SRA reveals scale of COLP/COFA failures as 1,200 nominees don't declare suitability issues

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By Legal Futures

23 January 2013

Barrass: focus switching to enforcement action

The scale of non-compliance with the Solicitors Regulation Authority (SRA) over COLPs and COFAs became clear yesterday, with 152 firms now facing enforcement action for failing to complete their nominations, and the revelation that 1,200 nominees did not declare “potentially relevant issues” – including undisclosed criminal convictions, serious disciplinary sanctions and undeclared bankruptcy.

As of yesterday, 9,744 firms (98.5% of the total expected to nominate) have now completed the nomination process for their compliance officers for legal practice (COLPs) and for finance and administration (COFAs). Of these, 9,165 have now been approved, although 200 do not know it yet because the SRA is resolving issues with inaccurate data in the nomination forms.

The SRA said there were various reasons why 579 firms have completed the process but not yet been approved, including declarations that have required further investigation, those who have failed to disclose suitability issues subsequently identified by the SRA and nominations that were made late.

It said the vast majority of these will be resolved by the end of January, adding that in general the strategy of achieving compliance in ways that fell short of formal sanctions “has been very successful”.

Some 152 firms have not completed their nominations (most of which did not even start it) “in spite of repeated requests and offers of assistance”, and enforcement action has now begun against them as they are in breach of the Authorisation Rules. They may also face charges of failure to co-operate with the SRA.

Among this group of firms is a substantial minority which have also not begun their practising certificate renewals, and they are being prioritised for further investigation.

A paper going to today’s meeting of the SRA board said officials recognised the risk of some of these firms choosing to abandon their practices, and were planning for the potential impact of this and the interventions that would have to follow.

The paper said the non-disclosure of information relevant to the suitability of some nominees was “one of the most concerning aspects” of the whole process.

“A strategy of encouraging re-nomination, detailed investigations and, where appropriate, risk-based decisions to approve nominees has been successful in managing this group of nominees, with approximately 60 remaining… who have serious issues that could result in refusal to approve,” it said.

However, in some cases, even though approval has been granted or there has been a re-nomination, “further questions will need to be raised in respect of the original non-disclosure”. The SRA said this could be a breach of rule 1 – failure to act with integrity and compromising public confidence in legal services.

A further 1,500 nominees self-declared suitability issues – which was higher than expected – although “it was largely the result of nominees taking a cautious approach to declaration”. In all a tenth of this group has yet to be approved.

SRA executive director Samantha Barrass said: “In general, our strategy to achieve compliance by engaging with firms to actively seek alternative nominations, encourage completion of nominations and investigate issues that have been identified, has paid dividends. However, we are now at the stage where there are only a small proportion of outstanding approvals to be made and our focus will switch to proportionate enforcement action against those firms that have refused to nominate or otherwise failed to engage appropriately with the process.”

She said this will range from letters of advice, fines, rebukes, through to revocation of authorisation, and referral to the Solicitors Disciplinary Tribunal.

The SRA said it will shortly be communicating with the COLP and COFA community to advise them on the processes it is putting in place to facilitate engagement with the Authority

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