Study shows that COLPs feel nervous about their personal liabilities
A study conducted on the role of COLPs found that they appeared to be really nervous about the consequences for them if the firm was found not to be…
60 Seconds with Michelle Garlick, Partner
It has been reported today that the first academic study conducted on the role of Compliance Officers for Legal Practice (“COLPs”) found that COLPs appeared to be really nervous about the consequences for them if the firm was found not to be compliant.
Michelle, are you surprised by this?
No, I am not surprised at all. It is an understandable concern for COLPs that they will be liable for non-compliances and poor outcomes under the Outcomes Focussed Regulation regime, particularly as there is often very little clear guidance issued by the SRA to support them in their role. There are many responsibilities placed on the COLP and indeed, there were concerns when the concept of the role was unveiled that instead of being revered as ‘compliance champions’, those appointed to the role would be exposed to sanctions for their firms’ non-compliance.
Whilst there is limited evidence currently of COLPs per se being disciplined by the SRA, we are certainly seeing an increase in disciplinary investigations and sanctions against firms and responsible individuals within those firms. The impact of an investigation on management time and stress cannot be under-estimated.
Ultimately, the COLP must be able to fulfil their role effectively and to do this they need to promote a firm wide culture of compliance and ensure that management of risk is taken seriously, coupled with an audit trail documenting the activity and thought processes as “back up” if the SRA were to call.
The study also found that there is a “tendency” for COLPs not to report regulatory failures to the SRA. Why do you think this is?
Both the COLP and the Compliance Officer for Finance and Administration “COFA” are expected to report any material breaches of the SRA Handbook. However, since the inception of OFR regime and the creation of theses roles, very little guidance has been issued by the regulator to clarify its expectations of compliance officers and to confirm the meaning of ‘material’ in the context of breaches. Naturally, this has created a dilemma of “to report or not to report?” There is inevitably going to be concern that if they do report, they will be faced with an investigation by the SRA and the costs and stress which follow but that is not a reason not to report a serious breach. It is much worse in my view not to report an issue and then find the SRA at your door because a third party has reported you!
The study gave examples of some serious breaches that had gone unreported, which is concerning. There are ways of presenting a report to the SRA and we have helped many firms in constructing a report which then leads to no further action.
So what do you suggest a COLP should do if unsure about reporting a breach?
Take advice. As the saying goes, “A man who is his own lawyer has a fool for a client”!
Carry out a full investigation and document your reasoning so that even if you decide not to report it, you have an audit trail. Evidence of having obtained independent advice on the issue re-inforces that you are taking the matter seriously and your systems and processes for identifying these issues are working.
As the report also found, being the COLP can sometimes be quite isolating and a difficult one to fulfil when faced with making difficult decisions where other forceful partners/managers are against you. Objective independent advice provides you with the support you need to deal with these difficult decisions.
If you are a COLP and need advice and support on any aspect of compliance and risk, call our ‘COLP’ helpline on 0345 070 1047.