Legal Services Board approves new compliance and management role separation

The Legal Services Board (LSB) has approved rule changes designed to separate management and compliance roles within law firms to mitigate risks following high-profile firm failures. Under the new Solicitors Regulation Authority (SRA) rules, firms—excluding the smallest entities—must separate those who make unilateral management decisions from compliance officer roles. The SRA plans a phased implementation starting in January 2027, with larger firms expected to comply first.

To protect smaller practices, the SRA increased the client money threshold for exemptions from £500,000 to £2 million, while maintaining the annual turnover exemption at £600,000. The Law Society and the Sole Practitioners Group have expressed opposition to these changes due to the potential impact on small firms.

In related enforcement actions, the SRA has issued penalties for client account breaches. Solicitor Jay Allan Tooker was fined £24,862 for authorizing 22 payments from a client account for non-regulated services, including client salaries and management fees. Additionally, Charsley Harrison LLP and Hawkins Ryan LLP received fines for breaches involving the late delivery of accountants’ reports and the accumulation of dormant balances in client accounts.