SRA Handbook

Approval of managers, owners and compliance officers

Version 21 of the Handbook was published on 06/12/2018. For more information, please click 'History' Above

Part 4: Approval of managers, owners and compliance officers

Rule 13: Application for approval

13.1

This Part governs the SRA's determination of applications for:

(a)

approval of an authorised body's managers and owners pursuant to Rule 8.6(a); and

(b)

approval of an authorised body's compliance officers, pursuant to Rule 8.5(b) and (d).

13.2

The SRA will deem a person to be approved as suitable to be a manager or owner of an authorised body under this Part if:

(a)

that person is:

(i)

a solicitor who holds a current practising certificate;

(ii)

an authorised body;

(iii)

an REL; or

(iv)

an RFL;

(b)

there is no condition on the person's practising certificate, registration or authorisation as appropriate, preventing or restricting them from being a manager, owner or interest holder of an authorised body or being a sole practitioner;

(c)

the SRA is notified on the prescribed form in advance of the person becoming a manager or owner of the authorised body; and

(d)

the SRA has not previously withdrawn its approval of that person to be a manager or owner under Rule 17.

13.3

The SRA will deem a person to be approved as suitable to be a compliance officer of an authorised body under this Part if:

(a)

that person is an individual who is a sole practitioner or a lawyer who is a manager of the authorised body;

(b)

the authorised body has an annual turnover of no more than £600,000;

(c)

the SRA is notified of the appointment of the person as a compliance officer on the prescribed form, correctly completed, in advance of the appointment commencing;

(d)

that person is not subject to a regulatory investigation or finding, including a discipline investigation of which they have received notice, a disciplinary decision or a SRA finding, or an application to or a finding of the Tribunal, or any equivalent investigation or finding of another regulatory body;

(e)

notwithstanding the generality of sub paragraph (d), the SRA has not previously refused or withdrawn its approval of that person to be a compliance officer under rule 17; and

(f)

the person is not a compliance officer of any other authorised body.

Rule 14: Approval process and production of information or documentation

14.1

An application for approval of a manager, owner or compliance officer may be made by an applicant or an authorised body and must include evidence to satisfy the SRA that the candidate is suitable to be a manager, owner or compliance officer of the body, as appropriate.

14.2

The applicant or authorised body, as appropriate, must:

(a)

co-operate, and secure the co-operation of the candidate, to assist the SRA to obtain all information and documentation the SRA requires in order to determine the application;

(b)

obtain all other information and documentation in relation to the candidate which the prescribed form requires the body to obtain and keep; and

(c)

keep all information and documentation under (b) above for a period of not less than 6 years after the person concerned has ceased to be a manager, owner or compliance officer of the body.

14.3

[Deleted]

14.4

The SRA's decision to approve or refuse approval must be notified in writing to the applicant or authorised body as appropriate, as soon as possible.

14.5

The SRA may, at the time of granting its approval or at any time subsequently:

(a)

approve the holding of a material interest in a licensed body subject to conditions in accordance with paragraphs 17, 28 or 33 of Schedule 13 to the LSA; and

(b)

make its approval of a person to be an owner, manager or compliance officer of an authorised body subject to such conditions on the body's authorisation as it considers appropriate having regard to the criteria in Rule 9.

14.6

If the SRA proposes to object to a candidate becoming an owner of an applicant or authorised body, or to approve such a person becoming an owner subject to conditions imposed under Rule 14.5(a) or (b), the SRA must:

(a)

give the candidate and the body a warning notice which:

(i)

specifies the SRA's intention to object or to impose conditions; and

(ii)

states that any representations must be made to the SRA within the period of 28 days from the date of the notice; and

(b)

consider any representations made to the SRA by the body and/or the candidate within the 28 day period in (a)(ii) above.

14.7

The SRA may issue a conditional approval or objection without a warning notice under Rule 14.6 if the application for approval has been made after the grant of authorisation and the SRA considers it necessary or desirable to dispense with the warning notice for the purpose of protecting any of the regulatory objectives.

14.8

The SRA may at any time require the production of information or documentation from:

(a)

a person who has been approved as an owner, manager or compliance officer under this Part (including a deemed approval under Rule 13.2 or 13.3);

(b)

an authorised body of which that person is a manager, owner or compliance officer; or

(c)

the body which originally obtained approval for that person and holds information and documentation under Rule 14.2(c);

in order to satisfy the SRA that the person met, meets, or continues to meet the criteria for approval.

Guidance notes

(i)

See also the guidance notes to Rule 1 regarding ownership and material interest.

(ii)

The SRA's notification "in writing" includes any form of written electronic communication normally used for business purposes, such as emails.

(iii)

See also Regulation 7 of the SRA Practising Regulations under which the SRA has the power to impose conditions on a practising certificate or registration which restrict an individual's ability to be involved in an authorised body.

(iv)

Specific provisions exist in the LSA about imposing conditions on the approval of owners of a licensed body:

(a)

For the approval of ownership on an application for a licence, see paragraph 17 of Schedule 13 to the LSA. For the approval of ownership on a change of interests after a licence is issued, see paragraph 28 of that Schedule. These give the SRA the power to approve an owner's or a prospective owner's holding subject to conditions where the Rule 15 criteria are not met in relation to that investment, but only if the SRA considers that, if the conditions are complied with, it will be appropriate for the owner to hold the interest.

(b)

For the imposition of conditions (or further conditions) on an existing ownership interest, see paragraph 33 of Schedule 13 to the LSA. This gives the SRA the power to impose conditions (or further conditions) on a person's holding of an interest, if the SRA is not satisfied that the Rule 15 criteria are met, or if the SRA is satisfied that a condition imposed under paragraphs 17, 28 or 33 of Schedule 13 (see above) on the person's holding of that interest has not been, or is not being, complied with. The SRA may only use the paragraph 33 power if it considers that, if the conditions are complied with, it will be appropriate for the owner to hold the interest without the approval requirements being met.

Rule 15: Criteria for approval

15.1

When considering whether a candidate should be approved to be a manager, owner or compliance officer of the body, as appropriate, the SRA will take into account the criteria set out in the SRA Suitability Test and any other relevant information.

Guidance notes

(i)

As well as evidence about the candidate, the Suitability Test takes into account evidence about the honesty and integrity of a person that the candidate is related to, affiliated with, or acts together with where the SRA has reason to believe that that person may have an influence over the way in which the candidate will exercise their role.

(ii)

Under paragraphs 19 and 20 of Schedule 13 to the LSA the SRA has the power, when dealing with an application for a licence, to object to the holding of an interest if it is not satisfied that the Rule 15 criteria are met in relation to that holding. The mechanism for objecting is set out in those paragraphs.

Rule 16: Effect of approval

16.1

Approval takes effect from the date of the decision unless otherwise stated and remains effective only if the candidate takes up the position for which he or she has been approved within the period specified in the notice of approval.

16.2

Subject to Rule 16.1, approval continues until:

(a)

it is withdrawn by the SRA; or

(b)

the approved person ceases to be a manager, interest holder, COLP or COFA of the authorised body, as appropriate.

Guidance note

(i)

The period specified in the notice of approval in Rule 16.1 will normally be 90 days although may be varied in individual cases.

Rule 17: Withdrawal of approval

17.1

Where the SRA has granted an approval of a person to be a manager, owner or compliance officer of a body (including a deemed approval under Rule 13.2 or Rule 13.3), it may subsequently withdraw that approval if:

(a)

it is not satisfied that an approved person met or meets the criteria for approval in Rule 15;

(b)

it is satisfied that a condition imposed on the body's authorisation under Rule 14.5 has not been, or is not being complied with;

(c)

it is satisfied that the approved person has breached a duty or obligation imposed upon them in or under the SRA's regulatory arrangements or any enactments; or

(d)

information or documentation is not promptly supplied in response to a request made under Rule 14.8.

17.2

Where withdrawal of approval relates to a director of a company, the SRA may set separate dates for that individual ceasing to be a director and disposing of his or her shares.

Rule 18: Temporary emergency approvals for compliance officers

18.1

If an authorised body ceases to have a COLP or COFA whose designation has been approved by the SRA (including a deemed approval under Rule 13.3), the authorised body must immediately and in any event within seven days:

(a)

notify the SRA;

(b)

designate the sole practitioner, another manager or employee to replace its previous COLP or COFA, as appropriate; and

(c)

make an application to the SRA for temporary approval of the new COLP or COFA, as appropriate.

18.2

The SRA may grant a temporary approval under this rule if:

(a)

it is satisfied that the authorised body could not reasonably have commenced an application for approval of designation in advance of the non-compliance; and

(b)

on the face of the application and any other information immediately before the SRA, there is no evidence suggesting that the new compliance officer is not suitable to carry out the duties imposed on them under these rules.

18.3

Temporary approval under this rule:

(a)

may be granted initially for 28 days;

(b)

may be granted to have effect from the date the body ceases to have a COLP or COFA whose designation has been approved;

(c)

may be extended in response to a reasonable request by the authorised body;

(d)

must be extended pending determination of a substantive application for approval commenced in accordance with Rule 18.4;

(e)

may be granted or extended subject to such conditions on the authorised body's authorisation as the SRA thinks fit, having regard to the criteria in Rule 9;

(f)

has effect only while the criteria in Rule 8.5(g) are met;

(g)

if granted, cannot prejudice the discretion of the SRA to refuse a substantive application for approval of designation or to impose any conditions on that approval; and

(h)

in exceptional circumstances, and for reasonable cause, may be withdrawn at any time.

18.4

If granted temporary approval under Rule 18.3 above for its designation of a new COLP or COFA, the authorised body must:

(a)

designate a permanent COLP or COFA, as appropriate; and

(b)

submit a substantive application for approval of that designation under Rule 13;

before the expiry of the temporary approval or any extension of that approval by the SRA.