The new COLP/COFA rules ask small firms to find a compliance officer they cannot afford

The Legal Services Board has signed off the Solicitors Regulation Authority's reworked rules on compliance officers, and the profession's reaction has been notably cool. The headline change is straightforward enough: firms above a defined size will no longer be able to hand the compliance officer for legal practice (COLP) and compliance officer for finance and administration (COFA) roles to the same person, and a £600,000 client account threshold sits at the centre of the new architecture.

What the £600,000 threshold actually does

The threshold is the SRA's attempt to draw a line between firms whose client account activity is incidental and firms where it is material. Cross it, and the regulator expects a genuine separation of duties — one individual owning conduct and regulatory compliance, another owning the money.

As a piece of risk logic, it is hard to argue with. The interventions that end firms are rarely subtle. They involve client money, and they almost always involve a single person with too much visibility and not enough challenge. Splitting the roles builds in a second pair of eyes at exactly the point where the profession keeps failing.

Why practitioners are pushing back

Opposition reported in the trade press this week has focused less on the principle and more on the practical reality. In a firm of six fee earners, the COLP and COFA are usually the same partner because there is no one else. The rule does not create a second compliance officer; it creates a recruitment problem, a fee, or an outsourcing contract.

There is also a fairness point. Compliance obligations have been ratcheting upwards for a decade — anti-money laundering, transparency rules, financial stability reporting, and now this — and each increment lands proportionally harder on the smallest firms. Large firms absorb it into an existing risk function. Everyone else absorbs it out of profit.

The context nobody at the SRA can ignore

The number of firms in England and Wales has been falling steadily and now sits below 9,000, while the number of practising solicitors keeps rising. The market is consolidating, and regulatory cost is one of the quieter reasons why. Every rule that adds a fixed overhead pushes a few more owner-managed practices towards a merger conversation or an early retirement.

That is not an argument for weak regulation. It is an argument for the SRA being honest about the trade-off it is making. If the intended outcome is fewer, larger, better-supervised firms, the regulator should say so, because that is the outcome this rule set will help produce.

What firms should do now

Three practical steps for anyone near the line.

First, work out where you actually sit against the £600,000 threshold across a full year, not on a single day. Client account balances fluctuate, and a conveyancing or probate practice can drift over the line without noticing.

Second, if you are close, start identifying a credible second officer now. The person needs authority, not just a job title — a COFA who cannot challenge the managing partner is a compliance fiction.

Third, if you plan to outsource, do the diligence properly. An external COFA who visits quarterly and signs off reconciliations they have not interrogated will not save you at an intervention.

Our view

The separation of COLP and COFA is the right answer to a real problem, and the SRA deserves credit for choosing a threshold rather than applying the rule to everyone. But the profession is entitled to ask why compliance reform so consistently arrives without any corresponding reduction in the reporting burden elsewhere. Firms will comply, as they always do. Some of them will not survive the accumulation.