disorganised so John looks after her tax affairs for her.

After preparing Jane's tax return, she is due a tax repayment. John asks the partner of Firm PTD to repay the payment to directly to him, and not to tell Jane anything about it.

Can anyone point me either to legislation or a reference with the client money regulations of the major accounting bodies which Firm PTD might quote at John? Obviously Firm PTD can't comply; the client money regulations are specifically designed to ensure that no client loses out financially. But where's the chapter and verse?

Monsoon

I don't know if there is a chapter and verse. It's just ethics.

jow774

I dont know about the legislation but wouldn't HMRC notify Jane directly and the Accountancy Firm of any refunds to be repaid like they do with other clients/agents?

So Jane would know about it unless they both live at the same address and John could intercept the post?

Monsoon

Also, Jane needs to sign her tax return. She would see it wasn't her bank details (you'd hope! - we always specifically ask clients to check bank details carefully).

Dean

Monsoon wrote: »

I don't know if there is a chapter and verse. It's just ethics.

LOL! You are funny

You're right that ethics are involved. Are you sure that there isn't a "chapter and verse"?

Regards

Dean

Monsoon

Dean wrote: »

LOL! You are funny

You're right that ethics are involved. Are you sure that there isn't a "chapter and verse"?

Regards

Dean

No I'm not sure. I don't know. That's what I said

The reason I said what I did is that it is one of those that sounds so obviously unethical it probably isn't specifically covered. I'd be interested to know the chapter and verse if anyone knows one.

jamesm96

Dean wrote: »

Are you sure that there isn't a "chapter and verse"?

It occurred to me that, given that the purpose of client money regulations is to ensure that no clients suffer any financial loss as a result of the firm's handling of their money, the writers probably felt that including a provision which stated 'you must not give any client's money to anyone else and keep it a secret from them' probably went without saying!

That said, I have now found, in the ICAEW's Client Money regulations at Regulation 24 b. and d.:

A Firm must keep Clients' Money records... which show... entries of all Clients' Money paid direct to the client, or, on the clients instructions, paid to a third party, identifying that person;

And in the ICAEW's Professional Ethics guide:

A professional accountant in public practice* entrusted with money (or other
assets) belonging to others shall therefore:... At all times be ready to account for those assets and any income,
dividends, or gains generated, to any persons entitled to such accounting

Some legislation might be good too, though.

NeilH

Hi

Would this not be a simple case of theft and/or fraud?

Neil

Monsoon

jamesm96 wrote: »

It occurred to me that, given that the purpose of client money regulations is to ensure that no clients suffer any financial loss as a result of the firm's handling of their money, the writers probably felt that including a provision which stated 'you must not give any client's money to anyone else and keep it a secret from them' probably went without saying!

Precisely!

Neil, I'm not sure it would be theft (intent to permanently deprive required) / fraud (though this can cover a multitude of offences). It's just clearly wrong and unethical!

Dean

Sorry for my delayed reply! Hols in the New Forest are far more enjoyable than Ethics!

Mike you have more or less gone to the correct place. My thought process would have gone along the lines of:

1. Do I owe a duty of care to X
2. Do I owe a duty of care to Y
3. Is there a LOE in place; what does that say?
3a. Am I going to breach any of the fundamental ethical principal? There are 5. One of these is further sub-divided into 'independence' which has a further 6 elements. Am I likely to fall foul of these also?
4. The above should be known without thinking. Then I would start looking at the ICAEW code of ethics.
5. Further information can be obtained by the IFAC code of ethics (of which the ICAEW code is based).
6. Is everything clear? If not, ring the ICAEW ethics helpline.

You say you act for both; I take this to mean you have a LOE in place for both individuals. Regardless of dealing with one dominant party you merely say to them in doing what he suggests it would be in breach of your professional ethical codes for a number of reasons (above).

If the would like to get the other parties express written confirmation to allow their family member to receive their repayment you would then be happy to carry out their instruction. As professional accountants we do not get involved with domestic disputes.

Sorry I haven't given full detail with regard to 3a above I'm setting Monsoon some homework!

Oh and as far as "legislation" there isn't any. Ethics are principles based but do contain a certain set of rules - namely then fundamentals.

Hope this helps.

Regards

Dean