The backlash against the Solicitors Regulation Authority’s attempt to split manager and compliance officer roles has taken on even more momentum with a call for the regulator’s board to resign.
The SME & Boutique Law Firm Alliance, to which more than 70 firms have signed up in the past four days, will today submit a formal open letter to the SRA and the Law Society demanding that the imminent restrictions on owner-managers acting as COLPs and COFAs are paused and reconsidered.
The group wants the Law Society Council, when it holds its annual general meeting next month, to call for the SRA to wait until there has been proper consideration of the evidence and practical impact on smaller firms.
It is also asking the council to express no confidence in the SRA board in light of what are described as ‘serious regulatory and governance failures’ identified in the independent reviews concerning Axiom Ince and, most recently, PM Law. Such a motion would give the profession the opportunity to express its view on whether it retains confidence in the SRA board following these high-profile firm collapses, where £100m in client money is missing.
In a statement, the alliance said: ‘Our concern has never been about resisting effective regulation. We want strong regulation and robust protection for client money. What we are asking for is evidence that the measures being imposed on hundreds of firms are necessary, proportionate and will actually make clients safer.
‘The findings concerning PM Law also cannot simply be viewed in isolation. Coming after Axiom Ince, they raise much wider questions about regulatory oversight, accountability and whether the SRA is addressing the causes of regulatory failure.
‘That is why we are asking the Law Society Council to put two separate questions before the profession at its AGM: whether these COLP and COFA reforms should be paused and properly reconsidered, and whether the profession retains confidence in the SRA board. These are serious questions and they deserve to be answered openly.’
Members of the alliance met the SRA earlier this week but the talks appear to have done little to find a solution to the dispute. Firms say they will struggle to find suitable people to take on compliance officer roles after the restriction comes into force from January.
Read more
Meanwhile the Conveyancing Task Force, which brings together organisations in the conveyancing profession, has joined the calls for a pause on implementing the new rules. The organisation has asked the SRA to publish analysis of what role COLPs/COFAs played in cases of law firm failures used to justify reform, and what evidence shows separation would have prevented failure.
‘A sole practitioner or small traditional high street practice is fundamentally different from a large, multi-office, high-volume ABS with layers of management and massive flows of client money,’ said the task force. ‘Has the SRA assessed whether COLP/COFA works equally across those models? Should requirements reflect size, ownership, management structure, client-money exposure, and regulatory history rather than predominantly financial thresholds?’
The SRA said it has opted to wait until it receives the alliance’s letter before responding. The regulator stressed that it has already listened to responses to its consultation on the issue earlier this year. Separation will apply to firms with a turnover of more than £600,000, or to firms that hold more than £2m in client money.
The handling of this surge of dissent will be one of the biggest tests yet for chief executive Sarah Rapson, who has been in post less than a year and was not present when mistakes were made in the Axiom Ince and PM Law collapses. She is not subject to any calls to go but she has made it a focal point of her leadership to listen to people in the profession.
No comments yet