In this What’s The Buzz? Episode, HiveRisk founder Kate Burt is joined by Tom Blandford to discuss the potential implications of the SRA’s published proposals on client money rules.
The most controversial proposal is to separate both COLP and COFA roles from the ‘ultimate decision maker’. The episode gives predictions and valuable insights on what this all means for sole practitioners, and larger practices.
Transcript:
Kate Burt: Hello and welcome everyone to a special edition of What’s the Buzz, a live LinkedIn edition of What’s the Buzz. I’m here today with my friend and colleague Tom Blandford from SurSum to discuss SRA, what the actual heck. Tom is founder of SurSum advisory, the law firm CFO.
Full transparency, Tom is also HiveRisk Fractional finance director. So we’re having a very interesting conversation a local level as well a couple of days ago was it just it was just the other day before the SRA announced their proposals following consultation relating to client money rules Some of those proposals look sensible some not so sensible and we really want to dig into the not so sensible in this conversation.
Now Tom did an excellent Linkedin post when it was announced. In fact, Tom, I think I was with you. We were on a call when the announcement came in relation to the update on the consultation a few months ago last year. So I always get my information on client money rules directly from you first because you’re going, what the hell, usually. So if that’s a good introduction to you, I think it is, Tom, you might do a better job at introducing yourself. But I’d love to start with you, Tom, what the actual hell, or insert expletive, SRA… Over to you.
Tom Blandford: No expletives. I’m live on LinkedIn, right? I must not swear. Right. Okay. yeah, absolutely. Yeah, yes, you’re right, Kate. So okay, should we just do the really easy one first? Because then I can like scream into the void about the hard one. Is that okay? So the SRA has been on a massive journey about client money over the last few years.
They have done all sorts of consultations, some of them you know, have been knocked into the long grass. They’re really struggling, I think, to get their arms round like the fundamental problem of some very significant frauds, right? I refer you to Axiom Ince, which is actually in the criminal courts. It is fraud, brackets allegedly subject to etc.
But it is in the criminal courts. And viewers might be aware of what’s going on in the Proddow Mackay
group, which again has been reported to the National Crime Agency. And I might also assume therefore is a fraud, but that was just a little bit earlier on in the process. But that’s two very large firms where probably client money was stolen on a significant level, but open the Law Society Gazette most weeks.
There is a small firm somewhere where somebody nicks a hundred grand or two hundred grand. So the SRA’s genuinely got a problem, right? It can’t say, yeah, it happens occasionally in little tiny firms, because there’s two ginormous examples. Nor can it say that, well, actually, it it’s the it only really happens when there’s millions and millions of pounds at stake. No, there’s there’s people sort of dipping in for you know the classically.
And in fact, I think literally in the Gazette yesterday, somebody dipped into the client account for 50 grand to pay that month’s wages. Right? Now they obviously can’t do that, but you can understand the impetus of just, I’m just a little bit tight, I’ll just cover it, I’ll replace it, blah, blah, blah, blah. Which I I understand they did, I wasn’t involved with the matter, but it happens at a very low level, it happens at a ginormous level. They’ve got a problem. Anyway.
After many years of trying to work their way through that, we have arrived at their new and official answer. Let’s do the easy one first. The easy one is that we are back to the report the compulsorily filing your annual audit report. Used to happen, used to be a rule. Those of us that are just enough grey hair at the temples will remember it. Like it used to be a rule. Makes complete sense to me. The only thing I will say to anybody.
Kate Burt: In fact, it’s crazy it hasn’t been or some kind of a better way of keeping tabs on for so long because there’s that section of and hopefully a minority of firms where they don’t have a qualified report because they haven’t got a report, never mind a qualified report and they’ve been going under the radar for too long. that is it seems as though it’s a sensible move.
Tom Blandford: I think it’s very sensible and I agree with you. Yes. how do we put this? If there is anybody watching this right now who might have accidentally not got a report at all at any point in the last year or two, you might that’s gonna come back to haunt you. You might want fix that. the only other thing I’d say by the way is if there’s anybody on this call who sort of doesn’t have the most robust auditor, who can be a little bit slow and it’s all a bit painful and what have you.
You might also want to think about that just because if you’re gonna have to compulsorily file it, you don’t want to be in a situation where you get fined for not filing it when really it was just your auditor being a bit rubbish.
But fundamentally a good idea. I think we can agree.
Kate Burt: And I was just checking though, as I was looking to the side, Tom, if we had any comments in the live and to check that we were live on LinkedIn and we are as well. thumbs up, tech’s working for us. So if anyone is listening, do, I will keep half an eye on the comments as we go through. Yeah.
Tom Blandford: So that’s the easy one, mate. Well, where do we start on the hard one?
Kate Burt: Okay, so the hard one. And I think when I was out in London yesterday, and I just dropped in the hard one to a few conversations and watched the look of horror, as I was announcing in the news to them. So basically, the hard one is the notion of separating COLP COFA roles from the ownership in a very succinct statement.
And there’s all sorts of fireworks that go off in your brain and questions with that very simple statement. But Tom, would you like to dig in to the layers a little bit more?
Tom Blandford: Yes. So let’s start with the new basic position. What we are saying is that the COLP, the COFA and the quotes unilateral decision maker must be three separate human beings.
Now let’s just break that down. And I think we’re all fairly happy on what COLPs and COFAs are, right? but you know, in many medium sized firms, your coffer is usually already your finance director, often times. Your COLP, depending on your size, is probably either your managing partner, that’s not unheard of, or you might have a sort of separate cult or separate head of risk or something like that.
And then so in some firms they’ve sort of already there’s a little bit of we’ve already achieved this in the sense of you know the coffer is one person, the cult is another person. But unilateral decision maker and becomes somewhat problematic. Now we’ll we’ll come to sort of mitigation K, I’m sure, later and what we might do about it. But I we’ll just note in passing at this stage.
The SRA has closed its consultation. This is the SRA’s official answer now. As with everything, it does have to be signed off by the LSB. That’s just the bureaucratic process. That’s just the way these things work. So there is maybe just a small window where things change or tweak, or you know, a little bit of nuance, blah blah blah. But as for now, unilateral decision maker. Not
Brilliantly drafted, I would suggest. Not not helpfully defined as currently written. And so why am I saying that? I’m saying, even if I’m a medium-sized firm and I’ve got, you know, a dozen partners, are all of those partners unilateral decision makers? Quite possibly. Quite possibly. As a collective. And so.
Kate Burt: As a collective, as a collective, yeah.
Tom Blandford: What I’m now saying is, well, I I think I’m okay because I’ve always my COFA’s that dude and my S’s her and happy days. But if those two people are also partners of the firm, which they probably are, and that makes them a unilateral decision maker, the definition is super important at this stage. What I’m now saying is my existing and COFA have to be replaced by with no disrespect to them, more junior employees within of the firm because what I can’t do is have any partners of the firm be ’s or COFA’s, because again it’s a three way split, not a two way split.
Kate Burt: And has there been any precedent as far as you’re aware of for that sort of terminology, that sort of, you might not know and I know these is all half the press, isn’t it? Yeah, I’ve not heard of it.
Tom Blandford: It’s it’s it’s not my regulator, your honour, but I I believe well I think there is something equivalent with the FCA. They do have the similar logic of sort of their I’m slightly paraphrasing, but like the FCA’s equivalent of a cult.
Kate Burt: Interesting.
Tom Blandford: Does have to be an identifiable person who sort of sits slightly outside every other structure. But I not my regulator, but but I think only again if you’re p you know if you’re certain banks doing certain financial things. Yeah.
Kate Burt: We do have a question in to the comments, which is, will the SRA therefore allow non-solicitors to take on the title of ? I’m guessing no. I’m guessing no. And certainly that’s not mentioned, but that seems to be that sort of that cornerstone of the whole, you know, ABS whole framework is that that has to be a solicitor.
And there’s no suggestion at this stage anyway that they’re looking to change that.
Tom Blandford: Yes. And I you know I you know it the devil is ever will be in the detail, particularly ’cause the LSB might move it around. I mean it might not get too technical, but it might be helpful at this stage just to to just read you one quote from it ’cause I’ve obviously got it up on my other screen. And so I’m definitely not here to defend the SRA, but I am gonna read this bit where they do well, yeah.
Kate Burt: Not with the title, what the actual F, I mean heck, SRA. Okay.
Tom Blandford: But they do say, and I’m going to quote it directly because I think it’s important to get the nuance here. And I quote: Our proposed separation does not mean that every member of a management board or equivalent would be unable to hold a compliance role. The restriction would only apply if that individual can unilaterally determine or direct significant management decisions within a firm.
Now, so they are a little bit alive to this point. But I still think it’s problematic, right? Because what I think what they’re trying to say is again, if you’ve got twenty odd partners, but I don’t know, five of those form the board, then your and COFA have to be part of where’s my mask? Have to be part of the other fifteen partners, not the five partners on the board.
So they are sort of allowing for some level of nuance. But again, even still, hang on, what you’re saying is I’ve got this board over here that meets once a month and makes board level decisions, but in the room isn’t the cult and the coffer. I like what
Kate Burt: And that’s frightening. If that’s the situation, that’s frightening because, and particularly when we’re conversations about risk and compliance, we’re always advocating that there should be someone responsible for risk or with risk oversight at the boardroom table because otherwise, who’s advocating for mitigation or good risk strategies in the boardroom? So to have not the cold, all the COVID in the room just seems crazy.
Tom Blandford: Right, so then they are in the room. Yeah. So then they are in the room, because I agree with UK, that’s absolutely what I think I would do. But if they’re in the room and they are a partner of the firm and I might assume most partnerships have, you know, one man, one vote, or one woman, one vote. So they but they they’re in the room, they go, Yeah, I agree with that you know, I mean most you don’t actually literally vote, do you? But like
Yes, I agree, yeah, yeah, yeah, like motion carried kind of situation. Well, have they not just made a decision? like so how does that how how does that work? like I’m confused. We’ll come to it later. I have one thought perhaps that might mitigate that. So there you go. That was Medium Ferns.
Kate Burt: And yet medium firms and the biggest outcry I’m hearing from is in relation to the sole practitioner. And of course there are the thresholds, I believe, and you correct me if I’m wrong, Tom, but if you’ve 500,000 in client account at any one time, if you’re above that, then you’ve breached the threshold. And also on revenue, what was that? Is that 600,000?
Tom Blandford: Six hundred thousand yeah.
Kate Burt: 600,000 on revenue. So if you’re a sole practitioner and you’re under those thresholds, then potentially this doesn’t apply unless if you breach that threshold on the client money, then you have to have a separate COFA. Am I understanding that correctly?
Tom Blandford: You are understanding that right. So yeah, so you’ve got six hundred and five hundred are your thresholds. The nuance being that if you are a soul practitioner, you still have to separate out your COFA, but don’t have to separate out your cult. So you’ve got a a level under which none of this applies, and then a level where I said a moment ago it was a three-way split, a level where it becomes a two-way split.
Kate Burt: Yes.
Tom Blandford: So where to start? Those those levels are incredibly, incredibly low. And let me do you the worked example. The worked example, which, you know, I I replied to the original consultation a couple months ago. that is obviously publicly available if you can go and look at it if you want. This was my response to the consultation, right? I’ve literally made this point to the SOA, but I’m gonna make it again, right? So
Kate Burt: Those levels are quite low, aren’t they, Tom?
Tom Blandford: The Law Society tells me that an average fee earner does about 160 grand a year. Right? There obviously will be variations within that, but it is an average fee earner. Imagine for a moment that I’ve got a fee earner who’s really, really good and does 200 grand or 250 grand. But on average, the average fee earner in a law firm in the UK does 160 grand.
So if I’ve got four fee earners, four sets of a hundred and sixty tips me over that 600,000 pound turnover threshold we were just discussing. Right? So I have to split my rolls. Right? That’s the first thing. So I’ve missed the first threshold. Then let us assume that I do a fair bit of conveyancing or probate.
Right? What’s the average house price in the UK? Well, it’s about 300 grand.
Let’s assume that I’ve got. Two or three house sales on the go. Let’s assume that I’ve got two or three estates on the go, each of which have a house that has just been liquidated. So very quickly, if I do conveyancing or probate, very quickly, I’m also over the client money threshold. So I have to split and I have to split three ways.
Kate Burt: It’s almost there. The thresholds are so low that any conveyancing firm really, unless they’re not properly doing it, are going to breach that threshold in the first few days.
Tom Blandford: So I have to split. I have to split three ways. Okay. But let’s go back to the start of my example. I had four fee earners. Well, one of those is presumably the managing partner or equivalent sort of role. So I split him or her off. One of those now has to be the . One of those now has to be the COFA, and I’ve got one left over. well, okay, but in my four.
What happens if one of them was a paralegal? What happens if one of them was a newly qualified? Like now I’ve got three roles across two relatively senior solicitors, one of whom is an employee. I literally cannot do that. I literally can’t. I’ve got three roles across two human beings. Can’t do it. Can’t.
Kate Burt: The other thing is this might massively backfire on what they’re trying to achieve because I have seen examples in my career of where the is there for that, particularly in ABS’s, only in ABS’s I’ve seen, the is there so that they can have the ABS. They’ve got no management control. They’re there for their practicing certificate.
In the examples that I’ve seen in the worst case scenario, that cult has no teeth. They’re scared, they’re stressed, they can’t report. Well, the managers aren’t listening to them and they’re probably in that deep on the compliance stress that’s been created because no one’s listening to them. That if they now report, which we all know they should, if they now report, they are going to be up to their necks in it as well.
Tom Blandford: Mm-hmm.
Kate Burt: And I’m envisaging a situation where the the or the COFA responsibility is given to two junior employee or other individual and the actual compliance is worse because of that dynamic. And that is a very dangerous place to be.
Tom Blandford: It’s yeah. It just it it’s kinda it’s like I’m not saying that these more junior employees couldn’t be COFA, but you might assume for all the reasons you just said, Kate, that they would be a little less good at it. You might assume that if they’re gonna take it on, they’re definitely gonna be wanting to be paid more, aren’t they? you know…
Kate Burt: They might be good at it, Tom. And in fact, they might be better at it. They may technically be better at it, but if they’re not heard or taken seriously or if they’re bullied, then that’s going to be a problem.
Tom Blandford: Yeah.
Kate Burt: And they do, and this is going back to the, it’s going to cost firms a lot of money if they want to get this right, is if there is the right person who’s willing to take it on, they should be paid properly for that responsibility and their role should be adjusted to allow for them to carry out the additional duties that come with that responsibility as well. So for firms, one, it’s extra on the payroll and two, less capacity to do the actual work if the COFA is fee earning.
Tom Blandford: Yes, isn’t that the beautiful irony of well, I’m gonna have to pay you ten grand more and actually get fifty grand less work out of you because you’re busy being the or the COFA. It’s the double whammy on the profitability.
Kate Burt: I have another question. Will the new replaced compliance role holders have the required and necessary independence and authority? I think Nina, that’s what we’ve just described, isn’t it? So I must have picked up subliminally your thoughts there Nina. So thank you for that question. So yes, they may not have.
Tom Blandford: They may not have. They may not have. So and then the the so the last point on these thresholds is if you are one of the lucky ones, if you’re sat here going, well, as it happens, my turnover’s about 500 So I’m under both thresholds. Whew. first of all, yes, you are. Congratulations. But the other thing is, I’m believing I’m gonna say this out loud, but here you go.
Speaking as a chartered accountant who deal has dealt with hundreds of law firms, who lives and breathes, you know, the outsource finance director for lots of law firms, here you go. My official advice to you, little firm that turns over 500 grand is never grow ever again. Because you need to sit underneath this threshold. Because if you just tip over that threshold by a few quid.
Tom Blandford: It’s gonna cost you so much money. So just if you could just stop growing now, please. Just just give give just stay where you are. Thanks.
Kate Burt: And as we know, Tom, if you’re not growing, you’re dying.
Tom Blandford: It’s dark. I would never give one of my clients that advice. But bizarrely, it creates a cliff edge, is the less flippant point that I’m making. There’s a very weird situation where, you know, at 590 grand of turnover, I’m relatively profitable. At 601 grand of turnover, I’ve got all of this cost that we’ve just described.
Kate Burt: Do you think Tom that the SRA has overlooked all these things that we’re talking about? Do they not care? And as some cynical parties might say, they don’t want law firms to do business or be in business and they don’t want people to set up firms or to thrive in small firms in particular. What do you think the thinking is from the SRA here?
Tom Blandford: I’d love to be in the SRA stand. It would make my life so much easier. I mean, I can’t believe I’m about to defend them again. In slight fairness, if we go back to where we started sort of twenty minutes or so ago, Kate, there is a problem in the profession. You know what? Like we are all of us collectively a little bit culpable because at the smaller end it does actually happen.
Like most weeks. You’d be surprised again. I refer you to the Law Society Gazette. You know, it it is happening most weeks, you know, 50, 60 times a year in 50 or 60 very small firms. But there’s two ginormous, incredibly high profile examples of it happening in massive firms. So we can’t sit here as a profession and say, well, we’re we’re in on the role of England Wales, we are absolutely upstanding members of the community. No. Some of our brethren, some of our community are absolutely fudging it.
Kate Burt: There are, and some, some of them, but it’s again that feeling that the many is under the cosh because of the few. And are there other ways to tackle that bad behaviour, police that bad behaviour than put this whole blanket requirement on the whole profession?
Tom Blandford: Well, absolutely. And you know what? Like there’s that that’s the wider, wider point, isn’t it? Is okay, even once we all go through the pain of this and we find way to separate out into our three different human beings or maybe two human beings depending on our thresholds. what does that actually achieve? Now I suppose you’re the expert here, Kate, you can tell me in a minute, but I might assume that committing these kinds of frauds might be a little bit harder. There might have to be a little bit more of a cover up or maybe a little bit more of a collusion. But fundamentally you can’t stop me.
Kate Burt: Genuinely, if you want my honest answer, if those at the top are corrupt, that cult will not know. They will not find out. If they are serious, if they are good at what they do. You can fudge things, you can make things look okay to the cult.
They’ll just package up what the wants to see or the dynamic where the has no say, you know, has no real teeth anyway. So I genuinely don’t think. So let’s look at, and I know we don’t have the details and the facts of the specific case of Axiom Ince, but it’s a giant sort of extreme example, isn’t it? So if the masterminds behind that had a separate cult, would it not have happened? If the masterminds behind that had a separate copper, would it not have happened?
Hmm, I’m not convinced. I’m not convinced.
Tom Blandford: Absolutely and the same logic of the the Proddow Mackay one which again is you know is still being investigated by the National Crime Agency. I mean they definitely had a separate COFA, and I’m mostly sure they had a separate . So…
Kate Burt: It’s important, is it not? It doesn’t change it. If there are true criminals and not making any suggestion about anything that isn’t confirmed in a court of law, blah, blah. But if you have true criminals, they don’t care. Same with money laundering. Same with money laundering. And this, have a bee in my bonnet about this.
The true, the masters of money laundering, they are not getting caught. And if they are getting caught or the net closes in, and I’ve seen this, it’s called Black Swan, and it’s a very good documentary, you should watch it. But what happens is those real hardcore criminals, if the net closes in on them, they throw someone else to the wolves and they’ve got the bribed, you know, they’ve got the blackmail to admit that it was them when it wasn’t them and they go to jail because of the bribery. And I’m being extreme, but these things do happen. And we’re talking about extreme when we’re talking about things like mass crime.
Financial fraud at the highest level. So if that was the aim of the SRA to stop that sort of thing, I don’t think that’s going to be effective.
Tom Blandford: Yes, I agree.
So I mean I feel better for venting.
Kate Burt: So what can you do about it, Tom? I mean, we can, as you said in your post this morning, and I know I did say this in my earlier LinkedIn post, this potentially is a therapy session, to, and as you said in your post this morning, Tom, shouting into the void. So we’re shouting, there’s people in the comments shouting as well. We’ve had another comment in here. It completely contradicts the objective of more stringent regulation if junior staff have this burden and role.
Tom Blandford: Yeah.
Kate Burt: Once again, private practices are carrying the cost of additional staff because of the SRA can’t regulate. That’s the latest comment in. But okay, so we’re having this therapy session, Tom. It’s great. It’s good for me. I’m enjoying it. Hopefully it’s cathartic for others. But as you are a solution finder, as am I, we don’t just want to go, this is rubbish. So there’s nothing we can do, you know, moan, moan. Like what can be done at this late stage?
Tom Blandford: I feel better. I feel better.
Kate Burt: And with an eye to, let’s not make the same mistake of only 20 people in the entire profession responding to the consultation. Is there a window here before it goes to the LSB to make such a noise as a profession that there’s a U-turn?
Tom Blandford: I mean, let’s let’s start with hope. So let’s start with yes. Please let that be true. So there is technically a window.
The SRA has closed their consultation. 20 people slash organizations in slight fairness. So, you for example, the Manchester Law Society replied. So you could argue they were doing that on behalf of a couple of thousand people. Arguably, I think that’s tenuous, but no.
Twenty people or organisations replied. Could maybe just a few more, please. Please get your pen out, send an email, write a letter. Now the SRA has closed their consultation. This is the SRA’s official answer. Because of the way just the bureaucracy works, the LSB does still have to sign it off. just the nature of the bureaucracy. That will take about a year ish, ’cause it just does that’s life. So
We’ve got a window. Please, for the love of God, open up your Outlook right now. You have my permission to, you know, pause the webinar or whatever. Open your Outlook right now. Send an email to the LSB expressing your displeasure and asking them to use their powers to I suspect they will not override their subordinate regulator. You know, you know, we’re a sort of
We’re appealing to mummy and daddy at this stage, but but we’re probably appealing to the grandparents. Anyway, so please, Granny, make mummy and daddy less harsh. Probably isn’t gonna work, is it? But what I would what I will be doing, what I will be doing, is the point I made earlier about the thresholds. I think if we have to do this, then the thresholds are mind-numbingly low. So
Kate Burt: It’s almost like there’s no point having them. They’re that low.
Tom Blandford: So that’s what I will be doing. I advocate everybody else just write an email to the LSB saying, look, I think this is ridiculous for these reasons, but blah, blah, blah, blah, blah, blah, blah. But at the very least, up, I mean, add several zeros onto the back end of those thresholds. Please, please, please. That’s sort of mitigation number one. mitigation number two is kind of like I say, it’s not a fact yet.
So everybody’s just got a little bit of time to just think about who who’s it gonna be? Like, genuinely, who is our sort of I don’t know, sort of the Venn diagram of junior enough not to be caught in that definition of decision maker, but senior enough to actually have some ability to do this and some nouse and some, you know, everything you said earlier, Kate, about actually can be that person that can, you know.
Look everybody else in the eye and go, no, don’t do that. so start to think about that. And I suspect what flows from that is therefore thinking about some of your policies and processes and how you support that person in that role. let me give you the example that works for me. Okay, so I’m more on the COFA side of the house. I know you’re more on the side of the house, but realistically, when it comes down to it, what is it that a COFA does?
Kate Burt: Yeah.
Tom Blandford: What a COFA does is you have a really good set of cashiers who are just like well trained and well sort of mentored by COFA’s to just sort of have their spider sense going. And the cashier’s job is to be that sort of, “Fiona’s asked me to do something that just feels just a little bit weird, and I’m gonna err on the side of weirdness, and if it’s like five out of ten weird, my job as the cashier is just to send it to the COFA.” That’s what you know. So that’s about building a culture in your cashiers that they’re allowed to query stuff, but also building a culture in your firm that says it’s not the cashier’s job to sort of have that bum fight with the solicitor. It’s the coffer’s job. And so, again, culturally, really, what’s a COFA for?
They’re there to mentor and protect and be the human shield of a cashier. So who have you got in your organization that can pick that up and look their fellow fee earners in the eye and go, nope, as COFA, I am not authorising that transaction for whatever reason.
Kate Burt: Yeah, yeah, I’m just there’s lots going on in the chat, know, Tom, about you are not looking at it, are you? Lots go lots of lots of chat. So one interesting point you make about the the take on the unilateral decision maker. And of course, we don’t know how it will be applied because it’s, as you said, the drafting is not fully there yet. And hopefully it is yet and not never.
But interesting take on that is that all partners collectively make a unilateral decision maker. I had been hoping possibly that this would not be the case. We don’t know yet, Claire, is the point. But as all good risk professionals, we have to look at what’s the worst case scenario and let’s at least have a start our thinking of if that were the case, how would we respond to that? That’s just
Tom Blandford: Yeah. We don’t. We don’t.
Kate Burt: Good risk management anyway.
Tom Blandford: It is. Which actually just segues me finally into my third and final mitigation is that point. So you’re right, you know, Claire, yeah, and Kate, the sort of subject slightly to the caveat of the exact wording when it is officially signed off. There is draft wording, but once it’s officially signed off, subject slightly to the exact wording. I think perhaps the answer here might be many firms might have to just change their consul constitution, change your members’ agreement.
Change your shareholders’ agreement. So what you might have to do, and I’m this probably runs slightly against your culture, I’m very sorry. But what you might have to do is rat I’m most firms tend to have, you know, one partner, one vote, usually.
What you might have to do is actually say that the managing partner does have some sort of veto right, golden share. You know, absolute arbiter of power because then what you will legitimise you know, the paperwork will support you when you say our unilateral decision maker is the managing partner, our coffer is whomever, our is whomever. There you go, three separate human beings.
Kate Burt: We do have some precedent in terms of independence on the compliance side when it comes to AML and an independent audit, for example. So we have seen examples where the SRA have said, well, if it’s the that’s done your independent audit, they’re not sufficiently removed from the management of the AML framework and even though they’re not involved in the not MLRO, the SRA have said in certain circumstances there that actually they’re not independent enough. So they can be quite too close.
Tom Blandford: Hmm. And I like so that might be the sort of the paperwork answer, if you see what I mean. It is potentially a huge cultural shift, ironically, then, for some firms who are, you know, many of my clients are lovely and genuinely collegiate and genuinely sit in a room and sort of talk it through and have that debate and sort of, you know, politely but firmly sort of challenge each other and come to quite a nice, sort of, you know, unified answer.
But maybe now what we’re saying is, yes, we can sort of do that, but there is a little element of I am the managing partner and my word is law weirdly, to achieve this this three way split that we’re supposed to achieve.
Kate Burt: Yeah. Yeah.
Yeah, but and if that culture is right, just because they’ve got that red buzzer or that golden buzzer, I like the visuals, doesn’t mean that they’re going to push the button every time. So you could still, you know, and I think we’ve had that conversation about high risk in the early days as well, Tom, about that sort of thing. you know, ultimately I can choose what colour paper we can have in the printer, but I’m not going to make the point every time.
Tom Blandford: Ha ha ha.
Kate Burt: It’s that sort of thing. You can keep a harmonious ship but still have that golden buzzer, red buzzer, if you need it, even if it’s just for the sake of this specific scenario.
Tom Blandford: Hmm, perhaps so. And again obviously the devil might be in the detail there of exactly how that is drafted and phrased. Because again, you know, again, it what happen if we are all in this room and we’re being lovely and collegiate, and like actually actually I would personally think that’s right answer. Are we in a weird scenario where the paperwork says we’ve got one unilateral decision maker?
The precedent is that we’re actually all sat in a room being lovely and collegiate, and then we’re like, are we sort of in a weird scenario of we’re following the letter of the rule, but certainly not the spirit of the rule. And actually does that cause us a problem?
Kate Burt: We’ve got a couple more questions. Kirsty Pappen says, are we recording? Daniel Burt says, always.
Yes, we are recording and it will be on the podcast as well, the What’s the Buzz podcast when that’s released. We’ve got a question in here. Is there an exemption for owner firms, one owner firms over threshold? We have answered that earlier on in the session. So just rewind when we finished and watch that on the replay.
Tom Blandford: Yeah.
Kate Burt: We also have a comment about whistle-blowing protection and that that needs to be if this is to go ahead that needs a lot a lot of work to be done to give those you know that reassurance and that that protection in relation to to whistle-blowers as well which I would agree with.
Tom Blandford: So thank you for letting me scream into the void. In conclusion, please open up Outlook, email the LSB. I will be doing it in a minute.
Kate Burt:
Thank you.
Kate Burt: Yeah, exactly. And in fact, we will tag the LSB into this for them to watch. In fact, I’m sure someone I know has a really good contact with the LSB, might tap them up for that contact as well. Or yeah, if anyone watching this does have a contact, do put it in the right mailbox. We will be continuing to talk about these sorts of things. Tom, were, we were already…
Tom Blandford: Yeah.
Kate Burt: Arranging for you to be on a What’s the Buzz session. This fast tracked it and through you live on LinkedIn. So thank you for being so responsive on this, but we will do a more another session on this potentially with a panel. Hopefully Rob Bletch will come from MHA, and we can have another conversation about this once we know more and once we’ve had more views from the profession as well. In the meantime, your DMs are open for people to scream at you as well, aren’t they?
Tom Blandford: But basically everybody’s been screaming at me for the last sort of forty eight hours. So join the screaming. like I’m feel I feel like we might need like sort of members only jackets or something like that. Yeah, my WhatsApp is like a flood of people going, and I’m just finally Yes mate, I know
Kate Burt: Yeah.
But as some of it is, you know, it’s not happened yet. Sit tight. But there is this window of opportunity to make some noise about it and just at least start thinking, OK, if this does hit in the worst way, how might we move pieces around just so it’s not, you know, it’s it’s not a big mad rush when it does, if it does actually happen.
But also just keep talking to each other. The whole, you know, the as a profession, we’re stronger together. We always say that and just don’t go through it alone is the message.
I would like to say, Tom, you’ve done really well on this first LinkedIn Live. It’s your first ever LinkedIn Live, isn’t it? And I think, yes, and I think people will want to see you every week, like we do. And I’ll just tell everybody about this, because as I said at the beginning, Tom’s our Fractional Finance Director. And in fact, you’ve been working with us since late 2022.
Tom Blandford: There you go. Did I get away with it?
Kate Burt: And every month since 2022, I’ve got a board report for my management account. And in a little circle at the bottom is Tom’s face with exactly that background on video, talking me through and talking our board through the report in such a accessible way, So if anyone doesn’t have a Tom in their life to do that and make management accounts and and co-firing and rather finance or X-Ring, easy than get in touch with Tom because you’re brilliant Tom although you’ve probably got no spaces left now have you…
Tom Blandford: Well thank you, Kate. That’s very you’re brilliant too for the record. but
Kate Burt: Yeah, this is now your point to say nice things about me, but we’ll save that for the next episode. no, no, no, genuinely. Thank you. And genuinely to everyone. Thank you for tuning in live. And I know a lot more people watch it on the replay and also on the podcast, but, you know, let’s let’s stick together on this one and get through it. Brilliant. Thank you. Thanks, everyone.