Hudson: compliance officer roles are unclear and unsettling
The Law Society is considering a scheme to shore up the position of compliance officers who could find themselves personally exposed under the Solicitors Regulation Authority’s (SRA) proposed handbook.
Speaking at Managing Partner magazine’s risk management for law firms conference in London, the society’s chief executive, Des Hudson, also raised concerns over the SRA’s progress towards outcomes-focused regulation (OFR), the application of a ‘one size fits all’ regulatory approach and ‘flaws’ in the draft handbook that will govern traditional firms and alternative business structures (ABSs) from October 2011.
Mr Hudson said it was wrong that compliance officers should be held personally responsible for the behaviour of others, a key plank of the OFR regime. He suggested that in the absence of detailed information on the duties and obligations of the officers in the handbook, the society could create its own guidance and provide backing for the individuals and their firms in the event of SRA action.
He said the SRA’s expectations of the two compliance officer roles – which cover legal practice (COLP) and finance and administration (COFA) – were “unclear… unsettling and must make those of us who have to carry out those roles, uneasy”. Under OFR they will be responsible for ensuring firm-wide compliance with practice and accounts rules respectively and be obliged to report breaches to the SRA.
A number of contributors at the conference echoed Mr Hudson’s concerns about the wide-ranging responsibilities of COLPs, citing a statement made earlier this year by SRA chairman Charles Plant that the SRA would not offer “safe harbours” to firms seeking approval for an activity.
Mr Hudson suggested that the profession could “collectively help” COLPs: “We’re not going to have safe harbour, we’re not going to have binding guidance. Perhaps we should offer [guidance]; the Law Society can stand behind that firm and individual.”
Responding to Mr Hudson, the SRA’s newly appointed chief adviser on City firms, Nick Eastwell, admitted that COLPs are “clearly a hot issue”. He advised solicitors to make their concerns known to the SRA and insisted the policy was “not yet inscribed in stone”.
Mr Hudson also raised a number of questions about the progress of the SRA towards OFR in time for next October’s deadline. He noted that there was less than a year for the SRA to achieve “a fundamental shift in attitude and decision making” and that there was still “a vast amount of work to do”.
Urging solicitors to respond to the final consultation on the draft handbook before the 11 January deadline, he said the current document had “ambiguities” and “drafting mistakes”. He added that the Law Society is “troubled” by the limited guidance provided in the handbook, which “in the absence of safe harbour is both culturally an error as well as practically an error”.
Highlighting fears that SRA decision-makers will lack sufficient sensitivity to the operations of large international firms or the potential impact of their judgments, Mr Hudson called for the creation of “a specialist team of people who understand City law firms” instead of the relationship managers currently proposed. He argued that only specialists could understand the impact of admonishment on a City solicitor.
Highlighting the information that all law firms will be required to supply – on such matters as financial status, vulnerability and risk – he said the SRA would need to explain how it was to be catalogued, stored and assessed before asking for solicitors to pay for it to be done.
Mr Eastwell attempted to provide reassurance that the SRA was genuinely responsive to criticisms from within the profession. He said he was persuaded that there is “a genuine desire to change culture at the SRA”. He added that he had been suspicious himself but was now convinced that “there is a real desire to get this right and to listen”.
Leave a Comment