COLP and COFA

normaldeerManagement

Nov 20, 2013 (3 years and 6 months ago)

51 views

COLP and COFA

-

getting started

Ian Muirhead

Why Outcomes Focused Regulation?


Because the range of different business
models for the delivery of legal services
post
-
LSA precludes standardised rules



The precedent is that of the FSA, which
superseded 7 FS regulators in 2001



SRA was instructed by LSB to adopt
FSA
-
style regulation



OFR permits firms to decide on their
own approach to compliance within
overall guidelines

The SRA Handbook


The Handbook comprises the new Code
of Conduct and the (largely pre
-
existing)
Rules, e.g.:


-

The SRA A
ccounts Rules


-

The authorisation/ practising requirements


-

The client protection rules


-

The disciplinary procedure rules


-

The property selling and financial services rules



In future the rules will also be applied in a
way which has regard to the outcomes

The Outcomes focus on RISK


Firms must demonstrate to SRA that they
are identifying and managing risk,
particularly
risk to the client
and
risk to
the reputation of the profession



For example, Outcome 3.1:



you have effective systems and controls
in place to enable you to identify and
assess potential conflicts of interest




The Code is a
guide

to compliance

Creating a compliant environment


FSA March 2012 report to regulated firm:




The
management

of the firm should be
able to demonstrate
personal ownership
and involvement with all regulatory
requirements.



This is vital to developing and sustaining
a
culture

which enables the firm better to
identify and manage risk to the firm and
its clients





The role of management


New Principle 8 in the Code of
Conduct requires effective business
management, and Chapter 7 states:




Everyone has a role to play in the
efficient running of a business.



However, overarching responsibility
rests with management.



The managers should determine
what arrangements are appropriate
to meet the outcomes






Conveyancing Enforcement Strategy


The first specific strategy, demonstrating
the SRA requirements of management:



A governance structure with effective
oversight of risk management systems



Systems for identifying & monitoring risk



Systems to monitor the firm’s viability



How the handbook applies to the firm



Evidence of training on risk



Monitoring the effectiveness of systems

The role of COLP and COFA


Management must create an efficient
business environment, in which
compliance equates to best practice



SRA Authorisation Rule 8.5 requires firms
to appoint COLP and COFA as
representatives of management



Compliance officers will not be regarded
as sacrificial lambs (A.Townsend, SRA)

Does Lexcel ensure compliance?


Lexcel is useful on policy. Less useful on
business management and compliance.
The summary to Lexcel V5 states:




COLP & COFA


This is a SRA regulatory specific
requirement which practices should
automatically be compliant with. As such,
it has not been included in V5.”



Responsibilities of COLP


To ensure compliance with the terms
of the firm’s authorisation and any
statutory obligations



To record any compliance failures



As soon as reasonable practicable,
report material failures to the SRA




COFA

has similar responsibilities in
relation to the SRA Accounts Rules

Steps to be taken by COLP


Familiarisation with the Code and Rules,
regulator alerts, legal press



Work with management to ensure that
departments and branches are aware of
and committed to compliance issues



Create a paper trail to demonstrate
compliance



Demonstrate continually questioning
standards and seeking improvement

The audit trail


Management structure: who owns the risks?



A compliance plan



A “Risk Register”



File checks



Record of compliance failures



Client feedback and complaints



Reports to the SRA and management


If you didn’t record it, it didn’t happen!

Reports to management & SRA


Ideally, five annual reports to the
firm’s
management

committee:


COLP & COFA


MLRO


Conflicts of interest


Complaints


Outsourcing



Annual report to
SRA

and interim
reports of material non
-
compliance


Structure and reporting lines

Firm’s Management Committee

Chief Executive

COLP

COFA

Fee earners

Admin/IT

SRA

Marketing


MLRO

HR/ T&C








Compliance plan


A document, accessible to staff and SRA,
explaining the firm’s compliance policy
and the forms used to record compliance



Could be a compliance manual



ABS application requires a compliance
plan evidencing policies/ procedures for
client care, complaints, equality, conflicts
of interest, client confidentiality, money
laundering, T&C, publicity, fee sharing,
undertakings and accounts


Risk Register



= evidence that management has thought
about and considered how to address risk



Could be rated by importance or likelihood



Conveyancing strategy mentions over
-
dependence on business type or clients



Major risks could include competition, loss
of business records, business continuity



Outsourcing is an SRA concern (O7.10)



Provide for staff concerns to be included



Risk v opportunity


Risk is the downside. Opportunities
should also be identified and form the
basis of the firm’s
business plan



Should include SWOT analysis
-

clients,
growth, pricing, profitability, staff, brand



Also finances
-

turnover, profits,
cashflow, balance sheet, fee
-
earner
gearing, WIP, debtor days, working
capital, borrowings

Outsourcing, per the handbook

Means
legal

activities and functions, e.g.:



Legal secretarial duties




Proof

reading



Research



Document review



IT supporting delivery of legal services



Business process



Outsource contracts must permit SRA
to have access to outsourced records

File checks


By peer group or using consultants



Covering MLR, risk assessment, fees,
consistency of presentation



10% of files to be checked on average



Can be random or related to KPIs



Results fed into Personal Development
Plans



Checklists to avoid creating docs which
could be used against the firm in any
future litigation

Record of compliance failures

Detailing:



Date identified



How identified



Date of matter



Description of matter



Remedial action



Date of reports to SRA where “material”



Comments

Client feedback and complaints


Aimed at improving services



Serves also to foster client relationship



Can provide testimonials for marketing



Complaints should be analysed to
prevent repetition



Is a satisfied client a client necessarily
one who has been treated fairly?
(inequality of knowledge)

COFA’s audit trail


Weekly review of bank balances



Quarterly review of old client balances



Fortnightly review of bills issued, to
identify pending transfers



Client and office a/c reconciliation



Written Agreements with banks and
building societies re client monies

SRA administration


SRA’s Practice Standards Unit has been
disbanded, so no pastoral help from SRA



SRA wants much more annual
information from firms, to inform its risk
assessments



“Fit and proper” tests for non
-
lawyers,
new authorisations, office holders,
owners, managers

Enforcement


Approach is risk
-
based. SRA will prioritise
issues by reference to their likely impact



SRA will obtain data from other regulators,
“thematic” work, consumers, Risk Centre



Investigates via on
-
site visits, interviews,
mystery shopping, thematic visits



Fines for ABS (and traditional law firms?)
<£250m per firm, <£50m per person

OFR


a blessing in disguise


The IFA experience of FSA
-
style
regulation is that it has made them
more efficient as businesses



This is what solicitors need if they
are to be competitive in the post
-
Legal Services Act era


How SIFA can help solicitors


COLP and COFA Compliance Manual



Telephone and e
-
mail helplines



Bushell’s Briefs up
-
date bulletins



Monthly webcasts and staff training



OFR and Lexcel consultancy



ABS applications



Go to
www.sifalegal.co.uk


Balancing risk and opportunity

Next webcast.....


Should you have any questions
please contact me on 01372 721172
or email
ian.muirhead@sifa.co.uk


The next webcast is on Wednesday
April 18
th

by Ian Cockerill, SIFA
Compliance Director on “The role of
Lexcel in Outcomes Focused
Regulation”.