52 BECOME 13

Richard Hill, chairman of the Institute of Legal Finance and Management, on how the new SRA Accounts Rules will mean new challenges for finance and administration compliance officers

The compliance officer for finance and administration (COFA) role is nearly seven years old and there are still mixed views on the purpose and success of the role in becoming, along with the compliance officer for legal practice (COLP), the lynchpin – or, some might say, Solicitors Regulation Authority (SRA) ‘watchdog’ – of compliance and governance. In less than a year after it was introduced the SRA began a review into the role, triggered by the need to review the accountant’s report and concerns around the financial stability of law firms, which ended up with the COLP and managers of law firms being responsible for financial stability.

COFAs now have a new challenge (or some may think nothing has changed) with the new SRA Accounts Rules coming into play on 25 November 2019. The prescriptive 52 rules of old are being culled down to 13 definitions with less detail and no guidance notes. Herein lies a challenge but also an opportunity for some.

The challenge will be adapting the historic approach and systems found in the detailed rules, specific timeframes and comprehensive record-keeping requirements to the new principle-based framework. COFAs will need to ensure the removal of rules does not allow for complacency, and they’ll need to think about how they will keep everyone in line without the often illusory certainty of prescriptive rules. Those familiar with following in-depth rules had hoped for more detailed guidance from the SRA to sit alongside the new rules but the SRA will be conscious of giving too much by the way of exhaustive guidance, which might contradict its new principles-based approach.

The old rules can still be followed and firms will remain mostly compliant. The opportunity could be for some firms to take a more flexible approach, which might better suit their business needs, without worrying about unnecessary rules and processes. The importance of COFAs and the culture of firms will be apparent as some COFAs have already said they will have to grapple with the perception that certain aspects are not required anymore, owing to them being ‘silent’ in the new rules, which is simply not the case. Others will understand that it’s not a move away from the philosophy to protect client money with sound management and internal processes.

COFAs should also use the opportunity to review and refresh their own role and protocols for protecting client money. In the next few editions of this COFA column we’ll explore some of the keys areas of interest for COFAs, including the banking facility rule, breach management and how to protect yourselves in the role.

If you do have any questions on the COFA role, please do contact the ILFM (www.ilfm.org.uk). The ILFM will also have a ‘COFA Corner’ stand at the LPM South and North 2020 events to help and discuss COFA dilemmas with any delegates.

This article can be found in LPM November: That’s not all, folks