Plans to impose separation of compliance roles in law firms will only add to the regulatory burden and increase costs, the Law Society said today. 

It was responding to a Solicitors Regulation Authority consultation on changing the rules so that the same person cannot hold the position of compliance officer for both legal practice and finance and administration (COLP and COFA).

This measure is part of a series of proposed reforms aimed at providing better protection of client money. The separation of COLP and COFA roles is intended to ensure appropriate checks and balances on who wields power and control within firms. It comes after financial collapses where the same person was in charge of monitoring finances and legal practice.

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But the Law Society said the proposed separation of compliance roles is complex and impractical and would impact small and medium sized firms. ‘If implemented, there are serious concerns the proposals would likely have a negative impact on small-to-medium-sized firms in terms of higher regulatory costs.'

These would be passed on to clients and have a 'knock-on impact on consumers’ access to justice', the Society said.  Instead, Chancery Lane said the SRA should focus on gathering data to highlight and manage risk better.

The requirement to separate compliance roles would apply to any firms with an annual turnover of £600,000 or holding a client account balance of at least £500,000 at any point in the most recent reporting period. The only exemption would be sole owner-manager firms.

Meanwhile, accountants have said they support the SRA's plan to collect all accountants' reports on firms – but they do not want responsibility for submitting them. Currently, only qualified reports must be submitted.  

The regulator also proposed requiring reporting accountants to submit their reports directly, confirming they have properly checked compliance with the accounts rules and whether they have found any breaches and/or weaknesses.

The Association of Chartered Certified Accountants (ACCA) said in its response that the requirement to submit must rest with the firm holding client money.

Since 2014, when the rule was relaxed, firms have only been required to submit qualified accountants’ reports to the regulator. However, a recent spot-check identified significant non-compliance. Of 596 firms surveyed by the SRA, 25 non-exempt firms had not obtained an accountant’s report for their last reporting period. Another 31 were late.

The ACCA response added: ‘This is a very concerning trend as lack of appropriate scrutiny poses a real risk to client money. ACCA welcome the proposals and commends the SRA for taking action to circumvent this behaviour. While previous relaxations in the regime were appropriate, we consider SRA actions proposed are reasonable and proportionate given the findings.’