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COLPs and COFAs central to outcomes-focused regulation
The launch of outcomes-focused regulation (OFR) on 6 October 2011 marked a pivotal shift in how law firms are regulated, with a less prescriptive and more risk-based approach. It has required firms to look closely at how they run their businesses and whether they have appropriate systems and procedures in place to provide competent and ethical legal services.
The appointment of compliance officers for legal practice (COLPs) and compliance officers for finance and administration (COFAs) is central to our new OFR approach. COLPs and COFAs will be responsible for ensuring that firms have suitable systems and controls in place to comply with regulatory requirements.
We recently announced that the COLP and COFA nomination process opens on 31 May and ends on 31 July. We expect to confirm most nominations between 1 August and 31 October, although we may need to accommodate some late approvals of COLPs/COFAs, and we are considering how best to manage this.
COLPs and COFAs will formally assume their duties on 31 October 2012, although it is important to note that firms should already be compliant with OFR. We will be contacting all firms before 31 May 2012 to provide advice and information about the process, including timescales for nominations and the obligations of those completing the forms.
Experience tells us that the primary driver for compliance lies at the firm level, with a particular responsibility for the most senior people in firms. We want the nomination of COLPs and COFAs to encourage firms of all sizes to develop proactive compliance cultures, reducing risk and leaving us at the Solicitors Regulation Authority to focus on those who cannot or will not deliver competent and ethical legal services, and those who are capable and willing but need support to manage their particular compliance issues.
While COLPs and COFAs are the formal focus points for compliance, they will not and must not be seen as sacrificial lambs. Senior managers will be held to account and will not be able to absolve themselves of their responsibilities. The objective is to create a firm-wide culture of compliance. The COLPs and COFAs nomination process is consistent with our proportionate approach: we will only ask for information that we need and cannot get elsewhere.
What will the process involve? The nomination form will be web-based and available online. It is a short form and primarily a statement, made by both the firm and the compliance officer nominee, that they understand their obligations, have suitable arrangements in place, that the nominee is qualified, suitable and consents to undertake the role. There will also be declarations relating to the SRA suitability test. We will take a risk-based approach to checking nominations as well as conducting some random sampling.
The SRA is on hand to offer support in this process and we have produced some guidance on nominating people for these roles. Dedicated phone support will be available to firm managers and nominees seeking advice. COLPs and COFAs in alternative business structures will still be subject to a full series of checks to ensure that they work to the same high standards as traditional law firms.
There have been calls for the SRA to set out COLP and COFA duties much more rigidly, with a detailed job description for those thinking about taking up one or both roles. There are very good reasons why we have not succumbed to such pressure. We believe that it is vital that firms should be responsible for making their own arrangements for compliance depending on their circumstances - the majority of firms already have in place suitable systems to manage their own risk.
Firms and nominees must read and understand the SRA Authorisation Rules, in particular rules 8.1, 8.2 and 8.5. Compliance officers must take all reasonable steps to ensure compliance and also have specific responsibilities in regard to the recording and reporting of failures in compliance breaches. Compliance officers play a key role in promoting the right culture but, ultimately, responsibility for compliance rests with the firm and its managers.
For full information about the COLPs and COFAs nomination process visit our website.
Charles Plant is chair of the board of the Solicitors Regulation Authority