The SRA Compensation Fund: if a solicitor loses your money

If a solicitor in England or Wales has stolen your money, failed to hand over money they were holding for you, or left you out of pocket because insurance that should have existed did not, the Solicitors Regulation Authority (SRA) runs a Compensation Fund that may pay you back. The maximum it can pay for a single claim is £2 million, and you must apply within 12 months of when you first knew, or reasonably should have known, of your loss¹.

Two things make this Fund different from the protections people know from banking. First, it is discretionary: no one is entitled to a payment, and the SRA decides each application on its merits¹. Second, it is a fund of last resort for losses caused by dishonesty or a failure to account for money, not a general complaints scheme for poor service or negligence¹. The SRA regulates the solicitors and law firms of England and Wales, a profession of just over 170,000 practising solicitors across more than 9,000 firms, from sole practitioners to large firms².

What the SRA Compensation Fund covers: theft, failure to account and uninsured loss

The Fund exists for three situations, all involving money and all involving someone the SRA regulates. The first is dishonesty: money stolen by a solicitor or someone working in a regulated firm. The second is a failure to account: money the firm was holding for you, for example a house deposit in a conveyancing client account, that has not been properly recorded or handed over. The third is a gap in insurance: where a regulated person bears civil liability to you that should have been covered by insurance, but the insurance was not in place¹.

The SRA sets out the eligibility test in terms of the loss itself. To be eligible, you must have suffered a financial loss resulting directly from one of those three causes¹:

• the dishonesty of someone the SRA regulates
• a failure to account for money by someone the SRA regulates
• the civil liability of someone the SRA regulates which should have been covered by insurance, but the insurance was not in place

What this means in practice is that the Fund is aimed at money that has gone missing, not at every complaint a client might have against a solicitor. A delayed completion, a badly drafted contract or rude treatment are not, in themselves, claims on this Fund. The common thread in the covered situations is that money you were owed has been lost because of dishonesty or an accounting failure, or because a liability that insurance should have met has been left uninsured¹.

The most typical real world example is conveyancing. When you buy a house, your deposit and other funds pass through the firm's client account. If the firm closes, or a solicitor siphons money from that account, the money you transferred is gone and the Fund is the route designed to address it. Similar situations arise with money held for probate estates, settlement payments or litigation proceeds¹.

A discretionary fund of last resort, not a legal right to payment

The single most important thing to understand about the Compensation Fund is stated by the SRA itself:

SRA guidance on the Compensation Fund¹

Discretion cuts both ways. It means the Fund can consider circumstances that a rigid rule might exclude, and it can weigh what is fair in an individual case. But it also means that even a person who has plainly lost money to a dishonest solicitor cannot demand payment as of right. The SRA assesses the application, the evidence and the circumstances, and decides whether to pay, how much to pay, or whether to refuse¹.

This is a different model from the Financial Services Compensation Scheme (FSCS), which is the UK's statutory compensation scheme for financial services³. The FSCS pays out under rules: if an authorised firm has failed and cannot return your money, eligible depositors are protected up to £120,000 per person or company, per authorised firm⁴. A depositor who meets the rules has a claim the scheme must pay. The SRA Fund has no equivalent entitlement, which is why the SRA describes it as a fund you apply to rather than a guarantee you claim under¹.

Because it is discretionary, the strength of your evidence matters more than in a rules based scheme. The Fund's decision makers will look at what happened, what documents show, and whether there are reasons to reduce or refuse the payment, which the next section sets out.

How to apply and what evidence to send

Applications are made to the SRA. The core of any application is showing the three things the eligibility test requires: that you suffered a financial loss, that the loss resulted directly from dishonesty, a failure to account, or uninsured civil liability, and that the person responsible was someone the SRA regulates¹. Evidence that supports a claim typically includes records of money you paid to the firm, correspondence about what the money was for, and anything showing the money was not returned or accounted for. The 12 month deadline applies from the point you knew or reasonably should have known of the loss, so gathering evidence early matters¹.

Maximum payment: £2 million per claim

The maximum the Fund can pay for a single claim is £2 million¹. That ceiling is far higher than the limits in the better known financial protection schemes, which reflects the size of the losses that can arise when a conveyancing client account or a probate estate is misused: a single house purchase can involve a deposit and completion funds running to hundreds of thousands of pounds.

For comparison, the main protections on the financial side work like this:

The bank reimbursement route for authorised push payment (APP) scams, where you are tricked into making a payment yourself, is capped at £85,000 per claim for Faster Payments⁵, and the same £85,000 figure appears in the ombudsman's guidance on scams⁶. Earlier policy set the maximum reimbursement level for APP scams at £415,000 per claim⁷, so limits in this area have moved over time and the current figure is the one to work from.

One further limit matters where a firm's collapse affects many people at once. Where the SRA receives multiple applications relating to the same or connected circumstances, it may cap the total amount it will pay¹. A £2 million ceiling on a single claim is therefore not a promise that £2 million will be available across a whole collapsed firm's client base.

When the Fund pays less or refuses

The SRA sets out several grounds on which an application may be reduced or refused. The first is your own conduct. The SRA states:

SRA guidance on the Compensation Fund¹

In practice this means the Fund will look at how the loss came about. If you ignored warnings, handed over money in an unusual way at someone's insistence, or took steps that made the loss more likely, the SRA may decide that part of the responsibility sits with you and reduce the payment accordingly, or refuse it altogether¹.

The second ground is timing. The 12 month deadline runs from when you first knew, or reasonably should have known, of your loss¹.

The third is the cap on connected claims. Where multiple applications relate to the same or connected circumstances, the SRA may cap the total amount it will pay¹, so a payment can be reduced not because of anything you did but because the Fund's resources are being spread across many claimants.

The fourth is scope. The Fund pays financial losses caused by dishonesty, failure to account or uninsured liability. It does not exist to compensate for distress and inconvenience. That is a real difference from complaint routes elsewhere in financial services: the Financial Ombudsman Service can award compensation for distress and inconvenience, with figures such as up to £300 in some complaint types⁸ and up to £1,500 in others⁹. Someone who lost money to a dishonest solicitor and also suffered stress will find the Fund addresses the money, not the stress¹.

Finally, the Fund is a last resort. Where the money can be recovered another way, for example from the firm itself, from its insurers, or through a court claim, those routes come first. The Fund's role is to catch the losses that would otherwise fall on the client¹.

Where the Fund applies: England and Wales

The Solicitors Regulation Authority oversees the regulation of solicitors and law firms in England and Wales². The Compensation Fund follows that footprint: it exists for losses caused by people the SRA regulates, and the SRA regulates a profession of just over 170,000 practising solicitors across over 9,000 firms in England and Wales, ranging from sole practitioners to large firms².

Two practical points follow. First, the dishonest person must be someone the SRA regulates. A lawyer or adviser who is not regulated by the SRA is outside the Fund, whatever they have done with your money. Second, if your matter is connected with Scotland or Northern Ireland, the position is different, because the SRA's regulatory reach, and with it this Fund, does not extend there. The protections that apply to money held by solicitors elsewhere in the UK are separate arrangements, and anyone in that position needs to check the rules that apply to the firm they used².

Paying a fake "solicitor": when a scam is not a solicitor's loss

A growing problem sits just outside the Fund's boundary: fake solicitors. In a typical case, a fraudster sets up a website that looks like a conveyancing firm, often inserted into a genuine property transaction by email interception, and the buyer sends their deposit to the criminal's account. The money is stolen, but not by anyone the SRA regulates, so the SRA Compensation Fund, which covers dishonesty by a regulated person, is not the right route¹.

The route that does exist for that situation is your bank and the APP scam reimbursement rules. Those rules require banks and other payment service providers to reimburse victims, up to a maximum of £85,000, and they cover individuals, charities with an annual income of less than £1 million, and micro-enterprises, but not larger businesses⁶. Claims must be made within 13 months of the payment⁵. If you have been tricked into paying a fake firm, contacting your bank immediately is the priority, and the bank's duties when a payment goes wrong are covered separately on when a payment goes wrong.

This distinction is worth holding on to because it determines who you chase. Money stolen by a real, regulated solicitor: the SRA Compensation Fund. Money paid to an impostor: your bank, under the scam reimbursement rules¹. Both routes have deadlines, and neither is guaranteed, so speed matters in either case.

How to check a firm is genuine and avoid scams

The consistent advice from regulators is to verify a firm through official sources rather than through the contact details the firm gives you. For financial services, the Financial Ombudsman Service advises consumers to check that contact details match those listed on the FCA's Firm Checker, precisely to avoid scammers pretending to be a real firm¹⁰. MoneyHelper's guidance on scams makes the same point in stronger terms: always check the company or organisation contacting you is legitimate by searching for it on Companies House and using the contact details listed there, not the ones provided in the message¹¹.

Applied to solicitors, the habit is the same:

• Confirm the firm and the individual solicitor are regulated before any money changes hands, particularly in a property transaction.
• Use contact details you have found yourself through official sources, not details that arrived by email, especially if instructions about where to send money changed late in a transaction.
• Be suspicious of last minute changes to bank details or urgent requests to send money to a different account.
• If a deal or a fee looks too good to be true, treat that as a warning sign, as scam guidance generally advises¹¹.

The FSCS makes a related point for investments: search the official register using the firm's reference number for the most accurate results¹². The principle across all of these is identical, and it is the single most effective defence against fake solicitor fraud: verify independently, then pay. More on the warning signs is in scams and fraud.

Negligence rather than dishonesty: the role of insurance

Not every loss caused by a solicitor involves dishonesty. A solicitor who misses a limitation deadline, drafts a will wrongly or gives negligent advice in a conveyancing matter has caused a loss, but the cause is incompetence or carelessness rather than theft. The Compensation Fund is not designed for that. Its test is a financial loss resulting directly from dishonesty, a failure to account for money, or civil liability that should have been covered by insurance but was not¹.

The ordinary route for negligence is the firm's professional indemnity insurance: SRA rules require firms to hold it so that unforeseen errors or negligence can be made good⁸. A consumer who has lost money through negligence typically raises it as a complaint to the firm, and the insurer responds to any claim that follows. Where the SRA Fund touches insurance at all is in the third limb of its test: where a regulated person's civil liability should have been covered by insurance, but the insurance was not in place. In that situation the loss falls on the consumer through no fault of their own, and the Fund exists to catch it¹.

If a negligence claim is resisted, the courts are the backstop. Small value claims can be pursued through small claims court in England and Wales, or the equivalent procedures in Scotland and Northern Ireland. The choice between an ombudsman style route and court is covered in ombudsman or small claims court.

Who pays for the Fund

The Compensation Fund is made up of annual payments by everyone the SRA regulates¹. In other words, the solicitors and law firms of England and Wales collectively meet the cost of the dishonesty and failures of their members, rather than the taxpayer or the victims themselves.

This industry funded model is the same in principle as the Financial Services Compensation Scheme, which is the UK's statutory compensation scheme and is funded by the regulated financial services industry³. The difference, again, is entitlement: the FSCS pays eligible claimants under published rules, with deposit protection up to £120,000 per person or company, per authorised firm⁴, while the SRA Fund pays at its discretion¹. A useful way to see the two schemes side by side is in FSCS vs Financial Ombudsman Service and the wider guide to consumer protection in UK financial services.

Where to find more help

If money has gone missing, act on the deadline first: the 12 month window from when you knew or should have known of the loss is the hard edge of the SRA route¹. Beyond the SRA itself, several kinds of free help exist depending on what has happened to you.

• If you paid a fake firm: contact your bank immediately and ask about the APP scam reimbursement rules, which cover individuals, small charities and micro-enterprises up to £85,000⁶. MoneyHelper has free guidance on types of scam¹¹.
• If a regulated solicitor was dishonest or failed to account for your money: apply to the SRA Compensation Fund, with evidence of the loss and how it arose¹.
• If your complaint is about service or negligence rather than stolen money: complain to the firm first, then consider the relevant ombudsman or the courts. The route is explained in how to complain to a financial firm and which ombudsman.
• If you are considering paying someone to pursue your claim: note that comparable compensation schemes state you do not need a paid representative such as a solicitor or claims management company to apply¹³. What paid representatives charge is covered in claims management companies.

For background on how the FSCS works, when it applies and what it excludes, see the FSCS explained, FSCS compensation limits and what the FSCS does not cover. The FSCS's own eligibility rules require that the firm failed and is in default, that it was authorised when you used it, and that you actually lost money¹⁴, a useful contrast with the SRA Fund's dishonesty test.