Managers will no longer double up as compliance officers: what the new COLP and COFA rules mean

Anyone who has quietly held both the managing partner's job and a compliance officer title is about to lose that arrangement. The Legal Services Board has approved Solicitors Regulation Authority rule changes that separate compliance officer roles from firm managers able to make decisions unilaterally, in every practice apart from the smallest.

The same decision cleared new rules obliging firms to file annual accountants' reports whether or not those reports are qualified, with fixed financial penalties for those that do not.

A phased start from January 2027

Implementation is staged. The compliance role changes begin in January 2027, with the largest firms going first; on the SRA's estimate, roughly 99% of client money should be covered by April 2027. The accountants' report rules follow in April 2027.

The regulator's own modelling suggests about 1,660 firms — around 18% of the market — plus 431 sole owner-manager practices may need to act, though it conceded the estimate rests on limited information.

Where the exemption lines fall

Thresholds moved after consultation. The turnover ceiling for exemption stayed at £600,000, but the client money ceiling was lifted from £500,000 to £2m, pulling more small firms out of scope.

In sole owner-manager firms under those thresholds, the owner can still be the compliance officer for legal practice (COLP) but not the compliance officer for finance and administration (COFA).

A further carve-out covers firms that breach the £2m client money figure through "anomalous transactions" that are not representative of their usual business. The LSB expects guidance and worked examples from the SRA before that exemption bites.

Why the SRA pushed for the split

The consultation launched in December was framed as a way to spot risk earlier, after collapses such as Axiom Ince exposed how concentrated authority and compliance responsibility can sit in the same pair of hands.

Both the Law Society and the Sole Practitioners Group objected strongly, arguing the burden lands hardest on small practices with fewer people to spread roles across.

The accountants' reports question is not settled

The SRA dropped its proposal for accountants to send reports straight to the regulator. The LSB, like the Legal Services Consumer Panel, saw real consumer benefit in direct submission and wants the work to continue.

The regulator says the idea still has merit but that liability, accountability and practical mechanics need resolving, and the sector needs to be ready, before it could work. The LSB has asked for progress updates.

What firms should be doing now

For most firms this is a governance exercise with a deadline. The practical questions are who becomes COFA if the current holder is also a decision-making manager, whether that person has the seniority and information access to do the job properly, and how client money totals are tracked against the £2m line month to month.

The LSB flagged one open risk: compliance costs may be passed to clients through higher prices, with possible knock-on effects for access to justice. The SRA argued a competitive market makes that far from automatic.

Source: Legal Futures