A residential completion stalls in a chain above, and the buyer's money, two hundred and forty thousand pounds on figures used here only to illustrate, sits in your client account for thirty one days. The matter completes, the client thanks the fee earner, then asks a fortnight later what happened to the interest. Nobody in the firm can produce the calculation, and nobody can produce the version of the interest policy that was current when the money arrived.
The fee earner asks the cashier, who points at the written interest policy. It names a de minimis threshold, so the answer comes back as a sentence rather than a working, and the sentence is that nothing was payable. Ask when that threshold was last looked at and the room goes quiet.
The Accounts Rules require a firm to account to its client for a fair sum of interest on client money it holds, and leave the firm to set a written policy on how it will do that. No rate is prescribed and no threshold is fixed, so fairness turns on how much was held, for how long, and what the firm earned on it while it sat there. The policy is the firm's own answer to that question, which means it carries the firm's judgement rather than the regulator's.
The policy that stopped being read
Most of these policies were settled in the years when holding a quarter of a million pounds for a fortnight earned almost nothing. Set the threshold high enough and the arithmetic never bites, the subject leaves the risk register, and the firm gets on with fee earning, which was a sound commercial judgement at the time. Rates then rose sharply from the near zero years and the policy stayed where it was, which is how a document drafted to be reasonable turns into one nobody has tested for years.
Beyond the stale threshold sit the ordinary failures that surface once someone asks. Firms apply the threshold matter by matter when one client has several linked matters running together, so four ledgers each holding a moderate balance for a long period fall below the line individually and sit well above it taken together. Deciding that nothing is payable is a decision, and on most files there is no record of who made it or on what working.
Client care letters compound it. The letter tells the client that the firm holds a written policy on interest and says where to find it, and then the firm updates that policy without keeping the superseded versions, so the document the client was pointed to no longer exists in the form that governed the retainer. Money also stays put far longer than anyone planned, on a delayed completion, a retention held against outstanding works, or damages waiting on a decision outside the firm, and holding periods of that length are where a fair sum stops being nominal.
Reading the policy against your own balances
The test worth running is whether the policy holds up against the balances the firm carried last quarter, rather than whether it reads well on the page. Any partner can run it without buying software.
Ask when the policy was last reviewed and against what the client account was earning at the time. Establish what the threshold is and whether it bites per matter, per client, or across linked matters for the same client. Pull the ledgers that held more than a set sum for more than a set period last quarter, then find what interest was accounted for on each and where the working sits. Read this week's client care letter against the policy the firm would rely on if a client complained. Then give the policy a review date, the way every other governing document in the firm carries one, so the next person to open it knows when it was last read.
Running that test across a full caseload by hand is the part firms postpone. The Bracton AI Assistant reads across the whole caseload and the ledgers overnight rather than one file at a time, working from the record the firm already keeps in the system it already runs, LEAP, Clio, Proclaim and others. Bracton, the case and client management platform, holds the matter side, and the joining is what a cashiering system does not do on its own, being holding period per ledger read against the policy the firm has set, so an exception arrives with the entries behind it and the working shown. Every output goes to a qualified fee earner or to the officer who signs, for sign off, before it counts as anything. It characterises nothing as a breach, because that judgement belongs to the firm.
Most firms find out where they stand by looking backwards. Take a quarter you have already closed and signed off, run the ledgers in it against the policy you would rely on today, and see what the exercise returns. If you want that done on your own matters rather than in the abstract, book a client account review.