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Session 7Compliance failure policy
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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?
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COLP and COFA duties
Part 1
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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
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What do we have to comply with and why does it matter?
Part 2
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Two sources of regulation
SRA Handbook General regulatory requirements
Principles Anti-money laundering/prevention of
terrorism regimeCode of Conduct Bribery Act 2010
Accounts Rules Fraud Act 2006
Practice Framework Rules Data Protection Act 1998
Authorisation Rules Equality Act 2010
Indemnity Insurance Rules Regulation 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 2013Rest of Handbook Cancellation of Contracts Regs 2008
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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
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Compliance arrangements
Part 3
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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
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Process for reporting compliance failures
Part 4
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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
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Compliance failure process
Stage What happens
1 You:•submit Compliance failure report form to the to COLP or to the COFA (not to SRA)•using Compliance Manager
2 COLP / COFA:•acknowledges•decides who should deal with this (COLP or COFA)
3 COLP/COFA investigates and as necessary:•records•reports to SRA•takes remedial action•takes preventative action•notifies insurer•gives feedback
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What does a compliance failure look like?
Part 5
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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
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Examples of compliance failures
• Email 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
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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
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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
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Compliance failure examples—reminders
• Examples only
• Each case is determined on its facts
• SRA factors
• Your duties v COLP/COFA duties
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Final comments
• Any questions?
• Email to [email protected]
• Update your training records in Compliance Manager
