By Legal Futures Associate Kord
The SRA has secured approval from the Legal Services Board (LSB) for an addendum to Rule 8 of its Authorisation of Firms Rules, changing who can hold the Compliance Officer for Legal Practice (COLP) and Compliance Officer for Finance and Administration (COFA) roles.
In firms with more than one manager or owner, anyone with authority to determine or direct significant management decisions can no longer also be designated COLP or COFA.
The rule is intended to stop the same individual controlling both a firm’s business decisions and its compliance oversight, including client money compliance.
The threshold
The restriction applies to firms that, in their most recent accounting period, had an annual turnover of more than £600,000 or held client money with a maximum balance exceeding £2 million.
That client money figure was raised four-fold from an initial £500,000 proposal, a change the SRA says still captures 99% of client money held across the sector while reducing the number of small firms caught by roughly half. Sole owner-manager firms get a partial exemption: those above the turnover threshold cannot hold either role, but those caught only by the client money threshold can remain COLP, just not COFA.
A separate provision covers incidental breaches, letting firms that exceed the client money threshold through an unrepresentative transaction avoid being caught, provided the SRA is notified and the reasoning is documented.
A parallel reporting change
Alongside the governance split, firms holding client money will need to submit an annual declaration on their reporting position, with fixed financial penalties for late or missing accountants’ reports and declarations from April 2027.
The wider role-separation requirement is being phased in from early 2027, with smaller firms given longer to comply.
What the profession is still asking
The changes have drawn mixed opinions in the industry since the SRA’s initial December 2025 consultation. The Law Society has called the plans complex and impractical, warning of disproportionate cost for small and medium firms, and is pushing for a pause, a stronger evidence base, and a targeted risk model built from data the SRA already holds rather than fixed thresholds.
A newly formed SME and boutique law firm alliance has raised similar concerns directly with the SRA, arguing the regulator has not shown the changes would have prevented the firm failures it has cited as justification.
The Law Society is set to debate the issue at its AGM on 14 October 2026, and the SRA has said detailed guidance will follow this autumn.
Getting the timing right
Whatever the outcome of that debate, firms sitting near either threshold have a practical planning problem: a new COLP or COFA needs SRA approval before taking up the role, so working out eligibility in the month the rules commence leaves little room to manoeuvre.
Firms should map who currently holds each role against who controls management decisions now.
Third-party regulated infrastructure, such as Kord’s real-time client money reporting, can also lighten the monitoring load a COFA is expected to carry, regardless of who holds the title.
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