Sunday, June 9, 2013

What senior management will want to know from their COLP and COFA

COLPs and COFAs  will be spending a lot more time with the other partners or co-owners of the firm in the future.

The SRA will be increasing pressure— and in some cases liability—on firms to keep up with regulatory demands, which means the firm’s management will increasingly lean on the COLP and COFA to keep them informed.

The SRA have made it clear that the COLP will not be a sacrificial lamb and owners of the firm can not simply ‘pass the buck’. The SRA guidance notes state “the existence of compliance officers in a firm and the requirements on them to ensure that the firm, as well as its managers and employees, are complying with the regulatory arrangements is not a substitute for the firm’s and manager’s responsibilities” the notes go on to clarify  “The firm and its managers are not absolved from any of their own obligations and remain fully responsible for compliance.”   In other words, the firm and its managers need to be knowledgeable about the content and operation of the compliance program to prevent and detect regulatory breaches and exercise reasonable oversight.

The dilemma for the COLP and COFA , however, is striking a balance between too much and too little information. A high-level report, issued only at infrequent intervals, may not be detailed enough to get the job done. Granular reporting runs the risk of data overload or taking too much time for the management of the firm to wade through.

The firm’s management should want to know is how their own programs live up to the hallmarks of an effective program in the eyes of the SRA. Ultimately it boils down to one question: ‘How do we know it is working?’

The managers should be looking for assurances that the firm doesn’t merely have “paper programs” or “point in time programs” that are not adequately tracked or analyzed. It is not enough to have a checklist just sitting on a shelf gathering dust or a software equivalent to an Excel spreadsheet with a list of SRA requirements to be completed a few days before the SRA annual report is due. Almost all of the current COLP software packages that I have seen to date claiming to manage compliance are “flat” – policies, tasks, alerts, diaries – really just sophisticated ways of ensuring a process can be demonstrated.

Whilst the Firm’s management need not be interested in the minutiae of specific compliance issues the should seek the comfort of knowing that there are systems in place that keep track of compliance requirements.

Whilst law firms may be struggling to keep pace with increased demands on the limited time and resources at their disposal at the very least they should be asking questions about what’s really going on with their culture and whether they have the right processes and protocols to comply with the new SRA regime. Even just inquiring can cause a ripple effect, and the compliance function does a better job because the owners of the firm are focused on them.

No comments:

Post a Comment