Firms have “heads in the sand” over compliance officers

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By Legal Futures

4 August 2011

October 2011: firms need to get working on implications of OFR

Law firms are not doing enough to train staff in risk and compliance matters, a leading expert on partnerships has warned – adding that practices must “get their houses in order by October 2011” to be ready for the new regulatory requirements.

The move to outcomes-focused regulation (OFR) in October will give the Solicitors Regulation Authority (SRA) a raft of powers, including the ability to visit law firms on random or risk-based assessments and receive an annual compliance report.

Law firms must also nominate a dedicated compliance officer for legal practice (COLP) to make sure the firm is adhering to the rules and its statutory obligations, although ultimately compliance is a matter for the firm as a whole and not just the COLP.

Firms need to appoint a COLP by March next year, meaning they will have just six months to make sure the firm has all the required processes in place before he or she becomes responsible for disclosure of material gaps to the SRA. The COLP has an obligation to maintain a list of all lapses in compliance and to make it available to the SRA on request and to notify the SRA of serious concerns in any event.

Richard Turnor, a partner at London firm Maurice Turnor Gardner, said that while many firms have been thinking about OFR and the role of the COLP, others seem to “have their heads in the sand”.

 “Firms will have to submit their first annual reports to the SRA in October 2012, covering the period from October 2011 no doubt, and disclosing any lapses about which questions are asked,” he said. “Therefore firms really need to get their houses in order by October 2011.”

Mr Turnor says a COLP needs to be a lawyer, and sufficiently senior to get things done. They should operate clear governance and reporting lines as well as having systems and processes in place to manage general business risks. In addition, law firms should develop a compliance plan and a risk register which identifies the risks and the controls in place as well as those responsible for different areas of risk.

“It will be a valuable tool in the future,” Mr Turnor concluded. “Engage the whole firm in the process and train all staff in what they can do to ensure the effective management of risk and compliance with the SRA handbook.”

Firms also need to appoint a compliance officer for finance and administration (COFA) to oversee adherence to the accounts rules. The COFA does not have to be lawyer, although can be the same person as the COLP if they have the skills to undertake both roles.

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