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Post-COLPs: Are Legal Firms More Compliant Now?

Compliance is always going to be an important issue for law firms - has the introduction of COLPs and COFAs changed anything?

Post-COLPs: Are Legal Firms More Compliant Now?

COLPs and COFAs

Since the beginning of 2013, all law firms have had to put in place compliance officers for legal practice (COLPs) and compliance officers for finance and administration (COFAs). The idea behind the enforcement of these roles is “that firms will take responsibility for managing risks to their delivery of legal services”. COLPs and COFAs have to ensure that their firm complies with the terms and conditions of authorisation by the Solicitors Regulation Authority (SRA) as well as any statutory obligations. They also need to record any compliance failures and must report any material breaches to the SRA. In the words of the SRA, COLPs and COFAs should be “champions of risk management and compliance within a firm, and will have responsibility for the firm's systems and controls.”

Teething troubles

Post-COLPs: Are Legal Firms More Compliant Now?

A thousand firms missed the deadline for appointing compliance officers (1st January 2013). Although it was theoretically possible to revoke authorisation for this breach, the SRA tried to work with the offending firms to nominate their COLPs and COFAs. But even where the appointments had been successfully made, there was a lot of uncertainty about exactly what had to be recorded and reported. At 466 pages long, the SRA Handbook doesn’t exactly make for light reading. The Law Society reacted to the problem that many compliance officers faced in getting to grips with their tasks, creating a “safe harbour” Risk and Compliance Service and stating “Submit your enquiry to our panel of regulatory compliance experts and practitioners and we will stand behind the advice that is provided to you.” Basically, it was an uphill struggle to gain a thorough understanding of SRA priorities and identify common risk areas.

Information (in)accuracy

Post-COLPs: Are Legal Firms More Compliant Now?

One finding that only 16% of Terms of Business documents and Client Care Letters contained accurate regulatory information meant that a key task for COLPs was to work on ensuring that all their firm’s client care documentation and public facing information was fully compliant and totally accurate. The rate at which certain legal changes come into force means that ensuring up-to-date versions of documentation are always used by fee earners can be a little like painting the Forth Bridge. But although this can seem like an arduous task, just as with the adoption of new technologies which brought an end to the constant repainting of the iconic bridge, clever use of IT can simplify the process of keeping files up-to-date. Furthermore, advances such as hosted services can provide an effective and automated audit trail which further assists with compliance requirements.

When to report a breach?

An exceedingly tricky job for compliance officers concerns the area of reporting breaches of the SRA Handbook. The first task was to adopt processes for monitoring and recording any compliance failures. But even with a system in place, assessing whether a specific breach is material (and therefore reportable) or non-material (and therefore only needs to be recorded) needs to be done on a case by case basis and the rules are often unclear (they were also amended in version 8 of the Handbook following a consultation). The COLP or COFA has to take into account factors including:

Post-COLPs: Are legal firms more compliant now?

The overall impact on the firm, its clients and third parties

Post-COLPs: Are legal firms more compliant now?

The detriment, or risk of detriment, to clients

Post-COLPs: Are legal firms more compliant now?

The extent of any risk of loss of confidence in the firm or in the provision of legal services

Post-COLPs: Are legal firms more compliant now?

The scale of the issue

Has anything changed?

A year on from the introduction of compliance officers, following a huge amount of expense and effort for law firms - particularly arduous for smaller practices with limited expenses, staff and time resources - it doesn’t seem like compliance has improved. As of January 2014, only around a third of law firms had given the SRA data on workforce diversity, within weeks of the final deadline for submission. But it’s unlikely the process will change in the near future and, as such, the best thing that COLPs and COFAs can do to ensure compliance, other than becoming well versed with the Handbook, is to focus on implementing effective IT systems in their firms which can assist with the process of meeting all the various requirements.

Discover how law firms can utilise technology to minimise compliance risk and save time spent on manual measures. Get your eGuide now: Cloud computing: the answer to legal compliance headaches?

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