SRA delays compliance reforms amid law firm concerns
The Solicitors Regulation Authority (SRA) has postponed its planned changes to compliance officer requirements after objections from smaller law firms, opting instead to concentrate on active oversight of high-risk practices. The regulator made clear that no modifications will be enforced in January, as first scheduled, due to warnings that the proposed measures might push some firms to close.
The original plan, backed by the Legal Services Board, had excluded managers with sole decision-making authority from serving as Compliance Officer for the Firm (COLP) or Compliance Officer for Finance and Administration (COFA) in firms with annual revenues above £600,000 or client funds exceeding £2 million. The client money limit was quadrupled following feedback from consultations.
Under the initial rules, sole practitioners below these thresholds could retain their COLP role but would be ineligible for COFA. The SRA now intends to suspend implementation while refining the rules through collaborative working groups and exploring alternative methods. Aileen Armstrong, the executive director for strategy and policy, stated that the regulator would focus on detecting and reducing risks of consumer harm, including through focused supervision of high-risk firms.
During this review period, the SRA is expanding its supervision pilot program, introducing new techniques to evaluate and address risks in regulated firms. The authority will verify that firms uphold proper governance and that compliance teams function without interference. Armstrong reiterated that the SRA’s strategy remains centered on consumer protection, combining precise measures with broader regulatory adjustments.
Responses from the industry varied. The Law Society, speaking through its president Brett Dixon, approved the delay, advocating for a risk-based strategy informed by evidence rather than fixed limits. Dixon emphasized that any adjustments must reflect firms’ operational needs while safeguarding clients. In contrast, Stephen Larcombe, chair of the Conveyancing Task Force, praised the pause but cautioned that unresolved challenges for law firms could endure without substantial reforms.
Regulatory oversight in legal services has grown stricter as firms contend with higher expenses and shifting client demands. The SRA’s move toward proactive supervision aligns with broader financial regulation trends, where monitoring now targets behavioral risks over routine compliance checks. Firms with weaker governance structures may now face stricter oversight, though the exact standards for identifying “higher risk” practices are still being defined.
