Prepare for a compliance marathon, not a sprint finish

By Jane Jarman, Senior Lecturer, Nottingham Law School

Only the most eagle-eyed would have noticed that while most of England was looking forward to turkey with all the trimmings and last-minute Christmas shopping, the Solicitors Regulation Authority (SRA) chose 23 December 2011 to publish the second edition of the.

True, most of the amendments are consequential and well signposted, but '¨the festive timing is indicative that it will '¨be necessary for someone to be ‘on '¨guard’ for changes and refinements of compliance requirements.

There may have been a general feeling of apathy and anticlimax after 6 October 2011. The regulatory D-day came and went without any attendant clap of regulatory thunder. There was a ‘phoney war’ feel to the introduction of outcomes-focused regulation (OFR), with doom-laden media predictions of regulatory meltdown, confusion about the nature of OFR and a general feeling in some quarters that this type of thing happens from time to time but it will be business as usual in no time.

The profession and its regulator also got their respective wires crossed. The SRA wanted to talk about its overarching regulatory strategy, but the profession just wanted to know “what do I have to do and how much will it cost?” Many of those who ventured to the SRA’s website to download a copy of the new handbook may have felt overwhelmed at its size and filed compliance under ‘pending’.

The issue has, however, become pressing. The need to have a compliance officer for legal practice and compliance officer for finance and administration named by 31 March 2012 has resulted in a rise in advertisements for compliance specialists, a professional group unknown outside some of the magic circle firms '¨until relatively recently.

There are two ways to go.

1. Buy in specialism

The first approach is to ‘buy in’ a compliance specialist, someone well versed in the new Code of Conduct, '¨the SRA handbook and the SRA’s approach to OFR. Such individuals are rare, if not unobtainable, save for those firms that may have already snapped '¨up ex-SRA personnel or those with '¨Lexcel or other types of compliance-'¨based experience.

However, many with the much sought after compliance background may actually be skilled in traditional claims avoidance, which is only part of the more nuanced approach demanded by OFR. There are outcomes that must be achieved, along with effective governance structures, systems and controls. Firms must also identify, monitor and manage risks.

This is the language of risk management professionals in industry (including finance), but lawyers have not, '¨in the past, been trained in such techniques. Few will have the precise attributes required for the post.

2. Grow specialism

The second approach is, effectively, to ‘grow your own’ compliance professional and not be distracted by the fact that the person chosen will need to get to grips with the handbook. Some strong coffee will do the trick as you get an overview of the regime, an idea of the type of work that may be required by the firm and a sense of the type of person who might fit the bill as a compliance officer.

A new compliance professional broom may sweep clean. There is something to be said for a fresh pair of eyes with a wide-ranging brief to look metaphorically under the regulatory carpet.

There is, however, no magic to the compliance professional. The better question may be: who actually knows the firm best, its client base, the work it does, the problems that emerge and the personalities involved? Does that person have a practical and pragmatic approach that will enable the firm to function and grow in a controlled manner? Some risk management professionals, especially those from a claims background, might be inclined to overcorrect and this approach could stifle innovation.

Compliance officers will need to be part diplomat and part judge, jury and corporate therapist. Some recent advertisements seem to be looking for someone with additional skills as a clairvoyant. However, OFR, at its heart (and in terms of the regulatory theory that underpins it), is about the firm being professional, self-reliant and accountable within itself as it delivers the best possible service to clients.

The best compliance specialist may actually be within your firm already. The truth is that no one is well-versed yet in the new SRA handbook or any of the new regulatory schemes. It will remain a work in progress for the next few years as the profession, the SRA and those other regulators that have adopted OFR learn '¨to apply the new approach.

 

jane.jarman@ntu.ac.uk