Law firms should not appoint the lawyer who handles their indemnity insurance as the compliance officer for legal practice (COLP) or risk discouraging lawyers from owning up to their mistakes, a leading City solicitor has advised.

Richard Harrison, who heads the lawyers’ professional liability sub-group at Clyde & Co, said the lawyer who deals with a firm’s professional indemnity insurance arrangements “will no doubt have spent time cultivating an atmosphere in which individuals feel comfortable approaching them with issues which might need to be notified promptly to insurers or lead to claims”.

If they were also the COLP, they might then have to report the matter to the Solicitors Regulation Authority (SRA), even if no claim actually arose. “As a result, people may shy away from sharing their problems,” he predicted.

Mr Harrison highlighted the difficult role the COLP will have: “There is the potential for a COLP to take a view on matters which his or her partners/members believe is over-cautious, and exposes the firm to the unwelcome attention of its regulator. Inevitably COLPs will need to tread a careful line between discharging their obligations to the SRA and looking after the proper interests of their firm.”

The SRA has still not confirmed when firms will have to start nominating their COLPs and also their compliance officers for finance and administration (COFAs), a process that was originally due to be completed by the end of last month; however, it maintains that COLPs and COFAs will still formally assume their responsibilities from 31 October.

Mr Harrison said the compliance officers should consider written agreements with their firm. For the COLP this could include an indemnity for any personal liability incurred, the right to take legal advice at the firm’s expense in relation to his or her duties and who the ‘client’ will be in relation to such advice, and an obligation on the firm to allow the COLP sufficient time and resources to perform the role.

“The firm may wish to consider taking out management liability insurance that would specifically cover the role of COLP,” he added.

Ahead of taking on the role, Mr Harrison said COLPs should be developing or updating a compliance plan, setting up systems to allow them access to all necessary business information and client files, arranging systems that allow the COLP to ensure compliance, and establishing a means of recording failures to comply.

 

Tags: COFA, COLP, compliance officer for finance and administration, compliance officer for legal practice, Solicitors Regulation Authority