SRA softens COLP/COFA rules after small firms warn of closures

The rule that alarmed the high street

The Solicitors Regulation Authority has amended its new rules on the separation of compliance officer roles, following sustained pushback from small firm owners.

As published last December, the rule appeared to say that for firms within scope, no senior manager could hold a compliance officer post. Read literally in a six-partner practice, that is an instruction to recruit an external COLP or COFA — a role that is scarce, expensive and carries personal regulatory exposure.

Firms said plainly that they could not find such a person, could not afford one, and would face closure rather than compliance.

What has changed

The amended wording narrows the restriction to an individual who can unilaterally make significant management decisions, rather than every senior manager or owner in the firm.

In practice, that lets many small and medium practices keep compliance responsibilities in-house, provided the person holding them is not also the single unchecked decision-maker at the top of the business.

The SRA has accepted that people were not clear on what the original rule meant in practice — a candid admission, and one worth remembering the next time a consultation response is dismissed as noise.

This is a clarification, not a retreat

It is important not to oversell the change. The underlying policy intent survives intact: the regulator still wants a separation between the person who can move the firm unilaterally and the person responsible for telling the regulator when something is wrong.

That intent comes directly from the Axiom Ince, SSB Law and PM Law failures, where oversight sat too close to the people being overseen.

What firms should do now

Three practical steps.

Review your governance documents and identify, honestly, whether any single individual can make significant management decisions without challenge. If the answer is yes, the rule bites.

Second, document the challenge mechanism. A board, a management committee or a partnership vote that genuinely constrains the principal is the substance of compliance here.

Third, refresh your COLP and COFA appointment records and make sure the reporting line runs somewhere other than straight back into the person being monitored.

Our view

Credit where it is due: the SRA listened and fixed unclear drafting rather than defending it. That is better than the alternative.

But the episode still illustrates the recurring problem with regulatory reform in this profession — rules written with the collapse of a large consolidator in mind, then applied unchanged to a four-partner firm in a market town. Proportionality has to be designed in at drafting stage, not bolted on after the letters arrive.