Session 7 Compliance failure policy

1 Contents Part 1: COLP and COFA duties Part 2: What do we have to comply with and why does it matter? Part 3: Compliance arrangements Part 4: Compliance failure process Part 5: What does a compliance failure look like?

2 COLP and COFA duties Part 1

3 Three duties 1.Take all reasonable steps to ensure compliance: COFA—Accounts Rules COLP—everything else 2. Report compliance failures to SRA 3. Record compliance failures and make available to SRA on request

4 What do we have to comply with and why does it matter? Part 2

5 Two sources of regulation SRA HandbookGeneral regulatory requirements Principles Anti-money laundering/prevention of terrorism regime Code of ConductBribery Act 2010 Accounts RulesFraud Act 2006 Practice Framework RulesData Protection Act 1998 Authorisation RulesEquality Act 2010 Indemnity Insurance RulesRegulation of Investigatory Powers Act 2000/Lawful Business Practice Regs 2000 Financial Services Conduct of Business Rules UK Privacy and Electronic Communications (EC Directive) Regulations 2003 Property Selling Rules Consumer Contracts Regulations 2013 Rest of Handbook Cancellation of Contracts Regs 2008

6 Consequences of failure to comply Complaints/negligence claims Damaged reputation Disciplined by the SRA Fines, disqualification or other sanctions Exposure to criminal prosecution Plus: Breach of an internal policy

7 Compliance arrangements Part 3

8 Compliance arrangements Ensure we comply with SRA requirements Ensure compliance with general regulatory requirements that apply to most businesses Separate policies and procedures – see our office manuals and intranet

9 Process for reporting compliance failures Part 4

10 Reporting compliance failures Internal reporting All staff have obligation to report actual or potential compliance failures to COLP/COFA What happens? COLP/COFA: investigates maintains register of compliance failures decides whether reportable to SRA External reporting to SRA COLP/COFA

11 Compliance failure process StageWhat happens 1You: submit Compliance failure report form to the to COLP or to the COFA (not to SRA) using Compliance Manager 2COLP / COFA: acknowledges decides who should deal with this (COLP or COFA) 3COLP/COFA investigates and as necessary: records reports to SRA takes remedial action takes preventative action notifies insurer gives feedback

12 What does a compliance failure look like? Part 5

13 Material compliance failure No definition of material failure, but should take into account all relevant factors, including: o the detriment or risk of detriment to clients o the scale of the issue o the overall impact on the firm, its clients and third parties o the extent of any risk of loss of confidence in: ― firm, or ― the provision of legal services generally Compliance failure can be material either: o taken on its own, or o as part of a pattern/trend of compliance failures

14 Examples of compliance failures sent to a random third party in error, disclosing confidential client information Loss of laptop containing client data One-off failure to notify client of referral fee Repeated failure to notify clients of referral fee These are possible examples only and not definitive guidance. Each compliance failure must be assessed by the COLP/COFA against the SRA’s list of factors

15 Examples of compliance failures (cont) Paying client money to an incorrect third party Knowingly acting in a solicitor/own client conflict situation Payment into wrong client account, rectified late but still within a few days Failing to account to a client for commission received as a result of their instructions Inadequate client due diligence applied on a commercial transaction file These are possible examples only and not definitive guidance. Each compliance failure must be assessed by the COLP/COFA against the SRA’s list of factors

16 Examples of compliance failures (cont) Falling behind with file audits Allowing a client to mislead the court Failing to update client on costs Commenting about a client on your private social media account Delay on a client’s matter Accepting money on client account that does not relate to an underlying transaction These are possible examples only and not definitive guidance. Each compliance failure must be assessed by the COLP/COFA against the SRA’s list of factors

17 Compliance failure examples—reminders Examples only Each case is determined on its facts SRA factors Your duties v COLP/COFA duties

18 Final comments Any questions? to Update your training records in Compliance Manager