Every Solicitor’s practice in England & Wales has to have a Compliance Officer for Legal Practice (COLP) and a Compliance Officer for Finance and Administration (COFA), who are responsible for ensuring that their Firm has a coherent approach to regulatory matters. They are the first point of contact for the SRA when regulatory matters are raised. An equivalent HOLP and HOFA are in place both in Alternative Business Structures for whom the same provisions apply, and in Licensed Conveyancers who are regulated by the Council of Licensed Conveyancers.
As the COLP/HOLP and COFA/HOFA are responsible for immediately reporting material breaches, Firms must have systems to identify and record such breaches. SRA guidance also recommends that COLPs/HOLPs consider systems for undertakings, checks on new staff, monitoring regulatory deadlines, monitoring and managing risk, professional conduct issues and staff development as part of their role and each of these items must be given due weight and consideration. COLPs/HOLPs and COFAs/HOFAs also have a requirement to ensure that regular file reviews are undertaken with follow up corrective action being completed where applicable.
Chapter 7 of the Solicitors’ Code of Conduct 2011 requires the Firm to have ‘effective systems and controls in place to achieve and comply with all the Principles, rules and outcomes … of the Handbook’ whilst the CLC Handbook places an equal emphasis on Licensed Conveyancers under Principle 2. This is an onerous burden and it is vital that Firms consider how they will demonstrate such systems and controls to their respective Regulator.
Many Firms believe that by keeping compliance in-house they will benefit from greater control and reduced costs. However for many Firms this is a mistaken perception as experience has shown that where the COLP/HOLP/COFA/HOFA is also a fee earner, they are reducing their fee earning capacity by having to concentrate on their regulatory obligations. By committing to outsourcing compliance, they take more of an overseeing role, thus increasing the percentage of time that they can commit to earning fees.
Let’s look at an example where a Senior Fee Earner charges £300 per hour:[default_table]
|Hours spent on COLP/HOLP/COFA/HOFA duties per month||20|
|Monthly hours potentially saved by outsourcing||10|
|Lost Annual Gross Income by not outsourcing||£36000|
Where the COLP/HOLP and COFA/HOFA are different people this doubles to £72000 of lost annual gross income. What effect would it have on your Firm to increase annual gross income by that amount? With the typical cost of outsourcing compliance being considerably less than that, you can begin to appreciate the financial benefit.
By outsourcing, more time will be available to focus on core business functions and core competencies as well as improving operational performance. Access to the capabilities of compliance professionals reduces the burden of keeping abreast with the regulatory changes in policies and procedures.
In reality, outsourcing is an increasingly growing area in the legal and financial regulatory area. It should be borne in mind that the Firm is still ultimately responsible for any work that is outsourced, but the figures and benefits speak for themselves.
Can you afford not to outsource compliance?
John W Graham
Associate: Legal Eye & Financial Eye