Solicitors Regulation Authority (SRA) restrictions on who can act as a compliance officer for legal practice (COLP) and compliance officer for finance and administration (COFA) are due to take effect in January. Any individual who can exercise unilateral management control over a firm will be barred from COLP and COFA positions if the firm’s turnover exceeds £600,000. According to the SRA, about 1,660 firms may be affected, including about 431 sole owner-manager firms.
More than 130 lawyers have signed an open letter from the SME & Boutique Law Firm Alliance to the SRA, warning the plans have caused ‘genuine alarm’.
The Alliance calls on the SRA to pause implementation and consider alternatives.
‘In some small firms, every director could potentially be excluded, forcing them to appoint someone more junior, recruit externally or outsource simply to satisfy a structural requirement,’ the Alliance writes.
‘The consequences are not theoretical. Firms face recruitment and outsourcing costs they may struggle to absorb, while hundreds could be competing simultaneously for a limited pool of experienced COLPs and COFAs. Existing compliance professionals may find their roles displaced. For some firms, the result may be reduced growth, higher prices, consolidation or even questions about whether remaining in practice is commercially viable.’
An SRA spokesperson said: ‘We all agree on the need to better protect the public by strengthening the safeguards around client money.
‘Understandably, given the complexities involved, there is real debate about the best way to do this. We are grateful to those that have signed the letter outlining their concerns. We are committed to continuing the conversation on this important issue and we will take the time to carefully consider the points raised with us before we respond further.’
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