Strengthening effective oversight

By Aileen Armstrong | 4 September 2026 | 5-minute read

Compliance officers play an important role within the regulatory framework and are responsible for overseeing the firm's compliance with all legal and regulatory obligations. This blog explains how changes to rule 8.4 and the separation of compliance roles will work in practice.

Reason for the rule changes

Following a consultation earlier this year, the Legal Services Board has now approved rule changes that aim to strengthen the checks and balances provided by compliance officers. At its core, the regulation exists to ensure that there are appropriate checks and balances on individuals who have significant power within, and control over, a law firm.

Compliance officers play an important role within the regulatory framework and are responsible for overseeing the firm's compliance with all legal and regulatory obligations. They must take all reasonable steps to ensure that the firm, its owners, managers and all people involved with it comply with the regulatory arrangements and the terms and conditions of authorisation.

However, if an individual who can unilaterally control the firm's decision-making and actions, is also the Compliance Officer for Legal Practice (COLP) or the Compliance Officer for Finance and Administration (COFA), this could negate that key checks and balances safeguard. This may in turn increase the risk of serious breaches of our regulatory arrangements and these breaches going undetected and unreported, causing significant harm to consumers and the public. The rules aim to reduce this risk, where responsibility for both running the business, and overseeing compliance, sits with just one person.

What this means in practice

We heard feedback that people were not clear what the rules would mean in practice. We’ve taken this on board.

The original rule, published following the December 2025 consultation, led people to believe that for firms within scope, no senior manager could be a compliance officer. This is not the intention. The rule will only apply to an individual who can unilaterally make significant management decisions - not to every senior manager or owner. Significant management decisions include important issues such as how the firm is structured and run, how it is governed or manages risk, or how it holds client funds.

The rule has been updated to include the word unilaterally. Compliance officer restrictions would apply where:

Firms should of course consider the new requirements in the context of their own governance arrangements. The rules do not necessarily mean firms need to recruit new staff or appoint external providers; what matters is whether they can maintain appropriate separation of responsibility and effective oversight.  For example, if your firm already has a decision-making structure based on shared responsibility, then in many cases further change won’t be necessary. And if changes are necessary, firms can determine what works in their circumstances.

Firms could for example:

• Adapt their governance arrangements so that significant management decisions are made jointly, rather than by one person acting alone. This might involve adding governing board members or otherwise sharing decision-making.
• Reassign the compliance role to another eligible person within the firm. This could include shareholders, partners and senior managers, depending on the firm's arrangements.
• Consider alternative business models, including not to hold client money.

Impact on sole practitioners and smaller firms

We have also listened to concerns about implementation and proportionality, including from smaller firms and sole practitioners. The Legal Services Board has approved a targeted approach, rather than one that requires full separation of compliance officer roles across all firms. These changes will not apply to all firms – there are risk thresholds applied.

So, who is affected by these changes? Under the new approach, separation will apply to firms with a turnover of more than £600,000, or to firms that hold more than £2 million in client money. The client money threshold was increased in response to consultation feedback. There will be limited exemptions for sole owner-manager firms and for certain firms with unusually high client money balances because of exceptional transactions. To clarify:

• Sole owner-manager firms that trigger the client money threshold only - need to separate out the COFA but not the COLP.
• Firms that trigger the client money threshold only in a single year for an unusual reason can rely on the rule 8.7 exemption meaning that the separation requirements will not apply.

Next steps

Stakeholder feedback has provided valuable insight and perspectives throughout this process. The SRA will work with stakeholders including The Law Society, local law societies and other interest groups to co-produce and test new implementation support materials, including guidance and case studies, to cover:

• the purpose of the new requirements
• how the rules apply to different governance and ownership structures; and
• the practical steps firms can take to comply.

These will be published in the autumn, before the rule changes are phased in during early 2027, with smaller firms having longer to comply.

Effective checks and balances are key to maintaining confidence in legal services. They help protect firms, clients and the public by making sure risks are identified, challenged and escalated at the right time. Strong compliance arrangements are an essential part of building trust in the legal profession, giving confidence to consumers of legal services and protecting the reputation of the sector as a whole.

Author profile

Aileen Armstrong

Executive Director, Strategy and Policy

Aileen has been an Executive Director at the SRA since June 2023.

Prior to this, she was a Senior Civil Servant for 20 years, leading teams at Ofwat, HM Treasury and the UK’s competition authorities. Her early career spanned a range of policy roles in Whitehall and at the European Commission.