Article summary
- The Alliance asks the SRA to suspend the proposed January 2027 implementation while it considers the concerns raised in the letter.
- The letter challenges the use of £600,000 turnover as a threshold and requests evidence connecting that figure with increased client-money or compliance risk.
- It records concerns about recruitment capacity, cost, equality and diversity, access to justice and the position of existing compliance professionals.
- The Alliance proposes enhanced financial reporting, periodic reconciliation data and a multifactor risk assessment as possible alternatives or additional safeguards.
The SME & Boutique Law Firm Alliance has asked the Solicitors Regulation Authority (SRA) to suspend the proposed January 2027 introduction of restrictions on who may act as a firm’s COLP or COFA. Its open letter, dated 11th September 2026 and signed by 103 people, requests further engagement and assessment before implementation. The proposals would prevent people with unilateral management control from acting as COLP or COFA where specified financial thresholds are exceeded. The letter supports the SRA’s objective of protecting client money, while raising concerns about the evidence for the proposed structure, its effects on smaller firms, and the time available to make any required changes.
Why The Alliance Challenges The Threshold
The letter says the SRA’s impact assessment estimates that approximately 1,660 firms may fall within the proposed thresholds, including about 431 sole owner-manager firms. It also says that approximately 3,525 firms, representing 39% of regulated firms, have annual turnover above £600,000. Its main concern is whether turnover provides an appropriate measure of organisational size or client-money risk. The letter states:
“A turnover of £600,000 does not make a firm large. Nor does it make it risky.”
It asks the SRA to publish the evidence showing a meaningful link between turnover above that figure and increased risk. The letter refers to probate and conveyancing practices that may hold large sums temporarily, and an advisory practice exceeding the turnover threshold while holding no client money. It requests an assessment that accounts for each firm’s work, client-account exposure, regulatory history and governance.
Concerns About Changing Compliance Roles
The Alliance says owner-managers in small firms may also have the closest knowledge of the firm’s systems, finances and regulatory obligations. Removing them from formal roles would not remove their responsibility as owners and managers, according to the letter, but could require appointing an employee or external provider with less day-to-day knowledge.
The letter states that “separation alone does not create independence”. It also describes the possible position of a firm with two directors who can each make significant management decisions. Both could be ineligible, leaving the firm to appoint an employee or an external compliance officer.
Recruitment, Cost And Timing
The letter asks whether the market can supply enough suitably experienced replacement officers if many firms must change their arrangements at the same time. It describes COLP and COFA appointments as positions carrying significant personal regulatory responsibilities and asks the SRA to publish its assessment of market capacity and likely cost.
The costs identified include employing a senior person, increasing an employee’s pay or using an external provider. The letter says turnover should not be confused with profit and describes similar firms on either side of £600,000 facing different requirements.
The Alliance says recruitment may involve identifying candidates, conducting due diligence, agreeing terms, waiting through notice periods, completing a handover and obtaining regulatory approval. It therefore requests suspension of the January implementation and a meaningful transitional period after the final requirements are confirmed.
The Alternative Measures Proposed
The Alliance asks the SRA to consider an enhanced supervision regime under which owner-managers could continue as COLP or COFA when appropriate safeguards are demonstrated. Its proposals include compulsory submission of accountants’ reports, periodic client-account reconciliation data, monitoring for unusual transactions and independent compliance reviews for firms meeting defined risk criteria.
The letter also proposes a risk matrix using factors such as turnover, maximum client-money exposure, regulatory history, staffing ratios, ownership structure and reporting findings. It says this approach could allow firms with different risk profiles to be assessed on more than one financial measure. It also suggests a mechanism allowing firms above the thresholds to retain their arrangements where they can demonstrate suitable governance, financial controls, independent scrutiny and enhanced reporting.
What The Letter Asks The SRA To Do
The letter makes several requests to the SRA. Alongside suspending implementation and reconsidering the turnover threshold, it asks the SRA to publish analysis supporting the owner-manager restriction, provide more detailed data about affected firms and model the impact on practices employing fewer than ten people. The Alliance also requests an equality impact analysis, direct engagement with a representative group of smaller-firm owners and an assessment of the combined effect of the COLP and COFA reforms with wider client-account proposals. It ends by requesting an urgent meeting with the SRA before implementation.
Speak To Jonathan Goodwin Solicitors
If your firm is concerned about how the proposed COLP and COFA restrictions may affect its compliance arrangements, contact Jonathan Goodwin Solicitors on 0151 909 2380 or complete our Free Online Enquiry