The new compliance officers required under outcomes-focused regulation (OFR) – which begins today – “will not be sacrificial lambs for the sins of the organisations they work in”, the chief executive of the Solicitors Regulation Authority (SRA) has stressed.
OFR, which from today is also being adopted by the Council for Licensed Conveyancers, represents a major shift from a prescriptive approach to regulation to a risk-based methodology that focuses on the outcomes achieved for the client.
All law firms are required to have compliance officers for legal practice and for finance and administration, and there are fears that the responsibility that goes with the roles will discourage people from taking them on.
“It does not in any sense remove the obligations from the partners and other managers,” Antony Townsend told Legal Futures.
Though firms have six months to appoint their compliance officers, they will also have to submit their first annual report to the SRA next October, disclosing any lapses about which questions are asked. Experts have said firms should get their officers in place as soon as possible.
The introduction of OFR, with new Code of Conduct, is the culmination of nearly two years of work, delivered on schedule, a task Mr Townsend described as “punishing”. Among the four new core principles underpinning solicitors’ conduct in future is a requirement to “run your business or carry out your role in the business effectively and in accordance with proper governance and sound financial and risk management principles”.
Mr Townsend recognised that the test of the success of OFR will come in the approach the SRA takes to enforcement, where it has promised to work with firms that are trying to comply and no longer behave as “somewhere between a teacher and a policeman”, reaching for disciplinary action too readily. The SRA will, however, come down hard on firms that wilfully refuse to comply, he added.
He dismissed calls to introduce ‘safe harbours’ – where firms can rely on advice provided by the SRA as a defence in the event of regulatory action – as a red herring. “Well-run firms doing their best will not come unstuck for the lack of a safe harbour,” he said.
Legal Services Board chief executive Chris Kenny said: “Moving to outcomes-focused regulation represents an important shift in focus for the SRA, for solicitors and those they serve. It promotes ethical behaviour and innovation by placing responsibility for achieving regulatory outcomes squarely on the shoulders on legal services providers and giving them the freedom to achieve them in different ways.”