The SRA said it is “pausing to take stock on the introduction of new rules requiring the separation of compliance and unilateral roles within firms”, a step it first announced in September. The pause, it said, “follows feedback that our original approach could have had unintended consequences within smaller firms and sole practices.” It added that it “will not be rolling out the proposed rules as originally planned in January”.
What the rules would have required
The separation rules were part of a package the SRA announced on 2 June 2026, following a consultation that ran between December 2025 and February 2026. Under the proposals, higher-risk firms “with a turnover of more than £600,000, or holding more than £2m of client money” would have had to ensure that individuals who can make significant decisions about how the firm is run cannot also act as the compliance officer for legal practice (COLP) or the compliance officer for finance and administration (COFA). Smaller sole owner manager firms were to receive a partial exemption.
The SRA said at the time that separating the roles “will make sure that no single individual can both run a firm and oversee its compliance, including with client money rules.” The rule changes were submitted to the Legal Services Board for approval and were expected to come into force “by early next year”.
The duties of the two roles are set out in paragraph 9 of the SRA Code of Conduct for Firms. A COLP must take all reasonable steps to ensure compliance with the firm’s authorisation and the SRA’s regulatory arrangements, and to ensure that serious breaches are reported promptly (paragraph 9.1). A COFA has equivalent duties in relation to the SRA Accounts Rules (paragraph 9.2).
Why the regulator moved on governance
The proposals came out of the SRA’s wider review of client money protection. Its consultation materials say that after a November 2024 consultation it chose to prioritise three near-term changes: improving the accountants’ reports regime, “strengthening the checks and balances provided by compliance officers” and improving oversight of firms that significantly change their profile, including through mergers and acquisitions.
The work has taken place under close scrutiny from the SRA’s oversight regulator. On 3 September 2026 the Legal Services Board said it had decided to initiate further enforcement action against the SRA, noting that the “cumulative loss of client money associated with Axiom Ince and PM Law is approximately £100 million.” The LSB said significant performance challenges remained in areas including “pace of regulatory action, organisational focus, specialist capability, systems and governance.”
What happens now
The SRA said that, as part of its supervision pilot, it is looking at adopting “proactive approaches to supervising firms where we identify potential higher risks”. As part of that work it is “seeking assurances that firms have appropriate governance arrangements in place and that their compliance function is able to operate with the necessary independence.”
The regulator said it will work with stakeholders, including through working groups, to explore issues relating to the proposed separation rules, test alternatives and consider wider approaches to governance in the firms it regulates. Once a decision on future requirements has been made, it said, “we will make sure that there is an appropriate lead-in time for firms to implement any changes needed.”
Aileen Armstrong, the SRA’s Executive Director, Strategy and Policy, said: “Already we have had productive conversations with stakeholders and will have even more moving forward. The insights we gain from these discussions are proving very useful in helping refine and develop our next steps.”
The 22 October statement does not refer to the changes to the accountants’ reports regime announced alongside the separation rules in June. Under those changes, all firms that hold client money will be required to submit annual accountants’ reports to the SRA, and fixed financial penalties will be extended to late or non-submission.