2019 - The Year of Compliance Professionalism by Tracey Calvert

It took me a long time to stop describing the SRA Handbook, when it was launched in 2011, as the new Handbook and sometimes it is hard to believe that we are now on the 21st incarnation of this rule book, and that is despite the fact that it is not actually a book nor are we talking exclusively about rules. Be that as it may, we are all expected to be familiar with this work but also be ready for change. The SRA would be critical of a firm which was still working with version 1 of the Handbook.

 

This year – and I sincerely hope that I do not come to regret writing the following words given that the SRA is a notoriously bad timekeeper - we will be expected to ditch the current Handbook and work with the SRA Standards and Regulations instead.

 

At the time of writing, the official launch date has not been announced. We are told that it is likely to be somewhere between April and July 2019.

 

Notwithstanding this vagueness, the fact that there will be a new regulatory toolkit means that we must be ready to refresh our ideas, processes and protocols, and even our compliance language, to accommodate the regulatory changes which will be thrust upon us. Have you started to plan for the changes? As a bare minimum, it will be necessary to change the language of internal policies and processes and consider training needs. More deeply, traditional law firms will be working alongside freelance solicitors and solicitors providing legal services in unauthorised businesses. It would be sensible to understand how the firm will work alongside these new types of practices.

 

One concept that was new in the SRA Handbook 2011, but which has survived the latest regulatory navel-gazing, is the role of the compliance officers and the compliance function in authorised law firms. Do you remember where you were when you first heard about the revolutionary idea of compliance officers? The idea that there would be an authorisation condition stipulating that certain members of the firm would be go-betweens, with specific roles intended to smooth the interaction between the firm and the SRA, was radical and most definitely a hard sale for the regulator. There was a certain wariness of both these roles and the regulator’s interest in law firm management. There was a feeling in some quarters that this was a fad because, really, what did management matter, and what interest should the regulator have in management, if clients received good legal services from good lawyers?

 

The critics have been proven wrong and the role of compliance in the well-run firm is the linchpin to the success of that firm in terms of its relationship with the SRA, and indeed with other stakeholders with an interest in the longevity of the business (such as clients, the Legal Ombudsman, the Information Commissioner’s Office and the firm’s insurers). Good lawyers become even better lawyers when they are working in a law firm which facilitates compliance with regulatory requirements and ethical behaviours. Bad lawyers are quickly identified and rooted out in such an environment.  The two compliance officer roles (the compliance officer for legal practice and the compliance officer for finance and administration) remain in the SRA Standards and Regulations and are essential to the correct regulatory and ethical response. In many firms, these roles are supported by other compliance professionals.

 

The idea is that all firms should be well-run with a solid regulatory and ethical core. The SRA made its expectations clear in the 2018/19 Risk Outlook. It’s simply stated; we are told the following: “Solicitors are responsible for meeting high professional standards. The business culture in law firms should reflect this.” How is this achieved? I would suggest these concepts as a starting point:

  • The managers of the law firm must demonstrate collective responsibility in their response to regulation, compliance and ethics. Whilst of course there will be differing opinions about the SRA’s requirements, the response to authorisation conditions must be understood; put bluntly, to lose authorised status means the loss of the business in its current form
  • The firm’s regulatory and compliance culture must be strong, clear and understood by all. This requires a universal understanding of certain concepts: the managers’ expectations; personal accountability; the need to be open; the duty to notify certain events; the reasons why working in a well-regulated environment is beneficial to everyone
  • The risk pinch points must be understood and managed: new employees, whether they are non-legally qualified support staff or lateral hires with fee earning roles must be educated to support the firm’s compliance viewpoint; maverick managers and employees must be managed to reduce their risk footprint; the third parties which might compromise the firm’s culture must be identified etc.
  • The role of effective supervision must be understood, whether this is a role for the head of the department, a line manager etc. Supervisors must understand their role as ambassadors for the firm’s compliance culture, and the need to act as risk monitors, and those who are supervised must understand the need for openness.

In my view, we will never go back to the pre-2011 position in terms of how we are expected to run our law firms, or to use more modern language, how we run our businesses. In practice, this means that the role of compliance cannot be treated as new or a fad or a passing fancy. The compliance function is here to stay and we are living in the age of the compliance professional, whether that is a role adopted exclusively by the firm’s compliance officers or whether the firm is employing individuals to support those officers. For my part, I have seen the rapid maturity of these roles and the role-holders in well-run law firms. How did law firms ever operate without a compliance function back in the day?

 

 

Tracey Calvert, 28 December 2018

Oakalls Consultancy Limited

tcalvert@oakallsconsultancy.co.uk

www.oakallsconsultancy.co.uk

 

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