COFA News: First law firm fined by SRA for failing to notify regulator of a material changes
Recognised* law firms in England & Wales must, at all times, have in place a have a compliance officer for finance and administration (COFA) and compliance officer for legal practice (COLP).
The Solicitors Regulation Authority (SRA) must approve that person before they commence their role.
Hathaways in Gateshead was fined in January 2024 for failing to “promptly notify the SRA of a material change to the information it had previously provided to the SRA about its COFA”, which is in breach of paragraph 3.8(a) of the Code of Conduct for Firms.
The fine Hathaways received was a fixed financial penalty of £750 and costs of £150.
If Hathaways breaches the rules again within the next three years, its fine will jump to £1,500, indicating the SRA’s intention to intensify penalties in response to repeated non-conformance. Consumers reading this news in the press will think twice before instructing a firm of solicitors who aren’t complying with the law.
The decision by the SRA highlights the authority’s commitment to maintaining legal sector regulations.
NOTE: Use of the word "promptly" should be used in its natural term, ie with little or no delay / immediately. This has been confirmed by the SRA Ethics Team as at 25 January 2024.
Compliance Officer for Finance & Administration (COFA) Training
The ILFM offers a COFA Training Course, which is online, live, and interactive, with chances for real time answers to questions within the sessions. Have a look at the ILFM Training Calendar HERE.
Firms must always have in place a compliance officer for legal practice (COLP) and a compliance officer for finance and administration (COFA) in place. As the ILFM deals with finance, compliance, and practice management we cater to the needs of that role specifically.
A designated COFA must:
- Be an individual.
- Be a manager or an employee of the authorised body or be an approved COFA in a related, authorised body.
- Consent to his or her designation as the COFA.
- Be of sufficient seniority and responsibility to fulfil the role.
- Not be disqualified from being a head of finance and administration (HOFA), if appropriate.
- Individuals must also be “fit and proper” to undertake the role of COFA.
A compliance officer must adhere to the SRA’s character and suitability profile and its “fitness” and propriety” under rule 13.1 of the SRA Authorisation of Firms Rules.
Rule 13: Approval of Law Firm Compliance Officer Role Holders
Rule 13.1 – SRA requirements for approval of a COFA
Subject to rules 13.2 to 13.4, the SRA may approve a person's** designation as a COLP or COFA or to be a manager*** or owner**** of an authorised body***** if it is satisfied that the individual is fit and proper to undertake the role, in accordance with the SRA Assessment of Character and Suitability Rules.
A firm must designate a person as its COLP and a person as its COFA and the SRA must approve that person before they commence their role. The roles of the COLP and COFA can be carried out by the same individual, but this generally only works healthily in smaller law firms.
The COLP and COFA of a firm have specific responsibility for ensuring a firm, its managers and employees comply with the SRA’s regulatory requirements. They are also responsible for recording any breaches and reporting those to the SRA, where necessary.
As we have seen from this fine, a law firm MUST promptly notify the SRA if it becomes aware of any material changes to information previously provided to the SRA, by it or on its behalf, including to its compliance officers.
SRA Chief Executive, Paul Philip said in October 2023 on the topic of consumer protection and transparency rules,
“Compliance is clearly not optional. Our transparency rules are there to benefit the public, helping people compare law firms’ services and make informed choices. All those firms that are publishing the correct information rightly expect that we will take action against those who don’t.
“We brought in fixed penalties so we could deal with non-complex breaches of our rules more swiftly. That saves everyone time, cost, and stress. It also appears that the threat of fixed penalties is proving effective in bringing firms into compliance.”
The ILFM has a COFA support section on its website too, which is for ILFM members (who can access the conversation through the website with their unique logins). Please find more information on COFA Support HERE.
* "Recognised" law firms refer to a more traditional solicitor’s practice in which all of the people who are partners / directors and all of the owners in the firm are legally qualified. Other law firm set ups are that the SRA’s FA1 form requires are “licensed” or “recognised sole practice”.
** “Person” includes a body of persons (corporate or unincorporated).
*** “Manager” means: the sole principal in a recognised sole practice; a member of a LLP; a director of a company; a partner in a partnership; or in relation to any other body, a member of its governing body.
**** “Owner” means, in relation to a body, a person with any interest in the body, save that:
- in the SRA Authorisation of Firms Rules, and the SRA Authorisation of Individuals Regulations, owner means any person who holds a material interest in an authorised body, and in the case of a partnership, any partner regardless of whether they hold a material interest in the partnership; and
- for the purposes of the SRA Principles and the SRA Code of Conduct for Firms means a person who holds a material interest in the body; and
- for the purposes of the SRA Assessment of Character and Suitability Rules includes owners who have no active role in the running of the business as well as owners who do,
- and "own" and "owned" shall be construed accordingly
***** “Authorised body” means:
- a body that has been authorised by the SRA to practise as a licensed body or a recognised body; or
- a sole practitioner's practice that has been authorised by the SRA as a recognised sole practice.
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