News releases

Reporting requirements eased on non-material breaches

The Solicitors Regulation Authority (SRA) plans to drop the requirement for compliance officers to report all non-material breaches, it has been announced.

SRA Executive Director Samantha Barrass told delegates at the Law Society's Risk and Compliance Annual Conference in London that, subject to Board approval, the Authority's current rules would be changed so that firms’ records of non-material breaches would not need to be reported annually to the SRA. Compliance officers for legal practice (COLPs) and finance and administration (COFAs) will still need to record non-material breaches however, in order to support the identification and management of patterns suggesting systemic risk issues.

The change to reporting requirements requires an amendment to the rules and will be consulted on as part of the next phase of the Red Tape Initiative, which looks to identify any unnecessary bureaucracy in the Solicitors Handbook. The consultation will be published in April, ready for the necessary changes to come into effect in October.

Samantha Barrass said: “In light of extensive engagement with those we regulate and the increasing effectiveness of our Risk Centre, we have come to the conclusion that we can safely remove the requirement for recognised bodies to report non-material breaches. We recognise that the requirement to record and report non-material breaches has not been popular with firms, many of whom have told us that this is a burden that is simply not proportionate to risks.

“We are acutely alive to these concerns and have been looking closely at how we can reduce this burden, whilst at the same time ensuring that firms identify and manage their risks. Our main concern is, and always has been, identifying patterns of non-material breaches, that combined may amount to a material breach because of the systemic underlying issues.”

She added: “We are keen to support COLPs and COFAs in carrying out their duties, and we hope that not having to record non-material breaches in a specified and standard format provides much greater flexibility. We think that this is a good example of what can be achieved by listening and working closely together.”

Ms Barrass said the Authority will shortly be providing regular COLP/COFA alerts so they will be the first to know of any developments which may affect their role. A section of the SRA's website will be dedicated just to compliance officers, while there will be opportunities for sharing information at speaking events, webinars and conferences.

Advice for COLPs and COFAs, including support for decision making on whether or not a breach is material, can already be found here:

COLPs and COFAs advice

The requirement for ABSs to report all non-material breaches annually will remain reflecting statutory requirements in the Legal Services Act 2007. The SRA will be advising ABSs shortly on the format for making these reports.

The SRA will also progress discussions with the Ministry of Justice in due course on removing this requirement on ABSs, not just to maintain a consistent approach to the regulation of all firms, but also because the SRA does not think maintaining this requirement for ABSs is proportionate to the risks.

Samantha Barrass said: “Consistent regulation of all kinds of firms we regulate is extremely important, and this is something we will be progressing with the Ministry of Justice. But requiring this information from 10,000 firms simply because the Legal Services Act requires us to impose the requirements on 100 or so ABS is unsustainable, and we think unjustifiable."

During the speech, Ms Barrass also expanded on SRA concerns around firms' financial stability as discussed at the SRA Board meeting on Wednesday.

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