SRA builds relations with high-impact firms

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15 April 2014

SRA: better understanding

The introduction of relationship management (RM) – giving certain law firms a dedicated contact at the Solicitors Regulation Authority (SRA) – is working for both sides, new research has indicated.

However, a poll of 59 RM firms found that a fifth consider complying with outcomes-focused regulation (OFR) to cost too much and take too much time.

RM is targeted as so-called ‘high impact’ firms – those practices where the emergence of problems would have a greater detrimental impact on the regulatory objectives than average. It involves periodic meetings and regular e-mail and telephone communication.

Some 90% of the RM firms said they had a constructive working relationship with their relationship manager, while six in ten reckoned that this had allowed them to comply with regulation more effectively. But at the same time, “overall firms were neutral in terms of the contribution of RM in allowing them to understand the SRA’s approach to OFR”, the research said.

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Nearly half reported that the extra responsibilities of being in the RM programme meant they spent more time on compliance, leading to a number having to recruit compliance officers.

On complying with OFR more widely, 21% said it cost too much and 22% that it took too much time. In each case over 50% were at the other end of the scale, with around a quarter of firms neutral on the question.

Some 85% said they had made changes to the way they complied with SRA regulation as a result of OFR. Examples cited in the report included implementing improved audit trails and risk management structures – including detailed risk registers – and larger firms appointing dedicated risk managers.

However, only 17% of respondents said SRA enforcement acts as a credible deterrent to them not complying with OFR.

Nearly half of compliance officers for legal practice (COLPs) spent less than a quarter of their time on compliance duties, a figure that shot up to almost 75% for compliance officers for finance and administration (COFAs).

The research put the average cost of complying with OFR among the firms at about £125,000 a year – £56,000 in administration, £51,000 on software, £15,000 on consultancy fees and £6,000 on training.

The SRA concluded that the introduction of RM has enabled the regulator “to identify and better understand the risks associated with particular firms. This has been facilitated through more regular interaction between firm representatives and the SRA. RM has [also] allowed for a more constructive relationship with the SRA”.

Among the next steps following the research will be increased communication with the RM community, while the SRA plans to “develop a bespoke approach to regulating the larger and City firms based on our greater understanding of the risks posed to our regulatory objectives by different cohorts of firms”.

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