Legal Services & Solicitors Accounts

Question 1

What facts or matters constitute a serious breach and may warrant a SRA investigation?

Answer 1

• Discriminating against a client based on your personal views
• Breach of an undertaking
• Knowingly acting in a situation where there is a significant risk of conflict
• Breaches of SRA rules
• Failure to appropriately handle client complaints

Question 2

What is a regulated activity under FSMA?

Answer 2

Activity of a specified kind carried on by way of business and relates to
- specific investment
- carried out in relation to property

Question 3

What things constitute as by way of business?

Answer 3

Deposit-taking business
Investment business
Managing Investments (Occupational Pension Schemes)

Question 4

What are the main excluded activities under FSMA which do not require regulation?

Answer 4

Arrangements not causing a deal
Enabling parties to communicate
Arranging transactions to which the arranger is a party
Arranging deals through authorised persons

Question 5

When are solicitors excluded from FSMA regulation in terms of shares?

Answer 5

Sale of a Body Corporate
- when the transaction involves the acquisition or disposal of at least 50% of the shares
- object of the transaction is the acquisition of the day to day control

Question 6

What are the conditions for property to be criminal property?

Answer 6

• benefit from criminal conduct
  -alleged offender must know or suspect it represents a benefit

Question 7

When may enhanced due diligence be required?

Answer 7

• Relevant transactions between parties based in high risk countries
• Customer is beneficiary of a life policy
• ## Customer is a third-country national seeking residence rights in exchange for property or investments

Question 8

When must due diligence be carried out?

Answer 8

If the person
- establishes a business relationship
- carries out an occasional transaction which amounts to transfer of funds
- suspect money laundering
- doubts the veracity or authenticity of documents provided

Question 9

When should simplified due diligence be done?

Answer 9

Low risk of money laundering (repeat customer based in the UK)

Question 10

What are the defences to money laundering?

Question 11

When are referrals prohibited?

Answer 11

When a claimant claims for personal injury or death
SO referrals for a fee is not allowed

Question 12

What is the definition of harassment?

Answer 12

A engages B in unwanted conduct related to a relevant protected characteristic which has the effect of
- violating B’s dignity
- creating an intimidating or hostile environment for B

Question 13

What is the definition of victimisation?

Answer 13

Protects individuals where A subjects B to a detriment because
- B has done a protected act
- A belivees B has done a protected act

Question 14

What duty is a service provider under to disabled people under the Equality Act?

Answer 14

Under a positive duty to take steps to remove or prevent obstacles

Question 15

What is client money?

Answer 15

Any money held or received by a solicitor
- relating to regulated service delivered to a client
- on behalf of a third party
- where the solicitor is holding the money as a trustee
- in respect of the solicitors fees or unpaid disbursements

Question 16

What are the requirements for a client account?

Answer 16

must include the name of the authorised body
must include the word ‘client’

Question 17

When will client money not need to be held in a client account?

Answer 17

• When the only money held or received is money in respect of solicitors fees and any unpaid disbursements prior to bill (if the solicitor is liable eg expert fees), then the solicitor can hold this money in one of the firms business accounts (must relate to costs and there must not be a client account)

-

Question 18

When must the solicitor pay client money into the client account?

Answer 18

Solicitor must pay client money into the client account promptly
Exceptions
- when the solicitor has received money as a trustee
- payment received from Legal Aid Agency
- solicitor and client agree another arrangement

Question 19

What is the prohibition on the use of the client account to provide banking facilities for third parties or clients?

Answer 19

Payments into and transfers from the client account must be in respect of delivery of regulated services

Question 20

What should the solicitor do if they have two clients (buyer and lender) who transfer money to them?

Answer 20

The solicitor need not open two client ledger, just one is fine as long as the lender was an institutional lender providing loans in the normal course of business and provided the funds were clearly identifiable

Question 21

What accounting must you do when you receive client money?

Answer 21

Obtain an accountants report for that accounting period within six months of the end of the period
Deliver it to the SRA within six months of the end of the accounting period IF it shows that client money has been put at risk

Question 22

What are the requirements for an accountant?

Answer 22

Accountant is a member of a chartered accountancy bodies AND who is or works for a registered auditor

Question 23

How long must you retain accounting records for?

Answer 23

Must retain accounting records for at least six years

Question 24

Who is liable for compliance of the rules?

Answer 24

Authorised bodys managers are jointly and severally liable

Question 25

What is a joint account?

Answer 25

Joint account is not a client account but money held in a joint account is still client money

Question 26

Is money held in a third party account client money?

Answer 26

no
- client must be informed of the use of the third party account

Question 27

What interest must you account to the client?

Answer 27

You account to clients or third parties a fair sum of interest on any client money held by you on their behalf

Question 28

Is interest client money?

Answer 28

No it is non-client money therefore it must be transferred to the business account and then paid to the client