Compliance specialists Jen Dunlop and Jess Irwin agree the client money system is in need of reform and welcome action by the SRA. But the Compliance Office MD and senior risk consultant question whether the plans will work in practice – or cause more problems than they solve.
The losses at Axiom Ince and PM Law were eye-watering. Client money disappeared on a scale that shocked the profession, and it was right that the SRA responded. Nobody seriously disputes that something needed to change. The question worth asking now is whether these specific proposals will achieve what the SRA hopes for, or risk creating new problems without solving the original ones.
The SRA announced on 2nd June that it is pushing ahead with two significant reforms: requiring all law firms holding client money to submit annual accountants’ reports, and separating compliance roles from senior management in firms they see as larger or higher risk. Both measures are subject to Legal Services Board approval, and implementation is expected by early 2027. The intent is sound. The execution deserves scrutiny.
The accountants’ reports problem
Requiring all firms to submit annual accountants’ reports, whether qualified or not, sounds like a straightforward tightening of oversight. It is worth remembering, though, that this is not new territory. This was the requirement before 2014, when the SRA scaled it back, requiring only qualified reports to be submitted.
The reason the original system was watered down was not ideological. The SRA simply did not have the capacity to analyse the reports it was receiving and use that data to meaningfully assess risk.
The SRA is currently seeking a £25 million (29%) budget increase for 2026/27, citing capacity pressures, including a significant rise in misconduct reports. The honest question is whether the infrastructure will be in place to do something useful with the flood of new data. More information coming in is only valuable if it leads to better decisions.
Before widening the reporting net, a stronger foundation might be rebuilding the kind of proactive risk profiling capability the SRA had until around 2013 – identifying vulnerabilities in firms before problems escalate, rather than waiting for them to surface.
Separating roles: right in principle, difficult in practice
The proposal to separate the COLP and COFA roles from senior management in firms with a turnover above £600,000 or holding more than £2 million in client money has a clear logic. Concentrating compliance and financial oversight in the same hands as significant management decisions creates obvious conflicts. The intention to reduce that concentration of power is reasonable.
The practical reality for many small and mid-sized firms is considerably more complicated. The general consensus appears to be that the £600,000 turnover threshold in particular is going to mean that a significant percentage of firms (including those that will not see themselves as “larger” or “higher risk”) will be impacted. Finding individuals with genuine compliance knowledge and the seniority to make those roles credible is already a significant challenge.
The risk is that firms end up pulling partners away from fee-earning work to fulfil a structural requirement they may have limited experience of, or appointing more junior staff to compliance roles simply because senior partners are now excluded by definition. Neither outcome obviously strengthens oversight. It may quietly diminish it.
The uncomfortable truth is that these costs won’t just be absorbed; they’ll be passed on to clients.
The Law Society has questioned the thresholds, noting they were arrived at without risk-based modelling and will have a disproportionate impact on smaller firms. That is a fair challenge. Regulation must protect the public, and proportionality matters.
What firms should be doing now
These proposals are not yet final, and LSB approval is not guaranteed. The LSB declined the SRA’s proposed complaints-handling changes in January, a reminder that sign-off is not automatic. Firms do not need to act immediately. They do need to start thinking.
For those likely to be affected by the role separation requirement, now is the time to map out who currently holds the COLP and COFA roles, whether any individual also holds the authority to make significant management decisions, and who might realistically take on those roles if separation is required. Training will almost certainly be needed, and finding the right people takes time.
The SRA’s direction of travel is clear. The profession should engage with these proposals, and use the window before implementation to prepare properly.
About the authors
Jen Dunlop joined Compliance Office in 2021 as a senior risk and compliance consultant, quickly making her mark with her deep regulatory expertise and practical, solutions-driven approach. She was promoted to head of compliance before becoming managing director in April 2025. Her career began in private practice defending professional negligence claims, primarily against solicitors. She then spent eight years at the Solicitors Regulation Authority (SRA), where she managed a specialist team prosecuting misconduct cases at the Solicitors Disciplinary Tribunal and advised multiple departments on complex legal issues. As managing director, Jen leads strategy, operational excellence and client service.
Jess Irwin joined Compliance Office in 2023, bringing over two decades of legal and compliance expertise. She qualified as a solicitor in 2000 and spent 19 years as a litigator at a leading, long-established Thames Valley law firm. In 2019, she became compliance manager at the same firm, working closely with the COLP and MLRO/MLCO to drive best practice and ensure full SRA compliance. As senior risk consultant at Compliance Office, Jess keeps a close watch on regulatory developments, produces much of the content for quarterly compliance updates, maintains and refines client policies and procedures, and provides accurate, timely and practical guidance.
