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COFAs face ‘huge burden’ as record numbers referred to tribunal

By John Hyde

Record numbers of finance officers from law firms are appearing before the Solicitors Disciplinary Tribunal, new figures show.

A total of 19 compliance officers for finance and administration (COFAs) were referred to the SDT in the year ended 31 March 2019. This was the highest since COFAs were established in 2013, with the numbers having grown each year in that period.

The figures were put together by Cheltenham-based accountancy firm Hazlewoods, which specialises in advising legal practices.

COFAs are personally liable for any issues in the management of a law firm’s finances, with their role including preventing misuse of client funds and the mixing of client money with the firm’s own money. They are also responsible for overseeing the financial stability of the firm and must ‘sign off’ the annual accounts.

Most COFAs are law firm partners rather than employees, because they are personally liable if accounts are incorrect and so need to be in a senior position.

Andy Harris, partner at Hazlewoods, said the COFA role is not easy, due to them taking responsibility even when someone else has made an error.

Harris said: ‘Given the huge sums of money some law firms hold on behalf of clients, there is a huge burden on COFAs to ensure no mismanagement is happening.

‘In a worst case scenario, theft or money laundering can occur if COFAs take their eye off the ball.’

In the last year, the SDT has struck off a COFA who employed a banned solicitor, banned another for retaining monies intended as payments for professional disbursements, and fined a compliance officer £10,000 for failing to ensure managers and employees at his firm complied with their obligations.

Harris said the rise in COFA referrals to the tribunal reflects the SRA’s crackdown on financial mismanagement and suggests more action is being taken to stamp out irregularities.

(Courtesy: Law Society Gazette)