Managing Regulatory Relationships - 5 steps to an effective compliance strategy

I was recently asked to speak at a national risk and compliance conference and asked to share my experiences of managing regulatory relationships. Whilst planning what to say, I reflected on my experience of good management and the fact that most lawyers and compliance professionals I meet are striving to achieve a common goal; to stay regulated and to be part of a well-run business. With time to reflect on how this can be

 t-calvert

achieved, I thought I would share with you – as I did with the Conference delegates – my thoughts on how to stay regulated.

 

Effective management of the regulatory relationship creates a situation which is unsurprising for both you and your regulator. It’s good to be dull in regulatory terms! It’s good to be low maintenance and work in an environment where events are anticipated and actively planned. It’s a situation where fire-fighting and chaos is avoided and regulatory reactions are well-rehearsed. It’s timely, you are not caught unawares, it’s supported by effective communication (internally and externally), and you have the means of being able to prove you do what you say.

 

It seems to me that there are five components to rolling out an effective compliance strategy:

 

Step 1 – understanding and agreeing to the concept of regulation 

 

Of course, I hear negative views about how we are regulated and I do understand why there are frustrations. However, my starting point is this: do we support the reasons why the law is heavily regulated and do we want to be part of this industry?

 

Regulation ensures that both we and our clients are protected from those who may try to undermine what we can do with our knowledge and skills. A good reference point for this is always the wise words of Sir Thomas Bingham who, in the landmark regulatory case of Bolton v Law Society, expressed it by saying that lawyers should act with “integrity, probity and complete trustworthiness” before adding “a profession’s most valuable asset is its collective reputation and the confidence which that aspires……the reputation of the profession is more important than the fortunes of any individual member. Membership of a profession brings many benefits, but that is a part of the price”.

 

These sentiments help with an understanding of both the regulatory objectives in the Legal Services Act 2007 and the SRA’s risk based regulatory framework. This isn’t up for debate which means that if we want a fuss-free regulatory relationship we must accept these motivations and ensure that everyone in the firm understands not only their duties to their business but also to the industry.

 

Step 2 – understanding the technical requirements

 

There are three areas of knowledge we must understand: the law and regulatory compliance standards, and professional duties.

 

Compliance is dynamic and legal and regulatory duties are constantly evolving. We need resources to keep ourselves and our firms up to date. However, I would argue that this is straightforward and it’s the third element that creates more challenges. We are professionals operating in a regulated industry. How do we ensure the right behaviours of our people?

 

Again, a useful starting point is Bingham’s phrase; integrity, probity and complete trustworthiness. What makes someone a trusted adviser? Surely, this includes an understanding of duties to the court, duties to our clients and then duties to uphold the collective reputation of the profession so that we do not do anything which brings the profession into disrepute (to revive a phrase from a bygone era).

This is a tough ask, particularly of those people with whom we work who may not have a legal background. It is risky to assume that everyone in the firm will have prior knowledge of the characteristics we are asking them to display. We make it harder with the language we use. Whilst we are getting better at toning down our language with our clients, shouldn’t we also do this with our non-solicitor staff to invite them into our world. Systems and consistency of methodology also helps as does effective and mentoring supervision.

 

Step 3 – creating the correct infrastructure

 

SRA Principle 8 is the ally to the regulatory champions in the business, enabling us to promote proper governance and effective risk management strategies. It allows compliance to be in the spotlight playing a central, non-negotiable role in keeping the business alive.

 

Some thoughts on this step:

  • It’s essential to deliver a clear message about the purpose of compliance and the compliance team within the business. Compliance is all-pervasive

  • However, the compliance team does not own responsibility for achieving regulatory standards. It’s a team effort and the message is collective responsibility

  • In particular, the owners of the business must be seen to be behaving properly. But, why wouldn’t they? It’s their business after all

  • The compliance team must have a role in decision-making. Not the final say, but a voice so that a decision is a well-informed one

  • No one must misunderstand the importance of compliance to the continuing survival of the business not only in terms of staying regulated but also from the perspective of the competitive advantage that this gives the business.

Step 4 – demonstrating accountability

 

Actions speak lounder than words; it’s not good enough to talk the talk, it’s essential to demonstrate through actions what we do.

The two demonstrables I focus on are training and supervision. Training provides evidence of the right culture to facilitate and encourage compliance. It allows the firm to tease out weaknesses – of both the system and people– and it affords the business the right to challenge attitudes which are out of line with regulatory and other objectives. Supervision is essential to this for so many reasons not least if we look at many recent disciplinary decisions where ineffective supervision has been raised.

 

Step 5 – demonstrating openness and transparency

 

Or, put another way, compliance with SRA Principle 7. This doesn’t happen by chance. It is managed through having confidence that you know enough about what is happening in the firm. This links up with instilling trust in colleagues that their own openness and accountability does not equate to a blame and shame culture. That is driven by the business owners and reinforced through supervision and training experiences.

 

Tracey Calvert

tcalvert@oakallsconsultancy.co.uk

Oakalls Consultancy Limited

23 February 2018

Like   Back to Top   Seen 2.6K times   Liked 0 times
Subscribe to Updates And Join Over 1.2K Subscribers Today!

Subscribe to:
x

Subscribe to Updates

If you enjoyed this, why not subscribe to free email updates and join over 1275 subscribers today!

Subscribe to updates



Subscribe to:

Alternatively, you can subscribe via RSS RSS

‹ Return to

All email subscriptions must be confirmed to comply with GDPR.

I've already subscribed / don't show me this again