Armstrong: Productive conversations with stakeholders
The Solicitors Regulation Authority (SRA) is to focus on proactive supervision of higher-risk law firms as it considers changes to its compliance officer rules.
It has also formally confirmed that nothing will come into force in January, which was the original intention.
The regulator announced a “pause” last month on implementing the reforms after a backlash from smaller practices over what they said would be unintended consequences – including putting some out of business.
The reforms, which were approved by the Legal Services Board, would prevent a manager with power to make ‘unilateral’ decisions from being the COLP or COFA of law firms with a turnover of more than £600,000 or which hold more than £2m in client money. The latter figure was increased four-fold due following consultation.
In sole owner-manager firms which operate beneath the thresholds, the sole owner-manager could be the COLP but not the COFA.
In a statement issued this afternoon, the SRA said: “This pause will give us the opportunity to work with stakeholders, including through working groups, to further explore issues relating to the proposed separation rules.
“Additionally, it will allow us to test alternatives and consider wider approaches to making sure appropriate governance arrangements are in place in firms that we regulate.
“Allowing this process to take place fully, means we will not be rolling out the proposed rules as originally planned in January.
Once a decision on future approaches and requirements has been made, we will make sure that there is an appropriate lead-in time for firms to implement any changes needed.”
In the meantime, the SRA is running its supervision pilot, introducing new approaches for how it understands and manages risks in firms.
“We are also looking at adopting proactive approaches to supervising firms where we identify potential higher risks,” it said.
This approach would increasingly be adopted more widely “to ensure we identify and respond to risks of consumer harm”. As part of this, the SRA will seek assurances that firms have appropriate governance arrangements in place and that their compliance function is able to operate with the necessary independence.
Aileen Armstrong, executive director for strategy and policy, added: “As the regulator, we are committed to acting decisively where consumers are being placed at potential risk of harm.
“This includes both targeted activity with individual firms and working toward the introduction of wider regulations and requirements which will safeguard consumers of legal services.”
“Already we have had productive conversations with stakeholders and will have even more moving forward. The insights we gain from these discussions are proving very useful in helping refine and develop our next steps.”
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