Time was when risk management was all about minimising the chances of facing a professional negligence claim. Those risks are as significant as ever but they have been joined by an area of risk that has mushroomed dramatically over recent years, compliance risk.
Some risks have been around for a long time such as those associated with money laundering and data protection. Others are more recent such as the offences created by Bribery Act 2010 which came into force on 1 July 2011. More recent still, the SRA’s move to Outcomes Focused Regulation arrived with the launch of its handbook in October 2011.
Outcomes Focused Regulation
The SRA has moved away from rigid rules, where possible, because ‘one size fits all’ is no longer considered appropriate for a profession with just under 11,000 firms (10,917 in October 2011) and 125,000 practising solicitors.
The result is that you have to achieve set outcomes for your clients. How you do so is left up to you. This has left some looking for certainty in an uncertain world. Look no further – contact us today for practical solutions, authoritative support and guidance.
Still preparing for a PSU visit?
Don’t hold your breath as this unit of the SRA was disbanded in August 2011 with many of its advisers made redundant. The SRA will be making fewer ‘routine’ visits to firms in the future, although visits may be made by the thematic risks team if particular trends are identified. Relationship management will take over from the work of the PSU.
The SRA handbook 2011
The handbook came into force on 6 October 2011. All that is except the Authorisation Rules. The most important part is the code of conduct, closely followed by the Authorisation Rules and the SRA Accounts Rules. Other sections will have enhanced significance at particular times in the lifecycle of your firm.
Tim Prior has delivered lectures for the Law Society of England & Wales (at national and local level) on the changes introduced by the handbook.
The code of conduct 2011
Much of the code of conduct is a re-statement of the 2007 code but there are important changes of detail and emphasis, not least the change from rules to outcomes and indicative behaviours.
Any firms ‘coasting’ in relation to the risk management and compliance requirements in the new code are, frankly, taking a risk. If you would like help in complying with the handbook, or would welcome an audit of your procedures to identify any gaps in compliance, please contact us.
The Authorisation Rules
These rules will come into force on 23 December 2011 for licensable bodies ie those looking to become ABSs. For all other firms (including sole practitioners if the necessary order pursuant to section 69 of the Legal Services Act has come into force by then) these rules only come into effect on 31 March 2012.
These rules impose significant additional requirements over and above the requirements in the code of conduct. You should act now to improve your risk management but it may relieve some of the pressure to know that the obligations in these rules won’t bite until April 2012 at the earliest.
COLPs and COFAs
These roles do not become fully operational until 31 October 2012 but you need to have notified the SRA of those to be appointed by 31 March 2012 at the latest. Leaving it until the last minute is not advisable. For definitive guidance on your obligations in this key area, speak to Tim Prior. Choosing the right people to fill the new compliance officer roles is crucial. Too senior and they may not have enough time to devote to the role. Insufficiently senior and they may be ineffective.
Even if your COLP is a solicitor, the appointment will not automatically be approved by the SRA. It is important to consider the checks likely to be made by the SRA before authorising your COLP and COFA. Once approved, they are likely to face tensions between their reporting obligations and their other duties, especially if they are fee earners. Being the PII or complaints partner now looks quite attractive by comparison.
The SRA Accounts Rules
Having been called the SARs (or Solicitors Accounts Rules) for years, some will find the change in name slightly annoying. The changes are modest but important. Contact us for help.
The Provision of Services Regulations 2009
These regulations were introduced in December 2009 following a European Directive and are sometimes overlooked by firms, particularly as they ‘bite’ every year. If you are not confident that you are complying with your obligations in this respect, please contact us.
In line with its target to deliver proportionate regulation, the SRA is developing its relationship management programme for firms seen as higher risk. All firms should be aiming to improve their risk profiles so that they are seen by the regulator (and insurers) as being low risk. Contact us for help in improving your risk profile or for an analysis of your current profile.
Perhaps surprisingly, the SRA will be focusing its efforts on national and global firms even though most regulatory investigations tend to involve smaller firms.
There are steps that you must take and others that you should take. Some steps will come at greater cost than others, so it is important that you know where you should be focusing your efforts. For example, is a compliance plan a requirement of the handbook or is it merely one option?
For up to date and authoritative guidance on compliance plans, risk registers, checklists, forms and everything else you need to know, contact us.