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What is the rationale behind the decision to place managing partners in charge of compliance?
Helen Bunker (HB): In many SME law firms, the managing partner is the obvious person to take charge of compliance as the firm generally does not have the resources to support a separate compliance function. Also the managing partner has access to people and all data - both tangible and intangible. Nothing should be off limits to those dealing with compliance and no questions should be able to be avoided, so this is the person who can ask questions and see the bigger picture. In a smaller practice especially, they are the people who know what is going on.
Iain Miller (IM): When COLPs first had to be appointed there was much discussion on whether a firm should appoint the managing partner as its COLP or someone else. In most firms the decision of who to appoint came down to a personality/availability issue and the question of who was best fitted to fulfill the function. The rational of appointing a managing partner to the role is that they are very directly involved in the management of the firm and are abreast of everything that is happening within it, so are best placed to make decisions about compliance. In governance terms, it might be better to have someone else, but then they may not be as familiar with the daily nitty gritty of the firm which could be difficult if a problem arose (especially if things were moving quickly).
In your experience, what process do firms go through when deciding on who will be in charge of compliance?
HB: The decision on who will be in charge of compliance is a challenge as the time commitments involved can be significant and hard to plan for. The person in the COLP role needs to be available to deal with situations that suddenly need attention, and this is harder if the person in the role has a full case load as a fee earner undertaking transactional work. Often, even in smaller practices, the managing partner is not expected to carry a full case load. In our firm, the decision was fairly obvious as I was already responsible for Lexcel, professional indemnity renewal, keeping all our records and so on. We discussed it of course but it made sense. My fee earning targets were already lower due to my managing partner role, and rather than impact on anyone else, it was simply added to my projects. We had a new financial director join us in December 2012 so while in some firms it may have been more obvious to allocate the compliance officer for finance and administration (COFA) role to the person responsible for finance, it wasn’t appropriate in our case.
IM: I think it depends often on the size of the firm. In a small firm, the managing partner - or the partner in charge of insurance - would often be fairly considered to be the best person to fulfill the role as they will be most familiar with management and compliance issues. Larger firms may have specialists who are dedicated to risk management who could well take on the role so it will depend often on the size and profile of the firm.
What are the potential risks of allowing a managing partner to hold the top compliance role?
HB: There are potential risks in allowing the managing partner to hold the top compliance role as it is possible that there may come a time when their responsibility to the Solicitors Regulation Authority (SRA) conflicts with their role as a business owner and partner - particularly when there are issues around the financial stability of the firm.
IM: The lack of separate oversight of management and compliance. The managing partner could be seen as having a conflict of interests if they undertake the COLP role too - which could pose particular problems if something had to be reported to the SRA.
On the other hand, what are the benefits of having senior personnel in the role?
HB: The benefits of having the managing partner in the role outweigh the burdens in my opinion, as the managing partner should have their ear to the ground and know exactly what is going on both in terms of the outward facing business and internally. The managing partner should be best placed to identify risks and to effectively manage these. Their position at the partnership table ensures access to the information necessary to make decisions and the ability to tackle the more challenging decisions, for example, whether to self-report. The responsibilities around financial stability need the individual to have access to a broad range of data and information about the business as it stands and its future commitments. I have an open door policy so people would be loath to keep things from me, and know that they should come to me early with any concerns that may touch on compliance.
IM: I believe the SRA has issued some guidance on this but presumably only someone senior - like the managing partner - would have the requisite knowledge of the firm along with credibility within it and with the SRA to do the job. The SRA maintains a watching brief of the 200 highest impact firms too - the COLP has to carry out these meetings and you need someone senior to do that too.
Now the compliance regime has had time to bed-down, do you expect the top compliance role to be held by different people (rather than a managing partner)?
HB: In a firm of our size I would expect the senior compliance role to continue to be held by the managing partner. This is due to the increasing time commitments and the need for the compliance role to be embedded and recognised at the highest level. As managing partner, I am accountable to the other partners and also to the SRA and have the experience to balance those responsibilities as best I can. Compliance is now such an integral part of our business that it has to be embedded within the culture of the practice. Having held the Lexcel kitemark since 2002, risk management and compliance has always been a priority and is one of the four pillars our lawyers are assessed against at performance review. Non-casework reviews are held monthly by each team and compliance and risk management is prioritised, high-risk files reviewed, file review data analysed and so on. Everyone in the practice needs to take responsibility for compliance and this has to be demonstrated from top to bottom.
IM: Some firms may review the appointment after a year or so, but I suspect that people are just getting on with doing what they have to do unless something untoward has happened to cause them to change their arrangements.
How can firms best-manage the compliance role in their practice?
HB: I find that provided everyone understands why they are being asked to do what they are being asked to do, they will be supportive. I do my best to minimise the impact of red tape on our clients and our people by not over complicating the compliance requirements. That goes a long way to winning people’s hearts and minds.
IM: It’s the responsibility of everyone in the management of the firm to ensure compliance. The COLP role has to form part of the overall management - and risk management - of the firm. There shouldn’t really be any responsibilities in the COLP role that would not be undertaken in any event. Issues of management, compliance and money laundering all sit together and it is best to approach them as a whole.
Helen Bunker, managing partner at Piper Watton Smith LLP, and Iain Miller, head of commercial litigation at Bevan Brittan LLP (Interviewed by Diana Bentley).
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
First published on Lexis®PSL.
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