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Outcomes-focused regulation has been trumpeted by the SRA as a game changer for the profession. Alternative business structures may have been delayed until early 2012 but the new framework officially rolled in last week, bringing in a new way of 'doing law' for all current and prospective providers in the sector. Not only will all operators be placed on an equal footing, the regulator says, OFR will also allow law firms to take control of their risk policy. Out with rigid rules, and in with risk-based regulation.

Sure, firms will need to be more methodical about their operations, appoint new officers '“ the famous COLPs and COFAs '“ and be prepared to provide evidence that risk and the interests of clients are at the forefront of their business. But the rules are a lot more malleable and the SRA is keen on developing a new collaborative working relationship with the profession. You're not sure about a particular policy or the way things are done at your firm? Just pick up the phone to Leamington Spa and they'll talk things over with you. That's all very good, some lawyers say, but all the SRA has done is shift the responsibility of risk management onto individual firms. And much as the principle of risk-based management is a good idea, the problem for firms is that they won't know they've broken the rules until the SRA tells them they have.

The agitation that surrounded the launch of the draft handbook in April seems to have subsided, replaced by a cooler outlook on the new regime. Major concerns haven't ebbed away, though, with many lawyers still wondering whether the SRA can genuinely move away from box-ticking and whether larger firms will not have an inherent size advantage over smaller ones. We've asked some of our occasional contributors how they reckon the new regime will affect them most.

Admirable, but concerns remain

Outcomes-focused regulation is a laudable concept. And to have a body of principles that are interpreted purposively, rather than on the basis of strict rules and precedents, brings us more in line with the approach of our European colleagues. This is 21st century thinking.

Law firms are beginning to operate as modern businesses. Some of them have indeed been doing so for a significant number of years, and the trend is spreading. Well-run firms should already have individuals with specific responsibilities for the various aspects of compliance and good financial management, and it is commendable that the SRA is encouraging this. The main addition to what is already sensible business practice for most firms is the self-policing relationship with the SRA '“ what could be described as a mea culpa.

This is where the concerns arise. How are these admirable concepts going to be implemented? It is all well and good for the SRA's own case studies to try to demonstrate that superficially similar factual situations may be dealt with differently depending on other surrounding circumstances. But we Brits are so wedded to our detailed rules and precedents that it is hard to envisage the whole regime developing along anything other than traditional lines.

COLPs and COFAs will undoubtedly contact the SRA for guidance. Will they receive it, or is the new approach simply going to be used by SRA box-tickers as an excuse for not engaging with the profession in any constructive way? If the latter, then the firms and people who most need assistance in bringing their business practices up to date will be left groping for the right thing to do, worried that if they get it wrong they will end up with some unspecified sanction being levied against them '“ victims of yet another extension of the blame culture.

One hopes that the staff of the SRA are being instructed at this very moment in the art of exercise of judgement.

Alan Williams is senior partner at Buss Murton

Taking a step back

Outcomes-focused regulation apparently means we can wave goodbye to tick-box regulation and petty bureaucracy '“ or so the SRA states. The emphasis is on supporting the firms that abide by the rules and punishing those firms that refuse to comply. The SRA is here to help, to be our friend, to supervise us when things go wrong (Orwellian doublespeak I wonder?). The focus now is on risk management and avoidance. Principles, outcomes (mandatory) and behaviours ('indicative') are the order of the day. Forced by the introduction of ABS to have one regulatory playing field across all firms it regulates, OFR in the guise of the SRA handbook seeks a new start in the regulation of law firms.

But, because it is a radical new beginning and the handbook, at about a fifth the size of its predecessor, looks like it spent its summer holidays on a starvation diet, where will the guidance come from? OFR requires you to take a step back and review your entire way of working. Professional conduct now incorporates business strategy. If you have not got a credible business plan the SRA will get involved. No one wants another Halliwells.

That's what my firm is doing: reviewing all our systems and procedures right back from first principles. OFR focuses on risk management, but this isn't just about having file review systems and making sure that limitation dates aren't missed.

Risk management for OFR means reviewing all aspects of what your firm does: from having a credible business plan to drafting a recovery plan if the office burns down. OFR is not prescriptive, so that the systems which might be necessary for a small firm will not be sufficient for a larger one.

Provided the interests of clients are protected, OFR is happy. And that is the problem for lawyers used to ticking boxes against sterile lists of dos and don'ts; the big challenge is to think outside the box.

Mike Scutt is a partner at Dale Langley & Co

Who wants to be a compliance officer?

6 October 2011 saw the implementation of major change within the legal profession, which included the introduction of a new regulatory regime (outcomes-focused regulation) and the SRA handbook. These changes were supposed to go hand-in-hand with the introduction of alternative business structures ('Tesco law') but regulatory delays have put this back to what is likely to be January 2012.

One of the new requirements contained in the SRA handbook is that all authorised firms must have compliance officers for legal practice and finance and administration (COLPs and COFAs); these roles will have wide-ranging responsibilities and will require officers to set aside plenty of time to ensure the roles are carried out properly. These roles will not be for the faint-hearted and those nominated will have to be SRA approved, and agree to their appointment, they cannot just be given to partners who are not present at the partners' meeting where nominations are put forward!

The COLP/COFA roles will not become effective until October 2012, but firms will have to submit their nominations to the SRA by March 2012. Although firms have time before the roles become active it is strongly recommended that they take steps now to find the right candidates and get them looking at the areas that will need addressing, this includes looking at the firm's finances to see whether it is viable and will remain so going forward.

COLPs/COFAs will have very onerous reporting obligations and they will be expected to report any material issues they find to the SRA, either immediately or on the next annual return.These reporting obligations could put COLPs/COFAs in direct confrontation with their fellow partners so it is critical that a workable reporting policy is developed and agreed so everyone knows where they stand.

Brian Rogers FCMI is a partner (non-lawyer) with Lewis Hymanson Small Solicitors LLP

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