SRA warns against "unthinking compliance" with indicative behaviours

Tick-box compliance: SRA will take a dim view

“Unthinking reliance” on the indicative behaviours in the Code of Conduct is not a risk-free approach to compliance, the Solicitors Regulation Authority (SRA) has warned.

Its executive director of supervision, risk and standards, Samantha Barrass, also warned larger firms against appointing their senior or managing partners to the role of compliance officer for legal practice (CoLP).

Addressing a risk management conference in London, Ms Barrass said the SRA is concerned that some firms might see the indicative behaviours that help interpretation of the 10 core principles as a checklist, rather than possible examples of practice – the SRA is likely to take a “dim view” of this.

She said: “The indicative behaviours are not mandatory, they provide examples or a starting point to aid thinking on how to deliver the outcomes and principles. Unthinking reliance on the indicative behaviours is not a risk-free approach to compliance; they do not cover all regulatory scenarios or compliance requirements, and certainly focusing attention on the achievement of the behaviours alone could actually lead to a firm overlooking or de-prioritising emerging risks.”

She said that some solicitors “have proudly told me that in preparation for outcomes-focused regulation (OFR) they had extracted the indicative behaviours, and ticked off every one that could possibly be relevant as being present in their organisation in order to present a model of best-practice compliance to the SRA”.

Ms Barrass asked: “But can the firm say, hand on heart, that this approach really gets to grips with the nature of the firm itself and its business practices?”

She said OFR is about “getting firms who are capable of delivering ethical, competent legal services, to manage their own regulatory risk – critically to get a shift from unthinking compliance to ethical, contextualised engagement with the principles and outcomes”.

Ms Barrass continued that she has a “great deal of sympathy” with the suggestion that the SRA Handbook would be better without the indicative behaviours. “And at the very least, we will be monitoring their use by firms to check for unthinking over-reliance. Which doesn’t necessarily herald a future bonfire of the indicative behaviours.”

Ms Barrass said a priority for the SRA’s supervisory activity with firms, particularly against the backdrop of legal aid changes, is the approach to client care by firms that have a client base that could be defined as vulnerable for any or all of physical, social, or psychological reasons. Just providing lengthy client-care letters may have complied with the old code but for many reasons may not with the new one.

“We are concerned about this, we think the risk is increasing with the changes in legal aid. Consequently, this matter is likely to be a priority for engagement with relevant firms.”

Every law firm has to nominate their CoLP and compliance officer for finance and administration (CoFA) by 31 March 2012 and the appointments will be made by October 2012.

Recognising that many in the audience were from larger firms, which are likely to be subject to relationship management with the SRA, Ms Barrass said: “I would also caution against making your senior or managing partner your CoLP. Over the summer there seemed to be a lot of fear and loathing around these roles… with a few – but by no means all – suggesting that only a senior or managing partner could take it on.

“It’s entirely up to you of course – we’re not prescriptive. But a lot of you will be in the relationship management approach to supervision, with a lot of engagement with us. We will expect to meet regularly with the CoLP and for that person to be completely on top of risk and compliance management in your firm.

“A titular CoLP will not be acceptable. If you think your senior or managing partner can take on this role, then fine. But please make sure they go into it with their eyes wide open and will have the time to devote to the job.”

See blog: The scary new world of OFR


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