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It has now been widely reported that the Solicitors Regulation Authority (SRA) has announced the timetable for the Compliance Officers nominations. For those of you who have not yet heard, firms can start nominating their Compliance Officer for Legal practice (COLP) and Compliance Officer for Finance and Administration (COFA) from 31st May 2012. The deadline for nominations is 31st July 2012, giving 11,000 firms 2 months to make their nominations.
Originally the deadline for COLP and COFA nominations was 31st March 2012 but this was delayed due to difficulties with the online application system for practising certificate (PC) renewals and applications for recognition. Firms will also need to complete an online application form to nominate their compliance officers. The SRA has also indicated that it expects to have confirmed most COLPs and COFAs by 31st October 2012, inline with their overall timetable. This gives the regulator just 3 months in which to assess the applications and approve the nominees of 11,000 firms.
The application is short and is comprised predominantly of binding declarations from both a senior manager with authority to sign on behalf of the firm and the COLP and COFA nominees, for which the signatories will personally be held to account by the SRA. However even with a straightforward application form, is 3 months really going to be enough time and if it is, how credible is the approval process going to be? The Law Society has already argued that COLP and COFA nominations should be deferred in the case of smaller firms and it is difficult to see how proper assessments can take place in such a short space of time.
So what will the approach be? The SRA has already stated that it intends to move away from the detailed approach to approving COLPs and COFAs of prospective Alternative Business Structures. Instead the SRA will adopt a risk-based approach to checking firms, focussing on highly complex structures, along with some random checking. The aim being to allow the SRA to focus on those who cannot and/or will not deliver competent and ethical legal services and on those who are capable and willing but need SRA support to manage particular compliance issues. Ultimately, this means that not every nomination will be checked.
So it seems that the SRA will largely be relying upon the declarations made by the senior managers of firms, which questions the efficacy of the process but also the fairness when you consider that Alternative Business Structures are to be subjected to detailed checking yet many law firms will not be checked under regulation which was designed to accommodate and be equal for both business structures. This method of approval risks creating the assumption that this is ‘light touch’ regulation and raises further questions about the resources of the SRA, who appear to be trying to do too much too quickly. In addition, the approach does not appear to be ‘risk based’ at all, it is in fact in total contradiction, and begs the question as to how the process can implement a ‘risk culture’ within firms, which the SRA has argued is the rationale for compliance officers.
The Law Society has subsequently announced a pilot scheme where it will provide advice to COLPs on compliance problems in an attempt to provide greater support to law firms and “put its money where its mouth is”. This service is to be provided through a new ‘Compliance Reference Group’, which will be made up of volunteers from top 100 law firms. However, this is only intended to be available to COLPs from top 100 law firms until the success of the service is known. As for all other firms, the line of support that is available is through dedicated phone support from the SRA for all managers and nominees seeking advice. This service alone has the potential to take up an immense proportion of resources and will add to the pressure on the SRA to meet the deadlines promised. By accepting nominations in stages i.e. accepting nominations from larger firms first, the SRA would have left itself with a much more manageable task.
Finally, the SRA claims that in light of the difficulties with the PC renewals, it has taken more time to ensure that firms did not experience similar difficulties with the nomination process. However, it seems that this has just resulted in the development of a rushed process to get nominations through as quickly as possible to recover from earlier embarrassment and meet initial deadlines. Having chosen to ignore widespread criticism, as well as the Law Society’s advice to delay the nomination process, the SRA is now running the risk of failing to meet yet another deadline, shipping through unsuitable nominations and creating controversy over the integrity of the regulation.
Client Relationship Manager
T: 0845 056 3949
M: 0743 727 4046
The Law Society has issued a practice note about the risks to solicitors posed by this new legislation, which came into force on 30 September.
The SRA has urged all practices to check HM Treasury’s consolidated list of asset freeze targets, which lists designated persons subject to financial sanction under EU or UK legislation.
The practising certificate renewal period opened on Monday 2 October.
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