The Conveyancing Task Force (CTF) has added its voice to growing calls for the Solicitors Regulation Authority to rethink changes to the rules governing who can hold compliance officer for legal practice (COLP) and compliance officer for finance and administration (COFA) roles.
The CTF – a collective of practising conveyancers drawn from firms of varying sizes – has written to the SRA’s chief executive, Sarah Rapson, to ask the regulator to publish the evidence it gathered before introducing the rule change.
In August the Legal Services Board approved an addendum to Rule 8 of the Solicitors Regulation Authority (SRA) Authorisation of Firms Rules, preventing owners and individuals with significant control of firms with a turnover of more than £600,000 or holding more than £2 million of client money from holding COLP or COFA positions.
The SRA estimates the rules – due to be phased in from January 2027 – will affect approximately 1,660 firms, including around 430 sole owner-managers.
The Law Society of England and Wales has described the proposals as “complex and impractical” and warned they would unfairly impact small and medium sized firms by increasing costs.
And earlier this week, a newly formed collective of SME firms called on the SRA to rethink the proposals, and asked for evidence of how a threshold of £600,000 was reached and what the proposed restrictions on owner-managers will mean in practice.
Now, the CTF has added its weight to the criticism in a letter which sets out support for effective regulation to protect client money, but says three “fundamental questions” have not been answered.
The Task Force says it supports effective regulation to protect client money but says three fundamental issues have not been addressed: the effectiveness of the current framework, whether regulation should reflect different business models and risk profiles, and whether COLP and COFA is the right model at all.
“Before changing who can be COLP/COFA, what evidence is there that COLPs and COFAs actually identify, prevent, or escalate serious failures?” the letter asks.
“In major client-money collapses, were problems identified and reported by the COLP/COFA, or did they come to light through accountants, whistleblowers, clients, banks, closures, or SRA investigations? At what stage and at what scale of loss?
“Independent reviews show that the SRA already held relevant information about firms that later collapsed but did not connect it, assess cumulative risk, or act. Blind Justice UK’s research, The Governance Blind Spot, shows structural warnings can be found in routine SRA and Companies House data.”
The CTF has called for the SRA to publish its analysis of the role COLPs and COFAs played in cases of client money collapse, and whether there is any evidence to show separation would have prevented failure.
“Would changing the roles address the real cause of client money collapses, or would better use of internal intelligence, public data, and independent financial information would offer more effective protection?” the CTF asks.
The collective also questions whether regulation should be specific to the financial attributes of a firm, or be more suited to its business model.
“A sole practitioner or small traditional high street practice is fundamentally different from a large, multi-office, high-volume ABS with layers of management and massive flows of client money”, the letter points out.
“Has the SRA assessed whether COLP/COFA works equally across those models? Should requirements reflect size, ownership, management structure, client-money exposure, and regulatory history rather than predominantly financial thresholds?”
Finally, the letter asks whether COLP and COFA is “the right model at all”, adding: “The Task Force says the forthcoming wider review should first ask whether reliance on named role-holders remains the most effective safeguard.
“It proposes a more proportionate, risk-based alternative: independent financial scrutiny, timely regulatory information, and actual indicators of risk, with oversight tailored to the nature and complexity of each firm.”
In a statement accompanying the open letter, CTF spokesperson Stephen Larcombe said: “We are not advocating weaker regulation. We are asking whether the forthcoming review should consider the effectiveness of the regulatory model itself before firms are required to restructure within it.
“The profession deserves a standalone consultation on such a potentially damaging change.”
One Response
Fair questions from the Task Force. In my experience the client-money failures we actually see in conveyancing rarely trace back to who held the COLP or COFA title. They start weeks earlier, with a compromised mailbox or an unverified change of bank details. Restructuring who signs the compliance forms won’t change that; evidencing the controls underneath it will. I hope the SRA’s review looks at the plumbing as much as the org chart.