As long as firms fear the regulator, they are unlikely to seek help over their finances.
‘Never smile at a crocodile’, I sing to my son, offering the kind of guidance that will be vital if he’s ever in such a situation.
Even without my advice, it’s highly unlikely he’d do anything other than run for his life on the off chance he’s faced with a croc. Certainly there’s little chance he would attempt to engage with something with its sights set on dinner.
In fact, there’s probably as much chance of my two-year-old facing up to a crocodile as there is a COLP or COFA picking up the phone to the SRA with a list of the firm’s financial woes.
In a plea we’ll label ‘wishful thinking’, the Solicitors Regulation Authority regulatory manager Sam Palmer last week lamented the lack of compliance officers willing to blow their whistle and invite in the regulator.
Well blow me down! Who would have thought that solicitors – even managing directors – might not be ready to open themselves up to investigation and probing and the possible eventual outcome of an intervention?
Palmer is, of course, right. Early engagement with the SRA will give your firm the best possible chance of survival. For all its faults the regulator is not the grim reaper and its main concern – the interest of clients – are not incompatible with the survival of a firm. Quite the opposite in fact.
I understand several ‘high-impact’ firms (ie those whose implosion would be the most costly) have been saved and steered on the right path by the SRA’s supervision team. The only problem is that few firms, for obvious reasons, are unwilling to publicise their redemption for fear of setting panic off amongst previously in-the-dark clients and lenders.
Much as it may be merited, we’re unlikely to see ‘SRA hailed as saviour’ headlines any time soon.
But the SRA cannot expect compliance officers to pick up the phone while there continues to be such fear around the consequences. Many solicitors have told me the public announcement by SRA director Richard Collins that ‘2014 is the year of enforcement’ is still reverberating around the profession. There is a mixed message coming from the Cube – supervision or enforcement?
Firms are terrified that raising cashflow problems with the SRA will put them on the inevitable road to closure. Until that culture is reversed – and it’s difficult to see how it can be – the regulator can expect a wall of silence and law firms burying their heads in the sand.
It’s not a case of never smiling at the SRA – solicitors are afraid to even look at it.
John Hyde is a Gazette reporter