Rapson: Building up supervisory capacity
The Solicitors Regulation Authority (SRA) is conducting monthly “intelligence-led reviews and risk assessments” of so-called accumulator firms, it has emerged.
Its executive team also maintains a “watchlist” of higher-risk firms that it reviews at fortnightly meetings, along with significant issues arising from its supervision, investigations and enforcement work.
Chief executive Sarah Rapson outlined how the regulator was improving its oversight of high-risk law firms in response to concerns expressed by the justice select committee about the collapse of PM Law Group and the conclusions of the independent review into it.
This identified failures to bring together intelligence about PM Law spread across the organisation, and to escalate concerns to senior staff.
The SRA has updated its definition of accumulator firms to encompass any that have acquired two or more firms in the last 24 months.
“We conduct monthly intelligence-led reviews and risk assessments of firms identified as accumulators,” Ms Rapson told committee chair Catherine Atkinson.
“A monthly intelligence-led review and risk assessment of wider firms is also undertaken through our firm tasking and coordination forum (FiTAC). FiTAC is an operational forum which holds two monthly meetings (one for all firms and one exclusively for accumulators) and uses operational reporting and profiling tools to identify firms of concern.”
In this process, it assigns a high, medium or low risk rating to firms and agrees actions to respond.
The SRA is moving away from reactive, case-by-case management and towards a supervision model. Ms Rapson said a number of firms handling high-volume consumer claims were taking part in the ongoing pilot that aims to determine the size and shape of the new supervision function.
“Separately, we are also engaging with firms involved in consumer facing areas of law to enhance how we assess compliance with handling client money and firms with complex business structures (business involving multiple entities, such as subsidiaries, holding companies, joint ventures, or trusts including complex financial models often operating across different jurisdictions and industries).”
But she stressed that the SRA was not yet in a position to supervise all higher-risk firms. “The necessary shift to a supervisory approach is a major strategic change for the SRA and will take time to put in place.
“We are however, making significant steps in building up our capability and capacity through the supervision pilot.”
She will shortly appoint an executive director of supervision and a director of supervision, alongside a new role – executive director for market risk, data and insight.
“In the meantime, we have put in place a ‘watchlist’ of firms that the executive team reviews at its fortnightly meetings on higher risk matters.”
This meeting also brings in details from the supervision pilot, as well as investigation and enforcement cases.
“This process provides for senior visibility of the most significant cases and awareness of issues, including consumer impact and risk to client money. In between the fortnightly meetings, we hold ad hoc meetings for urgent cases.
“Finally, a new escalation process is in now place to ensure higher risk matters are escalated, including to the board, where appropriate.”
Ms Rapson explained how the SRA was also seeking to improve its initial assessment of reports about solicitors and firms to better identify higher-risk matters, and has introduced senior oversight of the allocation of forensic investigations, prioritised according to risk.
The criteria for forensic investigation visits have been formalised, with clear timelines for high- and medium-risk visits.
The SRA is currently under an unprecedented three statutory enforcement measures imposed by the Legal Services Board – statutory directions to address the failures over Axiom Ince, and both a public censure and performance targets given the failures over SSB Law.
Ms Rapson also revealed that the SRA has submitted a consolidated implementation plan and performance targets for the board to consider. This may be published by the end of the month.
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