COLPs on the frontline

Just three days into 2025, and the role of compliance officer for legal practice (COLP) has come into real focus with the COLP in a listed law firm resigning with no notice after 25 years at the firm, apparently related to the potential ousting of the current Chief Executive by the largest shareholder.

All entities regulated by the Solicitors Regulation Authority (SRA) must have a COLP in place at all times, with the officer being responsible for taking reasonable steps to:

• ensure compliance with the terms and conditions of their firm's authorisation;
• ensure compliance by their firm and its managers, employees or interest holders with the SRA's regulatory arrangements which apply to them;
• ensure that their  firm's managers and interest holders and those they employ or contract with do not cause or substantially contribute to a breach of the SRA's regulatory arrangements;
• ensure that a prompt report is made to the SRA of any facts or matters that they reasonably believe are capable of amounting to a serious breach of the terms and conditions of their firm's authorisation, or the SRA's regulatory arrangements which apply to their firm, managers or employees;
• notwithstanding the point immediately above, they ensure that the SRA is informed promptly of any facts or matters that they reasonably believe should be brought to its attention in order that it may investigate whether a serious breach of its regulatory arrangements has occurred or otherwise exercise its regulatory powers,
• save in relation to the matters which are the responsibility of the COFA.

The firm in question is an Alternative Business Structure (ABS) and is required to have an equivalent to the COLP, known as a Head of Legal Practice (HOLP), but both have the above responsibilities.

What happens when a COLP resigns?

In this case, under the SRA Authorisation of Firms Rules, the firm will have had to apply for temporary emergency approval of a compliance officer within 7 days of the resignation, with approval, if granted, lasting for 28 days; during this latter period a new permanent COLP would have to be nominated by the firm and approved by the SRA. 

But what happens if a temporary or permanent replacement can’t be found? If this happens, strictly speaking the firm can no longer operate as a regulated business offering reserved legal activities.

Challenges Facing COLPs

For some COLPs, the role is seen as a ‘poisoned chalice’, especially with the regulatory pressure they are under to ‘get things right’, and where they get no real support from their firms, including a failure to appoint a deputy, no reduction in fee earning targets, no funding for compliance related training and resources, etc.

Disciplinary cases over recent years have clearly shown that many COLPs have not been fulfilling their roles as they should have done, for example, not ensuring that appropriate policies, controls,  and procedures were in place, and that relevant training had been undertaken; in some cases the solicitors involved said they didn’t even know they held the role of COLP!

The SRA and the Law Society have said that COLPs would not be seen a sacrificial lambs should things go wrong, and that as long as they had taken reasonable steps to ensure compliance they would not be held personally liable, but this is little comfort if they are a partner where there is joint and several responsibility if they share management responsibility with other managers of the firm!

What a new COLP should consider

If I was a new COLP in a firm I would want to be sure that all compliance and business systems were in place before taking on the role, for example: 

• effective governance structures, arrangements, systems and controls in place that ensure:
  • the firm is able to comply with all the SRA's regulatory arrangements, as well as with other regulatory and legislative requirements, which apply to it;
  • managers and employees comply with the SRA's regulatory arrangements which apply to them
  • managers and interest holders and those the firm employs or contracts with do not cause or substantially contribute to a breach of the SRA's regulatory arrangements by the firm or its managers or employees.
• the retention and maintenance of records to demonstrate compliance with the firm’s obligations under the SRA's regulatory arrangements.
• records to show the firm has remained accountable for compliance with the SRA's regulatory arrangements where its work is carried out through others, including managers and those the firm employs or contracts with.
•  records to show that the firm has actively monitored its financial stability and business viability.
• records to show that the firm has identified, monitored and managed all material risks to its business, including those which may arise from its connected practices.

Reporting and clean bill of health

I would also want it to be clear that if I found any serious breaches these would need to be reported and resolved, so I could start with a ‘clean bill of health’; I would not want to be held accountable for issues that were not of my making, and for the avoidance of doubt, even having COLP insurance or liability waivers in place would not absolve a new COLP from reporting to the SRA as required under 3.9 and 3.10 of the SRA Code of Conduct for Firms (SCCF), which say:

• (3.9) You report promptly to the SRA, or another approved regulator, as appropriate, any facts or matters that you reasonably believe are capable of amounting to a serious breach of their regulatory arrangements by any person regulated by them (including you) of which you are aware. If requested to do so by the SRA, you investigate whether there have been any serious breaches that should be reported to the SRA.
• (3.10) Notwithstanding paragraph 3.9, you inform the SRA promptly of any facts or matters that you reasonably believe should be brought to its attention in order that it may investigate whether a serious breach of its regulatory arrangements has occurred or otherwise exercise its regulatory powers.

What happens if reporting isn't agreed? 

If the above were not in place and reporting was not agreed, I would be left with no alternative but to report issues myself under SCCF 3.11 (“You do not attempt to prevent anyone from providing information to the SRA or any other body exercising regulatory, supervisory, investigatory or prosecutory functions in the public interest”), and hope that SCCF 3.12 would protect me from a career perspective (“You do not subject any person to detrimental treatment for making or proposing to make a report or providing, or proposing to provide, information based on a reasonably held belief, irrespective of whether the SRA or another approved regulator subsequently investigates or takes any action in relation to the facts or matters in question”).

If an appropriate compliance culture exists, taking on the role of COLP, partner or manager shouldn’t be an issue, but history shows that this does not exist in some firms and those filling these roles within these firms will be at serious risk!

It is often said that “if you think compliance is expensive, try non-compliance”, and this quote will become even more relevant in 2025 and beyond, with the SRA now having unlimited fining powers for financial crime breaches and expressing an intention to use them when appropriate!

Start off 2025 on the right foot by ‘doing the right thing’! 

For more guidance on navigating the challenges of being a COLP, check out our blog: Speaking from Experience: How to Be a COLP. In this piece, we interview an experienced COLP to gain practical advice and real-world tips, offering invaluable insights to help compliance officers excel in their roles.