COLP & COFA
ISSUES
Presenter
Brian Rogers
Chairman, Regulatory Affairs Committee, Manchester Law Society
Consultant, Lewis Hymanson Small Solicitors LLP
Director of Regulation & Compliance Services, Riliance Software Ltd
INTRODUCTION
Compliance presents a huge challenge to law
firms and many are still grappling with the new
SRA Handbook, Code of Conduct and Outcomes
Focused Regulation (OFR).
The next big challenge will be the implementation
of the new COLP/COFA regime!
TALKING NUMBERS!
• 0% - 99.99%
Will attract SRA interest!
• 25%
Long term COLP commitment?
• 50% - 75%
Initial COLP commitment?
• 750 (600)
Firms failed to meet COLP/COFA deadline
• c£30,000pa
Average cost of compliance (pre-OFR)
• £150,000
LSCP recommended compensation limit
• £50,000,000
Potential SRA fine for individuals!
• £250,000,000
Potential SRA fine for entities!
KEY REGULATORY ISSUES
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SRA compliance survey (pre-Oct 2011):
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90% of firms non-compliant (client care)
COLP/COFA nominations:
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Approval process – 1 August – 31 December 2012 (rejections?)
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Approved nominees take up roles on 1 January 2013
Insurance can cover costs, etc., but what about reputations & careers?
LeO Scheme changes:
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SRA will “check that sensible judgements have been exercised by the firm”; 150 random checks
£50k compensation limit (£30k now)
6 years to complain (12 months now)
Enhance scheme coverage – prospective clients & third parties
CMCs to be included from Apr 2013
Referral fees
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Ban comes into force April 2013
SRA – “Regulated persons should be able to determine from LASPO itself the sort of arrangements,
which will be acceptable and the risks associated in entering into arrangements for the referral of
work with third parties” – no “safe harbour” advice will be given.
Publication of data:
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Complaints – LeO contacted 750 firms (900 complaints) to check content before publication
Equality & Diversity (online survey during July – Sep 12) – 100 random “visits”
COLP NOMINEE ISSUES!
• “I am far more profitable than you, so it has to be you!”
• “You can’t be the COLP, you’re not approachable so staff will
sweep things under the carpet!”
• “I can’t be the COLP, my wife would kill me if I was fined and
we ended up losing the house!”
• “I won’t be the COLP if you’re going to restrict the time I need
to do the job”
• “I will be the COLP, but I can’t possibly dedicate more than
two days a week to it or it will reduce my fees too much!”
• “I want to delegate some of my COLP duties to my Practice
Manager but he won’t like it, what should I do?”
COLPs/COFAs – KEY DUTIES
• Take all reasonable steps:
• To ensure that the authorised body complies with all terms
and conditions of its authorisation, and its employees and
managers comply with any obligations imposed under the
SRA Accounts rules;
• To ensure that the authorised body complies with relevant
statutory obligations;
• To record any failure to comply with authorisation or statutory
obligations, make such records available to the SRA, and
report any material failure (either taken on its own or as part
of a pattern of failures) to the SRA as soon as reasonably
practicable
EFFECTIVE COMPLIANCE
ISSUES TO ADDRESS
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The firm’s work (type of work undertaken & regulatory requirements)
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The firm’s governance & culture (compliance plan, communication,
oversight, etc.)
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The firm’s infrastructure (reporting lines, risk register, risk mitigation)
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The firm’s policies (fit for purpose, documented, communicated)
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Monitoring and COLP/COFA reporting
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Reporting to the SRA; issues to consider:
• How prolonged &/or severe is the problem (would you report if your firm was locked out due to
non-payment of rent?)?
• Are clients’ interests &/or monies at risk?
• Can the COLP/COFA say that they are being open with the SRA if they keep this information to
themselves?
• Is the firm trying to prevent the COLP/COFA from reporting, or is this a difference of opinion that
can be resolved?
RISK REGISTER (General)
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Anti-money laundering non-compliance
Mortgage fraud
Conflicts of interest issues
Delays (lack of progress updates, giving clients false information, etc.)
Code of Conduct breaches
SIF rules breaches & PII issues
Practising certificate issues (struck off, new partners, etc.)
Health & Safety issues
Equality & Diversity issues
CPD training issues
Firm management issues (supervision, management, etc.)
Referral fees & fee share issues
Data protection issues
Publicity issues (website, stationery, leaflets, adverts)
RISK REGISTER (Finance)
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Overdraft facility (over-dependence)
Inability to finance retiring partners
Cash flow problems
Conditional Fee Agreements
File management (lack of progress, failure to bill & close files,
accounting to clients for balances)
Credit control problems
Time recording issues
Cheque signing issues (non-signatories)
High value cheques/bank transfers
Office account transfers
Payments in
Bank charges (charging clients)
Interest issues
Payment of invoices (validity, service received)
RISK REGISTER (Legal)
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Poor conduct where solicitors:
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Fail to identify the need to appoint a litigation friend
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Fail to update medical reports, despite recommendations to do so
by experts
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Simply send medical reports and offers to settle to clients without
offering any advice
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Settle cases prematurely, often without waiting for injuries to settle
down
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Fail to comply with court orders, resulting in their clients’ cases
being struck out
SRA RISK SCORING
CLIENT RELATIONS
MAKING IT TOO COMPLICATED!
“The length of this document defends it well against the risk
of its being read”
Winston Churchill
“The more technical the systems and procedures, the more
likely they are to create a risk”
Solicitors Regulation Authority
SRA WARNINGS
AND REASSURANCES!
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The SRA will come down hard on firms that attempt to use OFR as a means of
cutting corners or avoiding compliance with the SRA Handbook
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“Firms should be on notice that unthinking reliance on the indicative behaviours
is not a risk-free approach to compliance”
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Firms must create a culture in which fee earners can admit to mistakes so that
loss, inconvenience and serious distress to clients and inexperienced
practitioners can be minimised.
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“To those of you who still fear that your well intentioned, ethical approaches to
delivering the Outcomes will be second-guessed by us – you can see that we
simply won’t have the time, even if we had the inclination!”
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“Actually we can do some very constructive things with firms to help them
make progress – particularly help negotiate with banks and that sort of thing”
(SRA in relation to firms posing financial stability risks – Sep 12)
SUMMARY
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Read, understand and comply with the new SRA
Handbook, but don’t throw the 2007 Code away!
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Ensure the firm’s regulatory culture and systems are
‘fit for purpose’
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Train all staff
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Support your COLP & COFA; compliance is a team
game not just one for certain individuals!
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Try not to lose too much sleep!