COLP and COFA: Compliance in Practice

Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

About the author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi

Chapter 1: The requirement to have a COLP and COFA
Introduction to roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Brief background to the Legal Services Act 2007 . . . . . . . . . . . . . . . . . . . . . . 1
Role of the SRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Key extracts from Standards and Regulations that explain the authorisation process for compliance officer role-holders . . . . . . . . . . . . . 5
Approval of role holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Approval process for individuals who are not deemed approved . . . . . . 7
Individual role-holder and ongoing transparency requirements . . . . . . . 8
Withdrawal of approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Temporary emergency approval of a COLP or COFA................... 12

Chapter 2: Appointing your COLP and COFA
Key extracts from STaRs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Compliance and business systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
The duties of managers in SRA authorised firms . . . . . . . . . . . . . . . . . . . . . . 22
Compliance officers – necessary skills, knowledge, experience Compliance officers – time factors and other considerations . . . . . . . . . 25
Specific considerations about the COFA role . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Can the COLP and COFA be the same person? . . . . . . . . . . . . . . . . . . . . . . . . 27
Can we buy in a COLP or COFA? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Chapter 3: Working with the SRA – understanding entity and risk-based regulation
Regulatory objectives and a changed approach to regulation . . . . . . . . 31
The impact of the LSA on the work of approved regulators . . . . . . . . . . . 31
The SRA’s approach to risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Regulatory reach over the authorised law firm . . . . . . . . . . . . . . . . . . . . . . . . 34
The SRA’s supervision and enforcement work . . . . . . . . . . . . . . . . . . . . . . . . . 35
Investigation and enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
What this style of regulation means for the COLP and the COFA . . . . . . 36
Enforcement powers against the COLP and COFA . . . . . . . . . . . . . . . . . . . . . 36

Chapter 4: The COLP’s essential knowledge and suggested systems and controls
The extent of the COLP’s responsibilities contrasted with the role of the COLP and the firm’s managers . . . . . . . . . . . . . . . . . . . . 39
Key knowledge from the SRA Standards and Regulations of relevance to the COLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Overview of the STaRs from the COLP’s perspective . . . . . . . . . . . . . . . . . . . 42
SRA Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SRA Codes of Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Chapter 5: The COFA’s essential knowledge and suggested systems and controls
The extent of the COFA’s responsibilities contrasted with the role of the COLP and the role of the firm’s managers . . . . . . . . 95
Key knowledge from the SRA Standards and Regulations of relevance to the COFA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SRA Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SRA Codes of Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SRA Accounts Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Chapter 6: Identifying, recording, and reporting non-compliance
How will compliance officers know what they need to know? . . . . . . . . . 126
Record-keeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
File-based or central records? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Centralised or decentralised record-keeping? . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Self-reporting by staff or file reviews and supervisory oversight? . . . . . . 129
Just STaRs breaches or all complaints data? . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Records of decisions to deviate from the firm’s systems and controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
What information should be included in the record? . . . . . . . . . . . . . . . . . . 130
Identifying serious breaches – where to start . . . . . . . . . . . . . . . . . . . . . . . . . . 131
The role of the management team in dealing with non-compliance issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Common breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

Chapter 7: Compliance officers and international issues
Occasional or temporary practice outside England and Wales . . . . . . . . 135
Firms with an “overseas practice” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
How to respond to this section of the SRA Standards and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Other international regulatory issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

Chapter 8: Behaviours outside of practice
Equality issues outside of practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

Chapter 9: Personal perspectives
The relationship of the COLP and COFA with the management of the firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Is the role full-time or part-time?....................................... 147
Should the role be held for a fixed period? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Should there be a deputy or understudy? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
When and how often the compliance officer should report to the management team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
How will compliance officers work with the management team? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Insurance and indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Sources of help . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

About Globe Law and Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153