The Solicitors Regulation Authority’s recent thematic review of high-volume claims has done more than just highlight questionable practices; it’s reintroduced a regulatory instrument that could well define the landscape for years to come: the mandatory compliance declaration.
Firms operating in this area are now being told to sign a declaration, essentially affirming their understanding and adherence to the rules. On the surface, this might seem like little more than administrative tidiness. In reality, it could be one of the most significant changes to SRA strategy since the move away from black-and-white rules to principles-based regulation.
Why? Because a declaration shifts the entire conversation. It moves from “Do you have controls in place?” to a far more serious “Have you personally vouched for this?” And that seemingly subtle shift carries profound implications for those in compliance roles, for personal liability, for future enforcement actions, and for the very culture within legal practices.
Why regulators find declarations so appealing
It’s easy to see why a regulator would find declarations hard to resist. First, there’s the sheer speed and scalability. Unlike time-consuming, resource-intensive inspections, declarations can be rolled out across an entire sector with remarkable efficiency. The SRA can touch thousands of firms in a matter of weeks, achieving a broad reach that other regulatory tools simply can’t match.
Then, consider the impact on personal accountability. The act of signing focuses minds, particularly those at the top. Board members and compliance officers are suddenly acutely aware that their signature could, at some future point, be dissected and scrutinised by the SDT. It adds a layer of personal risk that should nudge people towards the desired behaviour.
Finally, their prosecutorial value is significant. Should a regulator later uncover a failing, a declaration that turns out to be false or reckless transforms a mere technical oversight into a much graver question of honesty and integrity. This makes for a far more straightforward case to pursue, and we’ve already seen this dynamic play out in the realm of AML. Firms declared they had compliant firm-wide risk assessments and controls, only for it to later emerge they didn’t. The SRA then argued not just non-compliance, but a reckless disregard in signing a contrary declaration.
An unexpected upside for law firms?
It’s not all doom and gloom, though. When wielded thoughtfully, a declaration requirement can act as a powerful catalyst for positive change within a firm.
Think of it as a baseline health-check. It forces firms to methodically document precisely how they manage crucial areas like introducers, funders, ATE insurance, and the entire client onboarding process. These are areas that might not otherwise have been reviewed for a long time – or even seen as “set and forget” by the firm.
It also serves as a crucial governance moment. For COLPs and COFAs, it provides an invaluable opportunity to elevate compliance to the very top of the board agenda, leveraging the urgency and mandate of the regulator. The deadline and regulatory power of declaration means that it cannot be a constant “brought forward” item.
And finally, it presents a genuine opportunity for a cultural reset. It allows firms to challenge and push back against ingrained bad habits, be it introducers sending over incomplete files or fee earners habitually cutting corners. Handled with care, the declaration can truly be a catalyst for more robust systems and a more informed, engaged management team.
Traps for the unwary and the allure of box-ticking
But, of course, the risks are real.
There’s the peril of signing blind. In the hustle and bustle of managing a firm, a busy managing partner might be presented with a declaration to sign without truly seeing or understanding the underlying evidence. If the SRA later inspects and finds gaps, that declaration itself instantly becomes a significant liability.
Then there’s the danger of form over substance. The risk is that firms approach the declaration merely as a bureaucratic exercise in filling out a form, rather than engaging in a genuine, rigorous review of their controls. This solves precisely nothing and merely creates a false sense of security.
And we must consider the effect on legal regulation as a whole. Once declarations become normalised in one area of regulation, it’s highly probable they will be rolled out to others. Marketing practices, sanctions checks, data protection – all are prime candidates. We risk drifting towards a culture where compliance is ‘proved’ primarily by a signature, rather than by tangible, demonstrable substance.
Practical steps for giving a declaration
So, how should firms navigate this new regulatory landscape?
First, make it a board-level project. This isn’t a task to be palmed off solely to the COLP or COFA. It demands full board visibility, documented discussions, and a collective assumption of responsibility.
Next, map every assertion to concrete evidence. Break down the declaration into its constituent statements. For each point, identify the irrefutable evidence that proves compliance – policies, actual file samples, training logs, introducer registers, correspondence with insurers. Leave no stone unturned.
Crucially, test, don’t simply assume. Don’t rely on casual assurances from internal teams or external referrers. Conduct sample testing. Prove it to yourself.
If you uncover any gaps, document your remediation efforts. Fix problems before signing. If remediation is ongoing, meticulously record this within your governance documents. Never, ever attempt to paper over existing issues.
How the SRA should approach declarations
Regulatory declarations can be effective, but only if they are handled with a sense of proportion and clarity.
The SRA ought to provide absolute clarity of scope. They should be explicit about what specific evidence is expected. Otherwise, firms are left adrift, guessing at the true meaning of “compliance.”
There should also be a safe harbour for self-fixers. If a firm genuinely identifies a gap and takes swift, decisive action to rectify it, enforcement should primarily focus on harm, not on the initial signature. Without this understanding, declarations risk inadvertently punishing honesty and proactive improvement.
Conclusion
Despite previous SRA leaders saying they would never regulate through declarations, it looks like they are here to stay. Their power lies in their ability to transform abstract regulatory requirements into very real, personal accountability. But they are undeniably a double-edged sword: whilst they possess the capacity to elevate standards, or they can ensnare the unwary and damage the already fragile relationship between regulator and professional.
For law firms, the message is remarkably simple: do not, under any circumstances, treat a declaration as just another piece of paperwork. Instead, approach it as a fundamental governance exercise. Every assertion must be evidenced, every assumption tested, and a signature should only be affixed when genuine, unwavering confidence in compliance exists.
