The compliance response to the SRA’s updated regulations

Written by International Compliance Association on Wednesday October 23, 2019

The long-awaited remodelled regulatory toolkit from the SRA is to be launched on 25 November 2019. Called the SRA Standards and Regulations, (or STARs for short), its tone is evolutionary rather than revolutionary, but it does provide some very strong messages about what will in future be expected from lawyers and others in SRA-authorised law firms. Compliance professionals employed in these firms should be busy preparing to support their colleagues to make a safe and appropriate transition.

The STARs embody phase two of the SRA’s regulatory relationship with regulated individuals and SRA-authorised law firms. Phase one was introduced by the SRA in 2011 with the SRA Handbook. This was revolutionary, introducing such unfamiliar concepts as outcomes-driven regulation, compliance officers, regulatory interest in internal governance and far more self-reporting than perhaps we were comfortable with. In other words, the regulator was creating the expectation that compliance would be a central service in law firms and that openness and accountability should be in evidence.

With phase two, the SRA is building on these foundation stones and making sure that compliance really is embedded as an effective and firmwide function. In fact, in well-run, forward-thinking entities, this is now the norm and compliance is no longer a backroom function. Compliance skills are now recognised as professional skills and many firms are hiring compliance professionals and/or upskilling their employees to facilitate this function.

The key features of the STARs build on this starting point and add further ingredients into the mix.

Changes which cannot be ignored include:

• Ethical behaviour being more explicitly referenced. Of course, there has always been the need for individuals to deliver legal services in an ethical way, but the SRA Handbook language focused less on this and more on regulatory compliance requirements. The emphasis is shifting again. The realignment is clearly in evidence with the SRA Principles 2019. Whereas the SRA Handbook introduced us to 10 Principles which included some which related more to our regulatory relationships and regulatory expectations, the 2019 version is pure ethics.
  
  
• Professional behaviours in the two Codes of Conduct continuing this message. The SRA Code of Conduct for those individuals with a direct regulatory relationship (solicitors, registered European lawyers and registered foreign lawyers) explains personal expectations in unambiguous language. Again, this is nothing particularly new but just re-emphasised so that, for example, individuals are clearly reminded that they remain personal accountable for those they supervise, and they must ensure that this supervision is effective.
  
  
• The SRA Code of Conduct for Firms delivering the message that being able to demonstrate compliance in practice is key. We are told, for example, that all managers are responsible for compliance and that there must be evidence of firmwide standards to support the delivery of good quality, ethical services
  
  
• The SRA Accounts Rules having finally been dragged into the twenty-first century with less focus on prescriptive timekeeping but continued emphasis on the protection of client money

Regulated individuals and everyone employed in SRA-authorised law firms will be expected to demonstrate business as usual on 25 November, and this is where a solid compliance function operating as the engine room of the firm will enable ethical behaviour and the delivery of good quality legal services.  We will be expected to ensure that there is a seamless adaptation to the new toolkit.

Suggestions for compliance professionals grappling with this task include the need to consider:

• Effective communication with colleagues – who needs to know about the changes and why? For example, if managers are expected to have collective responsibility for compliance, what do they need to be told about the SRA and the STARs? What agreement needs to be sought from these individuals to support the compliance function?
  
  
• Review of the STARs and assessment of current internal procedures – again, what needs to change and why? If the focus is increasingly on accountability, then do policies need to change to facilitate this? Does, for example, your supervision policy work in practice and support individual supervisors in their quest to demonstrate effective supervision?
  
  
• Training – the regulator will expect all individuals to understand what behaviours they must demonstrate and why. At the very least everyone ought to be familiar with the STARs language. In more detail, individuals at all levels in the organisation ought to understand what the firm and the regulator requires from them. Would everyone in the firm be able to hold a comfortable conversation about regulation?

The compliance skillset needed to ensure this smooth transition are not confined to simply the technical knowledge, although it goes without saying that excellent knowledge of regulation and the STARs is needed. In addition, compliance professionals need the skills to be able to communicate with, and influence, the right people with the right language. They also need to have knowledge of the firm’s business strategies, the ability to effect change, and the means to monitor and assess compliance.

About the author: Tracey Calvert is a Director at Oakalls Consultancy Limited and a Tutor on ICA Advanced Certificate in Legal Compliance. The course provides a comprehensive overview of the legal regulatory environment and is suitable for legal compliance professionals working in England and Wales.

Disclaimer: This article originally appeared on www.lexology.com