PC Flashcards

Question

Which one of the following statements about the client ledger balance is correct? The balance on the client side of a client’s client ledger account shows how much money in the client account belongs to that client. The balance on the client side of a client’s client ledger account shows how much money that client owes to the authorised body. The balance on the client side of a client’s client ledger account shows how much money there is in total in the client account.

Answer 1

The balance on the client side of a client’s client ledger account shows how much money in the client account belongs to that client.

Answer 2

Act in the best interests of your employer. Correct Correct. Acting in the best interests of your employer is not an SRA Principle. Whether you work for a law firm or in-house, you are subject to the Principles to act with independence, with honesty, with integrity, and in a way that upholds public trust and confidence in the profession. If these Principles came into conflict with a desire to act in the best interests of your employer, the Principles would take priority.

Answer 3

Principle 1: act in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice. Correct. If you provided a benefit to witness for providing evidence of a particular nature you would be jeopardising the proper administration of justice.

Answer 4

If you behave in an untrustworthy way but that behaviour is outside of your usual professional practice, you cannot be found liable to have breached Principles 4 or 5. Correct. Principles 4 and 5 apply to legal professionals in their personal as well as their professional lives. Therefore, the statement that you cannot be found liable to have breached Principles 4 and 5 if you behave in an untrustworthy way outside of your usual professional practice is FALSE.

Answer 5

Measles Correct. Measles is not one of the protected characteristics listed in your materials under the Equality Act 2010.

Answer 6

A large department store provides a private resting area for women who are pregnant or breastfeeding. A man feeling tired complains that he does not have access to a similar facility. Correct. Under section 13(1) Equality Act, direct discrimination occurs where “because of a protected characteristic, A treats B less favourably than A treats or would treat others”. Note however that, under section 13(6)(b) of the Act, in considering discrimination against a man, it is not relevant to take into account any special treatment given to a woman in connection with pregnancy or childbirth. This example is not discrimination because a man cannot compare himself to a woman in connection with pregnancy, childbirth, or it would follow, breast feeding. The other examples would amount to direct discrimination: A shop will not serve someone because of their ethnic origin: in this example the protected characteristic is race and the shop is treating the customer less favourably than they would treat others. A nightclub charges a higher price for entry to a man because of their sex where the service provided to a woman is exactly the same: in this example the protected characteristic is sex. The night club owner is treating men less favourably than they treat others (i.e women). A bowls club will not admit someone with a hearing impairment as a member: in this example the protected characteristic is disability. The bowls club is treating the person with a hearing impairment less favourably than they treat others (people without a hearing impairment)

Answer 7

The duty to make reasonable adjustments aims to make sure that a disabled person can use a service as close as it is reasonably possible to get to the standard usually offered to non-disabled people. The duty is ‘anticipatory’. This means a service provider cannot wait until a disabled person wants to use the service. They must think in advance (and on an ongoing basis) about what disabled people with a range of impairments (such as people who have a visual or hearing impairment, a mobility impairment or a learning disability) might reasonably need. Many adjustments will not be particularly expensive and a service-provider is not required to do more than is reasonable. Correct

Answer 8

CCS 6.3 Correct. CCS 6.2 contains the principle that you do not act if you have a conflict of interest or a significant risk of a conflict of interest. CCS 6.4 contains the principle that where you are acting for a client on a matter, you make the client aware of all information material to the matter of which you have knowledge (the duty of disclosure).

Answer 9

The duty of disclosure under CCS 6.4 does not apply where you have reason to believe that serious physical or mental injury will be caused to your client or another if the information is disclosed. Correct. This is an exception to the rule in CCS 6.4, as set out in CCS 6.4(c ). Under CCS and CCF, the decision as to whether or not you should disclose information that is material to your client’s matter does not rest with your Compliance Officer for Legal Practice or with what you consider to be reasonable.

Answer 10

Providing information to the court in compliance with a court order. Correct. Complying with a court order falls within the exception “unless disclosure is required…by law” under CCS 6.3.

Answer 11

The 3 Cs are customer due diligence, conflict check and client care letter Correct

Answer 12

CDD is identifying your client and verifying their identity on the basis of documents, data or information from a reliable source Correct

Answer 13

CCS 6.2 Correct

Answer 14

You should check that your firm is not acting for Gorspex in relation to the Acquisition. Correct. If your firm was acting for Gorspex, there would be a conflict of interest and your firm would not be able to act for Outdoor. Outdoor and Gorspex are not competing for the same objective here. The ‘objective’ Outdoor is ‘competing for’ is Gorspex, the target, so Gorspex cannot be competing for itself. Remember that the competing for the same objective exception applies mostly to tenders or auctions, not direct arm's length sales. ‘Own interest conflict’ is defined in the SRA Glossary as ‘any situation where your duty to act in the best interests of any client in relation to a matter conflicts or there is a significant risk that it may conflict with your own interests in relation to that or a related matter.’ If an individual solicitor owned shares in Gorspex, that solicitor would not be able to act on the acquisition due to their own interest conflict. But one solicitor in the firm owning shares in Gorspex would not prevent another solicitor in that firm from acting for Outdoor on the acquisition.

Answer 15

SRA Code of Conduct for Firms (‘CCF’) 2.1 Correct. CCF 2.1 states that you must ‘have effective governance structures, arrangements, systems and controls in place to ensure: You comply with all the SRA’s regulatory arrangements, as well as with other regulatory and legislative requirements which apply to you’. CCF 2.1 means that law firms need to have systems in place to ensure that there are no conflicts in place at the outset of the instruction.

Answer 16

John Smith, John Smith Films, and Galaxy. Correct. You should carry out a conflict check against your client, John Smith, the target, John Smith Films and the counter party, Galaxy. There is no need to carry out a search against Mars because at this stage it is not involved in the transaction, there have just been reports in the press.

Answer 17

ensure that the service you provide to clients is competent and delivered in a timely manner. Correct. This is an important standard from a client care perspective. You must be competent to give the advice your client requests and you must give it in a timely fashion. Many complaints arise from lawyers being too busy to give the client the level of service they are paying for.

Answer 18

The statement is false because there is no SRA requirement to send a client care letter. Correct. Sending a client care letter is not a mandatory requirement under CCS. However, as the SRA requires that certain information is provided to clients in writing, most firms choose to send client care letters to their clients as a way of demonstrating that they have met the SRA’s requirements.

Answer 19

Terminating your retainer to act on the divorce of a current client to give you time to concentrate on the divorce of a celebrity client who has just instructed you. Correct. You would be in breach of Principle 7 (act in the best interests of each client) and Principle 2 (act in a way that upholds public trust and confidence in the solicitors’ profession) amongst others if you did this. You would also be in breach of CCS 1.1.

Answer 20

Clients do not need to be informed of a law firm’s complaints procedure until you become aware that an issue has arisen which you reasonably believe may lead to the client wanting to make a complaint. Correct answer. This statement is false. CCS 8.3 requires legal professionals (and this requirement applies to firms under CCF 7.1) to inform their clients in writing at the time of engagement about their right to complain, how a complaint can be made and their right, if any, to make a complaint to the Legal Ombudsman.

Answer 21

If a law firm does not resolve a complaint from a client within 8 weeks following the making of the complaint, solicitors must ensure that the client is informed, in writing, of any right they have to complain to the Legal Ombudsman and the time frame for doing so. Correct. See CCS 8.4 (which applies to firms by virtue of CCF 7.1).

Answer 22

CCS requires legal professionals to ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred. Correct. See CCS 8.7. Note that CCS does not require this information to be provided in writing, but it is good practice to put this in writing.

Answer 23

Rent and salaries Correct. Two of the main liabilities of a law firm are rent and salaries. Many firms are based in central city locations to be close to the businesses which they represent. The downside to this is, of course, the higher rent. Equally, while more staff mean that more work can be taken on, the salaries of those staff are considerable. Fees paid by clients are the main source of income for a law firm, not outgoings. Marketing expenses is an outgoing but should not be one of the largest two liabilities of a law firm. Training events for staff should not be one of the largest liabilities of a law firm although it is an outgoing. Expenditure on client entertainment is also an outgoing, but again should not be one of the largest outgoings of a law firm.

Answer 24

Hourly charging is the traditional method of billing a client. However, it is coming under increasing pressure as clients seek to control the extent of their legal costs, and other methods of billing are therefore becoming more common. Correct. The problem with hourly charging from the client’s perspective is that there is no limit on the amount the firm charges the client for the work. If the lawyers take 100 hours to complete the project, the firm could charge for the full amount, assuming the partner responsible for the matter considers that to be a reasonable amount for the work. Clients are therefore increasingly looking to agree other billing methods, such as fixed fees or a cap on legal fees to help them manage the amount they spend on external lawyers.

Answer 25

In a fixed fee agreement, the law firm will invoice a client for a fixed amount, regardless of the amount of time spent by fee earners on the transaction. The fixed amount will be fixed at the agreed amount whether the hours worked by the lawyers on an hourly charging basis work out as more or less than the fixed fee. Fixed fee agreements are common for conveyancing or wills eg drafting a will for a set fee of £95 plus VAT Correct. In a fixed fee agreement the law firm will charge the client the fixed fee whether the hours worked by the lawyers on the task work out as more or less than the fixed fee. If the hours worked by the lawyers work out as more than the fixed fee the firm will make a loss, if the hours work out as less than the fixed fee, the firm will be able to charge the full amount of the fixed fee. Fixed fees tend to be used for projects the firm carries out regularly where they can confidently predict the number of hours it will take to complete the work. A capped fee agreement is where the law firm will record (and bill) their fees in the normal way, but the fees will not exceed a pre-agreed amount for the particular transaction. If the recorded time on a file reaches the cap, the legal team may be asked to stop work on the file while the partner attempts to renegotiate the cap. Otherwise, work will continue as normal past the cap, and any fees incurred above the amount will have to be written off. A conditional fee agreement is common in litigation and mediation cases. The lawyers do not recover any fees if they lose the case. If they win, they may recover their fees out of the damages awarded to the client. The maximum amount the lawyer can recover is capped, eg at 25% for personal injury cases. There are rules in place as to when and how conditional fee agreements can be used and enforced.

Answer 26

You must send the money to the client and the relevant accounting entries are as follows: Debit client ledger Credit cash sheet client account. Correct. Rule 2.5 states that you must ensure that client money is returned promptly to the client for whom it’s held, as soon as there is no longer any proper reason to hold those funds. These are the correct accounting entries for withdrawing money from the client account to send it (in a cheque or by electronic transfer) to the client.

Answer 27

Debit client ledger business account Credit cash sheet business account. Correct. These are the correct entries to record the payment out of non-client money. Non-client money will be used to make the payment because the client does not have any client money in the client account and Rule 5.3 states that you only withdraw client money from a client account if sufficient funds are held on behalf of that client to make the payment.

Answer 28

Credit client ledger business account Debit cash sheet business account. Correct. When the cheque reimbursing you is received, the entries needed are these ones to record the receipt of non-client money into the business account (because the cheque cannot be paid into petty cash as it is not an actual bank account).

Answer 29

Credit client ledger business account Debit cash sheet business account. Correct. When the cheque reimbursing you is received, the entries needed are these ones to record the receipt of non-client money into the business account (because the cheque cannot be paid into petty cash as it is not an actual bank account).

Answer 30

E The solicitor should write to the client to inform him about the agent’s fees and ask for his instructions because the original estimate is no longer accurate.

Answer 31

B The solicitor may draft wills for the client and the brother if the brother has given written authorisation in advance of the client’s authority to give instructions on his behalf. - authorisation does not need to be direct (just proper) - not a conflict of interest at this stage - no such thing as a low risk instruction - real debate between A and B: question of wording ("must" vs "may")

Answer 32

B They must make reasonable adjustments to ensure that the disabled employee is not placed at a substantial disadvantage compared to those who are not disabled. - "reasonable" is the wording from the legislation

Answer 33

D Yes, because the information is material to the client’s matter. - no duty owed to the acquaintance - need to act in the best interest of the client - personal duty of solicitor: does not matter that it is outside the office -

Answer 34

A Credit client ledger client account: Arjun Patel Debit cash sheet client account - get rid of those that only mention business account - D is wrong since the double entry does not match - client money credit since no bill has been sent - B is the wrong way around: looking for a credit in the client ledger!

Answer 35

C. The solicitor is under an obligation to identify and verify the identity of the company’s shareholder because the shareholder owns more than 25% of the shares. - the focus is on the beneficial owner as they earn more than 25%

Answer 36

B. You should carry out standard CDD on the client because there is nothing to suggest that this client presents a high risk of money laundering. not A -- the type of investment is not low risk and implied that there are only two types (simplified or high risk) but there is a third type: standard! not C -- not high risk not D -- first time and one off not E -- beneficial ownership irrelevant

Answer 37

scenario 1 -- own conflict scenario 2 -- conflict of interest scenario 3 -- own conflict scenario 4 -- conflict of interest

Answer 38

scenario 1 -- substantially common interest scenario 2 -- neither scenario 3 -- competing for same objective

Answer 39

E. No, because a solicitor cannot act if there is an own interest conflict or a significant risk of an own interest conflict.

Answer 40

scenario 1 -- client money scenario 2 -- not client money scenario 3 -- client money

Answer 41

A. Yes, it is client money.

Answer 42

B. Bank the cheque immediately in the firm’s client account and notify Sonia Jones that the money has been received.

Answer 43

D. Credit stakeholder ledger Debit cash sheet client account

Answer 44

B. Proceed with the transaction only after receiving authorisation from the relevant authority. A -- need authorisation or wait 7 WORKING days C -- wrong notice period: need to be 7 WORKING days D -- tipping off! E -- tipping off! (technically B should also include the possibility to proceed after the notice period of 7 working days but it is the best answer here)

Answer 45

E. No, because an exclusion applies if the transaction involves at least 50% of the voting shares in the company. Step 1 Shares are a specified investment Step 2 Arranging deals in shares is a specified activity Step 3 Excluded activity as over the 50% of the voting shares in the company are being sold

Answer 46

C.Yes, because the provision of generic advice is outside the scope of the Financial Services and Markets Act 2000 Step 1 Mortgages are a specified investment Step 2 Advising on the merits of investments is a specified activity But generic advice is not a specified activity. To be caught the advice requires an element of opinion on the part of the solicitor and a recommendation as to the course of action.

Answer 47

No and No! The starting point is to ask whether you can act in the best interests of each client, Principle 7. You cannot act if there is a client conflict CCS 6.2. Here, Jack has implicated Ben while Ben intends to deny any involvement. You cannot act for Ben as you are unable to act in both Jack’s and Ben’s best interests Principle 7. This would be a conflict between clients. In addition, we cannot tell Ben what Jack has said as we owe Jack a duty of confidentiality CCS 6.3 and cannot tell Ben without Jack’s consent CCS 6.4(b). Ben must be advised to seek representation from another firm. When speaking to the police it is important not to disclose any confidential information Another issue now arises as you potentially have information from Ben (that he denies all involvement in the robbery) which is material to Jack’s case (as Jack says he carried out the robbery with Ben but not to the extent that the police allege). You have a duty to disclose this to Jack CCS 6.4 . You also have a duty of confidentiality to Ben, which continues even though you no longer act for him CCS 6.3. Confidentialitywill overridedisclosure. You are now unable to act in Jack’s best interests Principle 7 as you are unable to disclose material information to him. You therefore will have to cease to act for Jack as well to ensure that you meet your mandatory Principles. It is always good practice to ask each client before taking instructions whether they think there might be a conflict. When we first saw Ben we should have advised him we were acting for Jack and asked whether this would potentially cause an issue. If he had said yes, then we might have been able to extricate ourselves from the situation before coming into possession of confidential information. This would have enabled us to continue to act for Jack.

Answer 48

NO no such thing as information barrier in criminal law You have taken instructions from Ron who has accused his girlfriend of lying in relation to an allegation of assault against him. You have now discovered that your firm previously acted for Sophie and that she had previously made an allegation of assault against another boyfriend which she subsequently withdrew. Clearly this information is material to Ron’s case and should be disclosed to him CCS 6.4. You cannot do so without Sophie’s consent because of your duty of confidentiality to her CCS 6.3, notwithstanding the fact that you no longer act for her. You therefore cannot act in Ron’s best interests and should cease to act for him because of the conflict between your duties to each client Principle 7.

Answer 49

DEPENDS! (in theory yes, but depends if Kathy insists on having her mum as a witness or on taking the stand herself) You cannot mislead the court. Kathy has indicated that she wants to call a witness whose evidence you know is untrue. You cannot comply with her instructions as this would mislead the court CCS 1.4 by calling a witness whose evidence you know to be untrue. You would not be complying with Principles 1, 4 and 5. If Kathy insists on calling her mother you will have to withdraw from acting. If you withdraw, you must not disclose the confidential information CCS 6.3. At most, you should only inform the court that your professional duties prevent you from continuing to act. The court cannot pressure you into providing reasons nor try to get you to reconsider; the decision to withdraw rests with you. Kathy is entitled to put the prosecution to proof. You could theoretically continue to act for Kathy but you would be very limited in your conduct of the trial as you would be unable to raise a positive case.

Answer 50

A - The solicitor should not help in putting this claim forward. The claimant can pursue the claim but risks a costs order against it. Rule 2.4 requires that you (as a solicitor) only put forward statements, representations or submissions to the court which are properly arguable. B and E are therefore wrong. Whether the claimant pursues the claim is up to the claimant, so C and D are wrong. A is correct.

Answer 51

A. The client’s right to complain about your services and your charges; how a complaint can be made and to whom; and any right they have to complain to the Legal Ombudsman and when they can make any such complaint. CCS 8.3 "required" at "time of engagement" B - mentions as the matter progresses C - no need to mention who will carry out the work D - no need to mention who will carry out the work E -

Answer 52

A desire to get the best outcome for your client, whatever the circumstances. Correct Correct. The circumstances may be such that your obligation to act in the best interest of your client is replaced by an overriding duty to promote the public good.

Answer 53

As well as knowledge and expertise, being a legal professional requires you to demonstrate trust, morality and integrity. Trust, morality and integrity are important to maintain the public’s trust in the legal profession. Correct Correct. As well as owing a duty to your clients, you also have a duty to promote the public good. Trust, morality and integrity are therefore important qualities in a legal professional.

Answer 54

Your colleague has breached the standards expected of a legal professional. Correct Correct. The standards of truth, integrity and morality apply to legal professionals in their personal as well as their professional lives and when they are dealing with members of the public as well as clients.

Answer 55

Clients can refer complaints about poor service from a solicitor to the Legal Ombudsman at any time. Correct. The statement is false. The right to refer a complaint to the Legal Ombudsman applies to individuals, small businesses, charities, clubs and trusts. It does not apply to larger companies. In addition the client should exhaust the law firm’s procedure before referring a complaint to the legal Ombudsman.

Answer 56

Strike a solicitor off the roll. Correct. This a power of the Solicitors Disciplinary Tribunal.

Answer 57

Award compensation to a party that has suffered loss. Correct. This action would have to be taken by a court.

Answer 58

“A statement, given orally or in writing, whether or not it includes the word “undertake” or “undertaking” to someone who reasonably places reliance on it, that you or a third party will do something or cause something to be done, or refrain from doing something”. Correct. Note that an undertaking can be given orally or in writing, and does not have to include the word “undertake” or “undertaking”. If the recipient reasonable places reliance on the statement it will be binding on the person giving it.

Answer 59

An undertaking can be given by any individual in a law firm provided it can be reasonably relied upon by the recipient. An undertaking could therefore be given by a partner, a qualified lawyer, an apprentice, secretary or any other individual in the firm. Correct. Note that it is important that any individual in a law firm can be found to have given an undertaking.

Answer 60

CCS 2.7 Correct. CCS 2.3 contains the requirement that you do not provide or offer to provide any benefit to witnesses dependent upon the nature of their evidence or the outcome of the case. CCS 2.4 contains the requirement that you only make assertions or put forward statements, representations or submissions to the court or others which are properly arguable. CCS 2.6 contains the statement that you do not waste the court’s time.

Answer 61

You must return the £450,000 to the buyer’s solicitors immediately, even though their client is in breach of contract. If you fail to do so you will have breached your undertaking to the buyer’s solicitors. Correct. You undertook to hold the £450,000 to the order of the buyer’s solicitors. This means that you cannot send the money to your client without the agreement of the buyer’s solicitors. The money does not belong to you or to your client. If you fail to return the money, you will be in breach of CCS 1.3. incorrect You should not return the money to the buyer’s solicitors because the buyer is in breach of contract. You should not forward the money to your client because you would be breaching your undertaking to the buyer’s solicitors. You should therefore keep the money in your firm’s account until the buyer has sufficient funds to complete the transaction. Incorrect Incorrect. You should read CCS 1.3 again. You undertook to hold the £450,000 to the order of the buyer’s solicitors. This means that you must comply with the buyer’s solicitors’ instructions. The money does not belong to you or to your client. If you fail to return the money, you will be in breach of CCS 1.3.

Answer 62

Explain the position to the client. Say that you will try to get hold of your supervisor and check whether it is ok to send him the advice. Then ring your supervisor on her mobile, follow her instructions and ring the client back and update him. Correct Correct. This course of action would be the best. You should not send the advice out without your supervisor’s approval. There may be points that she wants to change. In getting your supervisor to check the work first and, at the same time, keeping your client informed of what is going on, you are providing a competent service to your client in a timely manner in accordance with CCS 3.2.

Answer 63

CCS 2.2 Correct Correct. CCS 2.1 states that you must not misuse or tamper with evidence, and CCS 1.4 contains the rule that you must not mislead your clients, the court or other people.

Answer 64

Withdrawals from an authorised body’s client account must be in respect of the delivery of regulated services – your legal and professional services. Correct. This is in Rule 3.3.

Answer 65

You withdraw £250 from the client account to pay for the desktop environmental search which needs to be carried out in connection with the client’s property purchase. Correct Correct. Under Rule 5.1 this would fall within reason (a) for being able to withdraw money from the client account – that you are withdrawing the money for the purpose for which it is being held (generally on account of costs involved in their transaction). The client also has sufficient funds for this payment in the client account (Rule 5.3).

Answer 66

Transferring money from the client account to your business account to pay a bill which has been sent to the client where they have authorised the transfer of the costs and have sufficient funds in the client account. Correct Correct. Transferring money from the client account to your business account to pay a bill which has been sent to the client where they have authorised the transfer of the costs and have sufficient funds in the client account is in accordance with the SRA Accounts Rules.

Answer 67

CCS 8.8 Correct. CCS 8.9 contains the requirement that you do not make unsolicited approaches to members of the public in order to advertise legal services. CCS 8.7 states that you must ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred.

Answer 68

This arrangement is an introduction and Price Prior will need to comply with CCS 5.1 Correct Correct. This arrangement is an introduction. Price Prior is making a payment to a third party (either within your firm or outside) for introducing the client; the payment is a fixed fee or calculated with reference to the amount being charged to the client as a percentage of your gross or net fees; and the third party may be another lawyer, but not necessarily so. Here the third party is not a lawyer, but this does not stop the arrangement being caught by CCS 5.1.

Answer 69

… solicitors from referring or receiving referrals in respect of a claimant’s claim for damages in respect of personal injury or death to each other in consideration for a referral fee. Correct. This is a prohibited referral fee. Solicitors are not permitted to pay or receive a fee for referring or receiving referrals for these types of claims. incorrect … solicitors from referring or receiving referrals in respect of a clients who are the subject of criminal proceedings. Incorrect. This prohibition is contained in CCS 5.1(d), not section 56(1) LASPO. Check your notes and attempt the question again.

Answer 70

CCS 1.1: ‘you do not unfairly discriminate by allowing your personal views to affect your professional relationships and the way in which you provide your services. ‘ Correct. In refusing to accept the instructions, the supervisor has allowed their personal political views to affect their professional relationships.

Answer 71

Refuse to provide the witness statement, as to do so would breach Principles 1, 2, 3, 4 and 5. Correct. If you complied with your client’s instruction, you would be breaching Principles 1 (upholding the rule of law and the proper administration of justice), 2 (upholding public trust and confidence in the solicitor’s profession), 3 (act with independence), 4 (act with integrity) and 5 (act with honesty).

Answer 72

You should contact the individual on the other side and suggest that they instruct a lawyer. Failing to do so puts you at risk of breaching CCS 1.2. Correct Correct. Acting for your client where the individual on the other side does not have legal representation can be very challenging and puts you at risk of breaching CCS 1.2 ‘you do not abuse your position by taking unfair advantage of clients or others’. The simplest solution for you is for the individual on the other side to get their own lawyer.

Answer 73

All individuals regulated by the SRA in relation to their dealings with clients, the people they work with and other members of the public they deal with. Correct. Principle 6 is broad. As stated in the SRA’s guidance on their approach to equality, diversity and inclusion (‘EDI’), it applies to an individual’s dealings with the people they work with, clients and others.

Answer 74

Vegetarianism Correct. Vegetarianism is not one of the protected characteristics listed in your materials under the Equality Act 2010.

Answer 75

Law firms have a legal obligation to provide reasonable adjustments to disabled clients and employees to make sure they are not at a substantial disadvantage compared to those who are not disabled. Law firms may pass on the costs of those adjustments to those clients or employees. Correct. This statement is FALSE. Read the guidance note again to check whether law firms can pass on the costs of such adjustments.

Answer 76

It applies to you and everyone in your workplace. Correct Correct. This principle is something everyone needs to be concerned with. Accidental disclosure / human error is the most common cause of breach of the data protection legislation. You must comply with your employer’s IT / data protection policy. For example, not disclose your password etc.

Answer 77

Personal data’ does not include truly anonymous information. However, if you could still identify someone from the details, or by combining it with other information, it will count as personal data. Correct Correct

Answer 78

Refuse your friend’s request because you would be breaching your duty of confidentiality to your client if you disclosed this information to your friend. Correct. The witness statement contains information which is confidential to your client. You would be breaching your duty of confidentiality to your client under CCS 6.3 if you disclosed this information to any person, let alone the other side, without your client’s consent or being required to do so by law.

Answer 79

If you would be breaching the law in accepting the client’s instructions. Correct Correct. Under Principle 1 you must act in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice. You would not be able to comply with this Principle if you accepted instructions that require you to breach the law. The other options may put you in a difficult position personally and there might be an argument for getting a colleague to act on the matter, but it is not a reason to refuse to act at all.

Answer 80

Advise the new client that although you may not personally be able to attend the call that afternoon, you will speak to your supervisor to see if you or another lawyer in your team can attend. Then speak to your supervisor and agree whether you should work on the document for the trial or attend the call and advise the client accordingly. Correct. CCS 3.2 states that you must ensure that the service you provide is competent and delivered in a timely manner. If you do not agree the work allocation with your supervisor there is a risk that you will not be providing a timely service on the matter that is coming to trial. There is also the possibility that you are too busy to act on the new matter, but another lawyer in your team might be able to do so.

Answer 81

You should recommend that the wife obtains her own independent advice on the re-mortgage because there is a risk that you would not be acting in the wife’s best interests if you acted for both the husband and the wife. Correct. There is a risk that you would not be acting in the wife’s best interests if you acted for both the husband and the wife here. If the husband defaults on the loan, the wife could lose her home and she does not appear to be benefitting from the loan as it is to expand the husband’s business. You should recommend that the wife obtains her own independent advice.

Answer 82

Any situation where your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter Correct

Answer 83

The clients have a substantially common interest in relation to the matter or the aspect of it, as appropriate; or the clients are competing for the same objective, and the conditions set out in CCS 6.2(i)-(iii) are met. Correct Correct. This is the correct position as set out in CCS 6.2.

Answer 84

A situation where your separate duties to act in the best interests of two or more clients in the same or a related matter conflict. Correct

Answer 85

Acting for a client on a dispute against your spouse. Correct Correct. This is an example of an own interest conflict. As the client has a dispute against your spouse, there is a risk that the interests of the client could conflict with your interest. There is a risk you may not wish the client’s claim to be successful.

Answer 86

A client asks you to represent her in relation to a dispute with her employer. When you read the email from your client, you realise that your mother owns 50% of the shares in the company which employs her. Correct. This is an example of an own interest conflict. As your mother owns 50% of the shares in the company employing the client there is a risk that the interests of the client could conflict with your interest. There is a risk you may not wish the client’s claim to be successful.

Answer 87

A new client has asked your firm to act for them on the purchase of a company from a large international company. Your firm has acted for the international company on a number of acquisitions and disposals in the past, although your firm has not been instructed to act for them on this disposal. Correct. Conflict of interest is defined in the SRA Glossary as ‘a situation where your separate duties to act in the best interests of two or more clients in the same or a related matter conflict’. You have two clients here, the new client and the international company. Although you have not been instructed by the international company on the same matter, your firm has acted for them on disposals in the past, and this could be a situation where your separate duties to act in the best interests of both clients conflict. incorrect A new client wants to instruct your firm on a software licence with an international software provider. Your conflict search reveals that your firm’s property department is currently acting for the software provider on its lease of office space. Incorrect Incorrect. Technically the software licence and the lease of the office space are not the same or a related matter. Therefore, strictly, this does not fall within the definition of a conflict of interest. However, many firms would not feel comfortable acting for the new client when they are advising the counter party on an unrelated matter. There is a separate issue here of complying with Principles 2, 3, 4, 5, and 7. In practice most firms would seek the software provider’s consent before agreeing to act for the new client.

Answer 88

Any situation in which two or more clients are competing for an “objective” which, if attained by one client, will make that “objective” unattainable to the other client or clients, and “objective” means an asset, contract or business opportunity which two or more clients are seeking to acquire or recover through a liquidation (or some other form of insolvency process) or by means of an auction or tender process of a bid or offer, but not a public takeover. Correct. You have correctly identified the definition of competing for the same objective. The other options were the definition of substantially common interest, and an incorrect definition of competing for the same objective.

Answer 89

As both bidders are competing for the same objective (the Target), the firm can act for both bidders provided different teams of lawyers act for each bidder. Correct Correct. There is a conflict of interests here, but this is a case where both bidders are competing for the same objective (the Target). The firm can act for both bidders provided they meet the conditions set out in CCS 6.2. One of the conditions is that you put in place effective safeguards to protect your clients’ confidential information. If the same partner and associate solicitor act for both bidders, the confidential information of each bidder will not be protected. The firm should therefore ensure that different teams of lawyers act for each bidder.

Answer 90

Su Sukit Singh and Parul Shah who live together and are buying a property together. Correct. ‘Substantially common interest’ is defined in the SRA Glossary as ‘a situation where there is a clear common purpose between the clients and a strong consensus on how it is to be achieved.’ Here the clear common purpose for Sukit and Parul is buying the house. It is likely that they have a strong consensus on how to achieve that purpose, as they will both want to purchase good title to the house without any problems.

Answer 91

(i), (ii), (iii) and (iv) Correct Correct. (i) is good practice as well as helping a firm comply with CCS 8.7. (ii), (iii) and (iv) are good practice and recommended in the SRA’s guidance on client care letters. (v) is not correct, a client would not complain to the Law Society. Clients such as individuals who have a right to complain to the Legal Ombudsman should be informed of this in writing under CCS 8.3.

Answer 92

A client care letter should set out what is going to happen and what the client needs to do. Correct. These are two recommendations from the SRA guidance on client care letters

Answer 93

One benefit of a client care letter that is clear, easy to understand and contains the right information is that it can reduce potential complaints by clearly setting out what a client can expect, particularly in relation to costs. Correct Correct. This is one benefit of a clearly written client care letter as described in the SRA’s Guidance on Client Care letters.

Answer 94

A means test and a merit test Correct. Civil CLS funding is only available for clients with limited income and capital, and if the client's position is sufficiently meritorious.

Answer 95

Very few Correct. The vast majority of civil legal work is not eligible for CLS funding.

Answer 96

The client may recover the basic fee and disbursements from the other side, together with damages. The client will owe the solicitor a success fee which will be payable from the damages and is not recoverable from the opponent Correct. Well done!

Answer 97

Lawyers do not recover any fees if they lose the case. If they win, they receive a proportion of the damages awarded to the client by way of payment for their work. Correct. Well done.

Answer 98

No. She will still be liable for her own disbursements and might still be held liable for the other side’s costs. Correct. Well done.

Answer 99

VanH will not be able to claim the premium. VanH will not be able to claim the premium.

Answer 100

He will automatically pass the means test because he is in receipt of welfare benefits but he must also pass the merits test to be eligible. Correct He is passported through the means test because of his receipt of welfare benefits, but he will still have to show that it is in the interests of justice for him to receive public funding for his defence. The other answers are plausible but incorrect: - He does not need to pass the means test – he automatically passes it - He won't automatically qualify for public funding because he still has to pass the merits test - Whether the offence is imprisonable or not is not a deciding factor.

Answer 101

It is in the interests of her daughter that she is represented Correct For the purposes of the merits/ interests of justice test, the interests of another person does not include family members impacted by a sentence. The other answers while plausible are not correct. All could be included in the relevant sections of the CRM 14 form. incorrect The proceedings will involve the cross examination of a police officer Incorrect Cross examination of a prosecution witness should be included. Please review your materials on funding and the 10 propositions in particular. An alibi witness will need to be traced and interviewed Incorrect She says she has an alibi so they will need to be traced and interviewed. Please review your materials on funding and the 10 propositions in particular. She is likely to lose her liberty It seems likely on these facts that she would receive a custodial sentence. Please review your materials on funding and the 10 propositions in particular.

Answer 102

He will not obtain a representation order as will fail the means test Correct In light of the university professor’s salary and the size of his household (he lives alone) he will be ineligible for public funding because his weighted gross annual income will be above the upper threshold i.e. £22, 325. The other answers while plausible are incorrect: · While he will suffer serious damage to his reputation, might lose his livelihood and therefore it might be in the interests of justice that he be represented, he will not pass the means test. · While he is not in receipt of benefits that does not mean he will automatically fail the means test.

Answer 103

Any organisation providing reserved legal activities for the public must be authorised by the SRA unless they are exempt. Correct. The SRA Guidance note, “Firm Authorisation” , contains guidance on when organisations need to be authorised by the SRA, including if they provide reserved legal activities.

Answer 104

Reserved legal activities are defined in section 12 Legal Services Act 2007 and are: (i) rights of audience: the right to appear before and address a court, (ii) conduct of litigation, (iii) Reserved instrument activities which includes preparing instruments relating to land, (iv) certain probate activities; and (v) administration of oaths. Correct. Reserved legal activities are defined in section 12 LSA and are: (i) rights of audience: the right to appear before and address a court, (ii) conduct of litigation, (iii) Reserved instrument activities which includes preparing instruments relating to land, (iv) certain probate activities; and (v) administration of oaths. The term does not include acting for a client on the acquisition of a company.

Answer 105

'Sole practice' means a sole principal. A sole practitioner can employ several qualified solicitors, as long as those solicitors are not also principals (e.g. not partners or co-owners) of the practice. Correct Correct. 'Sole practice' means a sole principal. A sole practitioner can employ several qualified solicitors, as long as those solicitors are not also principals (e.g. not partners or co-owners) of the practice.

Answer 106

Money Laundering Correct. The SRA put issues with money laundering at the tops of its priority risk in the Risk Outlook for 2020-21.

Answer 107

It is the responsibility of supervisors to ensure that the individuals they manage are competent to carry out their role and keep their professional knowledge and skills up to date. Individual solicitors also have a responsibility under CCS to maintain their competence and keep their knowledge up to date. Correct Correct. CCS 3.3 requires individual lawyers to maintain their competence to carry out their role and keep their professional knowledge and skills up to date. CCS 3.6 requires legal professionals to ensure that the individuals they manage are competent to carry out their role and keep their professional knowledge and skills up to date. So the responsibility falls on both individual lawyers and supervisors.

Answer 108

Although most persons supervising individuals working on client files will have a legal qualification, such persons do not necessarily have to be legally qualified. Correct. As long as they have suitable experience, knowledge and competence to deal with any issue which may arise and such persons have clear guidance as to when and to whom issues outside their competence or authority should be referred ‘upwards’, people who are not legally qualified are permitted to supervise client matters.

Answer 109

The Compliance Officer for Legal Practice (‘COLP’) must be an individual who is authorised to carry on reserved legal activities by an approved regulator. This is not a requirement for the Compliance Officer for Finance and Administration (‘COFA’). Correct. This requirement is true for a COLP, but not a COFA. A COFA’s role is to ensure the firm complies with the SRA Accounts Rules and as such the COFA does not need to be a lawyer.

Answer 110

The COLP has responsibility: to ensure the firm complies with all the terms and conditions of authorisation by the SRA; to ensure the firm complies with its statutory obligations; to record any failures to comply with the firm’s authorisation or statutory obligations and make records available to the SRA; to report any material failure to the SRA as soon as is practicable. Correct Correct. The COLP’s role is to ensure appropriate systems are in place to minimise the risk of non-compliance with the Codes. Much of the COLP’s day to day responsibilities will be spent trying to ensure that the firm, its staff and managers are meeting the standards in CCF and CCS.

Answer 111

The managers of a firm have joint and several responsibility for the firm’s compliance with the SRA Code of Conduct for Firms. Correct. Compliance with the SRA’s requirements is ultimately the responsibility of the owners and managers of the Firm. Under CCF 8.1 managers have responsibility for compliance by the Firm with CCF. This responsibility will be joint and several with other managers of the firm. Nevertheless, COLPs and COFAs clearly have a pivotal function in their organisation for ensuring that the right systems, procedures and checks are in place to minimise the risk of non-compliance.

Answer 112

One advantage of a traditional partnerships is that although they are governed by the Partnership Act 1890, in practice most of their arrangements are set out in partnership agreements, which are not a matter of public record. Correct. Although technically partnerships are governed by the Partnership Act 1890, in practice most partnerships agree the arrangements for how they are run in partnership agreements. There are no requirements on partnerships to disclose the contents of their partnership agreements which means that arrangements relating to profit sharing and running the partnership can be kept confidential. One disadvantage of a traditional partnership is that the liability of individual partners is unlimited opening the partners to potentially large exposure of risk.

Answer 113

An LLP is a separate legal entity, distinct from its members. An LLP can own property in its own name, and employ employees. However one disadvantage of an LLP is that they have to file certain information with Companies House, including financial statements, which can be accessed by the public. Correct. An LLP is a separate legal entity, distinct from its members. An LLP can own property in its own name, and employ employees. LLPs are subject to many provisions of the Companies Act 2006, which means that they have to file certain information with Companies House, including financial statements and information about the members (or partners), which can be accessed by the public. LLPs are generally considered to be less tax efficient than incorporated companies. In addition unlike incorporated companies, they are not recognised in foreign jurisdictions so foreign expansion is more difficult.

Answer 114

Incorporated companies can raise finance by issuing shares to investors and can borrow money from lenders. Correct Correct. Incorporated companies are separate legal entities in their own right. They can borrow money from lenders, grant security to lenders, and they can also raise finance by issuing shares to investors. Traditional partnerships can use working capital to finance growth, and can also use overdrafts or take out loans from lenders. Traditional partnerships cannot issue shares to investors.

Answer 115

When you submit a proposal to a prospective client in a beauty contest to provide them with legal services. Correct. Under regulation 27 MLR a relevant person must carry out CDD if they establish a business relationship, carry out an occasional transaction, suspect money laundering, or doubt the veracity of documents or information provided by the client. When you submit a proposal to a client in a beauty contest, you don’t know whether you will win the work, so it is too early to carry out CDD.

Answer 116

Regulation 4 Correct Correct. Regulation 4 sets out the definition of business relationship. The definition of occasional transaction is set out in regulation 3. The definition of beneficial owner is set out in regulation 5.

Answer 117

Regulation 33 Correct Correct. Regulation 33 sets out the requirements for CDD. Regulation 37 sets out the requirements for simplified CDD and regulation 12 sets out the definition of independent legal professional.

Answer 118

Technically a solicitor may rely on CDD carried out by another law firm with the consent of that law firm, but in practice this is rare partly because the solicitor will remain liable for any failure to carry out CDD. Correct Correct. A solicitor may rely on CDD carried out by another person under regulation 39, but the solicitor will remain liable for any failure to apply CDD so in practice it is rare to rely on the CDD carried out by another person.

Answer 119

Every lawyer, whether they work in a law firm or in-house, is at risk of exposure to money laundering. Correct. The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLR 2017’) apply to a wide range of people and businesses, not just law firms.

Answer 120

Money laundering can include receiving small proceeds of minor crimes into your employer’s bank account. Correct Correct. Receiving the proceeds of crime, however small into your bank account can constitute possessing criminal property and could be a criminal offence.

Answer 121

The Proceeds of Crime Act 2002 (‘PoCA’), and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLR’) Correct, these are the two key pieces of legislation relating to money laundering in the UK.

Answer 122

The MLR apply to financial institutions, some legal work, auditors, estate agents and casinos. Correct. These organisations are listed in Regulation 8(2) MLR. The MLR do not apply to all types of legal work, only those falling within Regulation 8(2).

Answer 123

The MLR are designed to ensure that organisations establish procedures to forestall and prevent operations relating to money laundering. Correct. The Proceeds of Crime Act 2002 anticipates the reporting of suspicious transactions involving the proceeds of crime. MLR requires organisations to get themselves in a position to identify potential money laundering and report it as necessary.

Answer 124

A solicitor advising a company on the sale of a business entity is likely to fall within the definition of independent legal professional and be caught by the MLR. Correct Correct. A solicitor advising a company on the sale of a business entity would fall within regulation 12(1)(a) MLR, “the buying and selling of real property” and would therefore fall within the definition of an independent legal professional. A solicitor who sets up a company for a client is likely to fall within the definition of independent legal professional under regulation 12(1) (e) “ the creation, operation of management of trusts, companies…” and also “trust or company service provider” under regulation 12(2)(a), “forming companies”, and would therefore be caught by MLR. A solicitor who advises their client on a personal injury litigation matter would not fall within the definition of independent legal professional and is therefore not likely to be caught by the MLR.

Answer 125

Assuming you meet your client face to face, producing a valid passport or photocard ID should meet the CDD requirements. Correct Correct. This is the evidence recommended in the guidance on anti-money laundering regulations (‘AMLG’) published by the Legal Sector Affinity Group. It is good practice to have either one ‘government document’ which verifies either the name and address or name and date of birth; or a ‘government document’ which verifies the client’s full name and another supporting document which verifies the name and either their address or date of birth.

Answer 126

You should identify the name, registered number and address of the registered office of Autolext, and verify it, for example by a search of the relevant company registry in Bermuda. You must also take reasonable measure to determine and verify the law to which the company is subject, its constitution, and the full names of the board of directors (or equivalent management body) and senior persons responsible for its operations. In addition you will need to examine the background and purpose of the transaction, to determine whether the transaction or relationship appear suspicious. This would involve making further enquiries to understand the financial situation of the company, getting additional independent sources to verify the information you obtain and satisfying yourself that the transaction is legitimate. Correct Correct. There are a number of factors that suggest that there is a high risk of money laundering in this scenario and you therefore need to carry out enhanced CDD. This means that in addition to carrying out ‘standard CDD’ of identifying and verifying the identity of Autolext, you will need to carry out further enquiries to satisfy yourself that the client and the transaction is legitimate.

Answer 127

As Regency Investment PLC is an existing client, you should already have carried out CDD on it. As a listed company, it is likely that you will have carried out simplified CDD for example by obtaining a copy of the dated page of the website of the relevant stock exchange showing the listing, and verifying it by a search of the company registry. You will need to conduct ongoing monitoring by checking that the identification documents you hold are up to date and checking the transaction is consistent with your firm’s knowledge of the client. Correct. This is an existing client whom the firm acts for on a regular basis and a listed public company. It is likely the firm will already have carried out simplified CDD on the client. The firm will need to carry out ongoing monitoring, by checking that the transaction is consistent with the firm’s knowledge of the client and checking at regular intervals that the identification documents it holds for the client are up to date.

Answer 128

There are many different investment products available on the market and individuals increasingly look to professional advisers to help them decide which investment to make. The provision of financial services is regulated in the UK to ensure that consumers are adequately protected from negligent financial advice. Correct Correct. Individuals need to make decisions on difficult issues including the level of risk they should take and the return they seek when making an investment. Financial advisors in the UK must be authorised to ensure that they do not give negligent advice to their clients.

Answer 129

There are two regulators of financial services in the UK, the Prudential Regulation Authority and the Financial Conduct Authority. Correct Correct. The two regulators of financial services in the UK are the Prudential Regulation Authority and the Financial Conduct Authority. The Prudential Regulation Authority is currently a subsidiary of the Bank of England.

Answer 130

It is a criminal offence to carry on a regulated activity, for example advising on the merits of an investment, unless you are authorised by the Financial Conduct Authority to do so, or exempt. Correct. See section 19 Financial Services and Markets Act 2000 (FSMA).

Answer 131

Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 Correct Correct. The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (‘RAO’) contains the majority of the detail you will need to navigate the FSMA decision tree. Part III lists the specified investments, and Part II lists the specified activities. In addition, each chapter within Part II RAO lists the specified activity and then the exclusions that apply to that specified activity. This is very helpful in helping you navigate questions 1, 2 and 3 of the FSMA decision tree.

Answer 132

Section 19 FSMA Correct. Section 19 FSMA contains the general prohibition. Section 23 relates to offences for contravening section 19. Section 327 relates to the exemption from the general prohibition.

Answer 133

The person must be (i) a member of a profession, (ii) must not receive payment or commission unless this is passed on to the client (or the client agrees otherwise), (iii) the activities must be incidental, and (iv) the person must comply with their relevant designated professional body’s rules. Correct. See section 327 Financial Services and Markets Act 2000 (FSMA).

Answer 134

Section 22 Correct Correct. Section 22 FSMA defines a regulated activity as follows: ‘an activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and – relates to an investment of a specified kind’

Answer 135

Rights under a contract of insurance Correct Correct. Rights under a contract of insurance is a specified investment under article 75 RAO. A freehold property is not a financial product and is therefore not a specified investment under Part III RAO. A loan to a company to purchase an office does not fall within the definition of a regulated mortgage contract so is not a specified investment under Part III RAO.

Answer 136

Advising a client to use the sale proceeds from their sale of shares in a company to purchase shares in British Gas plc would be a specified activity under article 53 RAO. Correct. Advising a client to use the sale proceeds from their sale of shares in a company to purchase shares in British Gas plc would be a specified activity of advising on the merits of an investment under article 53 RAO because the advice would involve giving an opinion on the part of the solicitor and a recommendation as to a course of action. Giving advice on the legal rights attaching to two different classes of shares in a company is generic advice, it does not require an element of opinion on the part of the solicitor and a recommendation as to a course of action, so it does not fall within advising on the merits of an investment under article 53. Arranging the sale of a client’s shares in a company to their business partner would be a specified activity under article 25 (arranging deals in investments) but not under article 53 RAO.

Answer 137

Step 3 of the FSMA decision tree is to work out whether the specified activity is one of the excluded activities under the RAO. Correct. Step 3 of the FSMA decision tree is to work out whether the specified activity is one of the excluded activities under the RAO. Step 2 of the decision tree is to work out whether the activity is specified under Part II RAO. Working out whether the solicitor is providing an exempt regulated activity forms part of step 4 of the FSMA decision tree.

Answer 138

A solicitor who arranges for their client to buy 50% of the shares in a private company would NOT need to be authorised by the FCA because they fall within the exclusion in Article 70 RAO. Correct Correct. The exclusion in Article 70 applies to the specified activities of arranging deals, advising and dealing as agent (which includes selling), so it could potentially apply to all three options. One of the conditions for Article 70 to apply is that the shares consist of or include 50 per cent or more of the voting shares in the company. Arranging for your client to buy 50% of the shares meets this condition, so the exclusion WOULD apply and the solicitor would NOT need to be authorised by the FCA. Advising your client to buy 10% of the shares does not meet this condition, so the exclusion would NOT apply and the solicitor WOULD need to be authorised by the FCA. Selling 50% of your clients shares as agent meets this condition, so the exclusion WOULD apply and the solicitor would NOT need to be authorised by the FCA.

Answer 139

A solicitor does not need to be authorised by the FCA to arrange for their client to buy shares in a company if the client is entering the transaction on advice given by a financial advisor who is authorised by the FCA. Correct Correct. Arranging for your client to buy shares in a company is a specified activity under Article 25(1) RAO. However if you read further, Article 29 RAO states that arrangements made by a person are excluded from Article 25(1) if they are entered on advice to the client by an authorised person. A financial advisor authorised by the FCA is an authorised person. Therefore under Article 25(1), the solicitor does not need to be authorised by the FCA to arrange for their client to buy the shares. This conclusion is logical. If the client is acting on the advice of someone authorised by the FCA there is no additional need for the solicitor to be authorised by the FCA. The financial advisor would need to be authorised by the FCA to advise under FSMA, not the SRA.

Answer 140

Section 327 FSMA Correct. Section 327 sets out the conditions that must be satisfied for a person to meet the exemption from the general prohibition. The conditions include: the person must be (i) a member of a profession, (ii) must not receive payment or commission unless this is passed on to the client (or the client agrees otherwise), (iii) the activities must be incidental, and (iv) the person must comply with their relevant designated professional body’s rules. Section 19 FSMA contains the general prohibition. Section 325 relates to the FCA’s general duty.

Answer 141

Does the activity fulfil the basic conditions in s 327 of FSMA and the SRA Financial Services (Scope) Rules 2019? Correct Correct. This statement correctly summarises step 4 of the FSMA decision tree. If the activity does fulfil both these conditions, the solicitor will not need to be authorised by the FCA to carry out the regulated activity provided it complies with the rules set by the SRA.

Answer 142

The solicitor cannot give the advice without breaching the general prohibition under s 19 FSMA because giving the advice would not arise out of or be complementary to the provision of a particular professional service to a particular client for the purposes of Rule 2 of the SRA Financial Services (Scope) Rules 2019. Correct Correct. Shares are a specified investment and the solicitor would be advising on the merits of investing in shares which is a specified activity. No exclusion applies. Giving the advice would fall within the condition of being incidental under s 327 FSMA because it would be a small part of the practice of the firm as a whole. However it would not be complementary for the purposes of Rule 2 of the SRA Financial Services (Scope) Rules 2019 because giving advice on whether to invest in shares in a particular company does not arise naturally out of the work the solicitor did in selling the property, it is a completely unrelated matter. The solicitor should advise the client to take advice from a person authorised by the FCA, otherwise they would need to be authorised by the FCA to give the advice (which will require a lot of work on the part of the solicitor and their firm) or they will be in breach of s 19 FSMA which is a criminal offence.

Answer 143

It is a criminal offence to offer shares to the public in the United Kingdom without issuing a prospectus approved by the relevant regulatory authority. Correct. Under s 85 FSMA it is a criminal offence to offer shares to the public without issuing a prospectus approved by the relevant regulatory authority. The relevant regulator in the UK is the FCA. In addition under s 21 FSMA it is a criminal offence to communicate a financial promotion unless you are authorised by the FCA or the financial promotion has been approved by a person authorised by the FCA.

Answer 144

An exemption to the prohibition on communicating a financial promotion without the contents being approved by an authorised person that can be useful in practice is the sale of a body corporate exemption. Correct. The sale of a body corporate exemption applies where the shares consist of 50% or more of the shares in the company or the buyer is buying day to day control of the company and certain conditions are met. This is can be a very useful exemption for solicitors acting on share sales. Necessary part is not an exemption to the prohibition on communicating a financial promotion without the contents being approved. Getting a financial promotion approved by an authorised person can be time consuming and expensive for the client.

Answer 145

If client money is lost or taken, you must report this breach to the SRA promptly, even where the money has been replaced already. Correct. The SRA recommend that if client money is lost or taken, then you/the firm must report this breach to them promptly. This is the case even where you/the firm have already replaced the money.

Answer 146

At least six years. Correct. This is the time period specified in Rule 13.1.

Answer 147

If a firm’s balance of client money does not exceed an average of £10,000 and a maximum of £250,000 during an accounting period, it will not have to obtain an accountant’s report. Correct. This is the exemption to Rule 12.1(a) set out in Rule 12.2(b).

Answer 148

An accountant discovering a minor breach of the SRA Accounts Rules arising from an administrative error at a law firm will not necessarily have to prepare a qualified report in relation to that law firm’s accounts. Correct. SRA Guidance: ‘Planning for and completing an accountant’s report’ states that the SRA only expect reports to be qualified where there has been a significant breach of the Accounts Rules, such that client money is at risk. It also says that breaches arising from administrative errors are not likely to be significant but could be if they are persistent, derive from a failure of controls and have put client money at risk. The guidance states that the SRA recognise minor breaches of the Accounts Rules do occur in many firms and they are not expecting all identified breaches to be notified to them in the form of a qualified report.

Answer 149

Rule 8.2 (bank statements) and Rule 8.4 (bills of costs). Correct. Rule 9.1, on the operation of joint accounts, says that Part 2 of the SRA Accounts Rules does not apply to the joint account except for Rules 8.2 and 8.4.

Answer 150

A joint account in Rule 9.1 is an account which is in the names of the solicitor/authorised body and the client or a third party. Correct Correct. See Rule 9.1.

Answer 151

An accountant’s report must be obtained for a client’s own account where the solicitor/authorised body is signatory unless one of the Rule 12.2 exceptions apply. Correct. This is set out in Rule 12.1. incorrect Rule 10.1 on operation of a client’s own account applies whenever a solicitor/authorised body operates a client’s own account as signatory. Incorrect. Rule 10.1 states that it applies if, in the course of practice, the solicitor/authorised body operates a client’s own account as signatory.

Answer 152

Rule 11.1 only applies when the authorised body is delivering regulated services to the client. Correct Correct. Rule 11.1 is clear that it covers use of a third party managed account for payments in respect of regulated services delivered by the authorised body to the client. incorrect Rule 11.1 allows an authorised body to receive and hold clients’ money in an account without Part 2 of the SRA Accounts Rules applying to the client money. Incorrect. Rule 11.(a) expressly states that a third party managed account must not result in the authorised body receiving or holding the client’s money. Rule 11.1 provides that the fees for use of the third party managed account will be paid by the client. Incorrect. Rule 11.1(b)(i) states that the authorised body must take reasonable steps to ensure the client knows and understands the contractual arrangements around the use of the third party managed account, including who will pay any fees for using the third party managed account. The Rule does not set out who has to pay any fees, just that the client should be told and understand who will pay any fees.

Answer 153

The third party managed account must be held at a bank or building society. Correct Correct. incorrect The third party is regulated by the SRA. Incorrect. The definition of a third party managed account in the SRA Glossary includes that the third party must be regulated by the FCA (Financial Conduct Authority) not the SRA. The monies in the third party managed account must be owned beneficially by the client. Incorrect. The definition of a third party managed account in the SRA Glossary includes that the monies are owned beneficially by the third party (not the client).

Answer 154

Money held in a third party managed account is not client money (as defined in the SRA Accounts Rules). Correct. The SRA Guidance ‘Third party managed accounts’ explains that money held in a third party managed account does not fall under the definition of client money in the SRA Accounts Rules because it is not received or held by the authorised body. That the client’s money is not received or held by the authorised body is a requirement of Rule 11.1(a) on third party managed accounts.

Answer 155

Rule 4.1 Correct. Rule 4.1 states that you must keep client money separate from money belonging to the authorised body.

Answer 156

Promptly Correct. Rule 3.2 states that client money must be paid promptly into a client account.

Answer 157

Yes, if it is part of a mixed payment and is then promptly moved out of the business account and into the client account. Correct. This is the position implied by Rule 4.2 which states that you must promptly allocate funds from mixed payments you receive to the correct client account or business account.

Answer 158

You cannot transfer £995 from the client account to the business account to pay your costs until the bill of costs has been given to the client. Correct. See Rule 4.3(a) and (b).

Answer 159

You should promptly replace the client money withdrawn by doing the following: Debit client ledger business account Credit cash sheet business account Credit client ledger client account Debit cash sheet client account. Correct Correct. Under Rule 6.1, any breaches of the SRA Accounts Rules must be corrected promptly upon discovery. Money improperly withdrawn from a client account must be immediately replaced. These are the correct entries to transfer money from the business account and pay it into the client account to replace the money improperly withdrawn.

Answer 160

If a law firm receives a cheque from a client which includes both client money and non-client money, it is possible for the law firm to instruct their bank to ‘split’ the cheque and pay part of the money into the firm’s client account and part of the money into their business account. Correct Correct. Such a cheque would constitute a mixed payment. The accounting entries involved are: Credit the client ledger client account of the client; and Debit the cash sheet client account with the client money element of the payment and Credit the client ledger business account of the client and debit the cash sheet business account with the non-client money element of the payment.

Answer 161

Debit the client ledger client account of the client who is transferring the money and credit the client ledger client account of the client to whom the money is being transferred. Correct. If you act for two clients and a transfer of client money is being made from one client to the other, the client money being transferred is already in the firm’s client account. There is no need to take the money out of the client account and then pay it back into the same account. You can transfer money between two clients of the firm in one step.

Answer 162

Debit client ledger client account of the executors Credit client ledger client account of the beneficiary. Correct Correct. As both the executors and the beneficiary are your clients and the money is already in the client account, only one step is required to record this and show that the money in the client account is now held for the beneficiary rather than the executors. There will not be an entry in the client account as there is no need to withdraw the money from the client account and then pay it back in.

Answer 163

Debit client ledger client account of the bank Credit client ledger client account of the buyer. Correct. As both the bank and the buyer are your clients and the money is already in the client account, only one step is required to record this and show that the money in the client account is now held for the buyer rather than the bank. There will not be an entry in the client account as there is no need to withdraw the money from the client account and then pay it back in.

Answer 164

Receipt of deposit monies by a seller’s solicitor to be held as agent - Credit client ledger client account for the seller client - Debit cash sheet client account Payment of deposit held by a seller’s solicitor as stakeholder to the seller on completion - Debit stakeholder ledger - Credit client ledger client account for the seller client Receipt of deposit monies by a seller’s solicitor to be held as stakeholder - Credit stakeholder ledger - Debit cash sheet client account

Answer 165

Credit stakeholder ledger Debit cash sheet client account Correct. These are the accounting entries to record the receipt by the seller’s solicitor of a deposit, to be held as stakeholder.

Answer 166

Credit client ledger client account Debit cash sheet client account Correct Correct. The accounting entries are simply the usual ones for client money received. The deposit is client money under Rule 2.1(a) and the fact the deposit will be held as stakeholder is only relevant to the seller’s solicitor. In this question we are the buyer’s solicitor and how the deposit will be held by the seller’s solicitor once it has been paid to them is irrelevant to our accounting entries. incorrect Debit client ledger client account Credit cash sheet client account Incorrect. These are the accounting entries for client money being paid out. Whilst the deposit money is client money under Rule 2.1(a), in this question it is being received in, not being paid out by the buyer’s solicitor. Do revisit your materials on accounting entries for deposits and in particular focus on which entry is a credit and which a debit. Credit stakeholder ledger Debit cash sheet client account Incorrect Incorrect. These are the accounting entries to record the receipt by the seller’s solicitor of a deposit, to be held as stakeholder. These entries will be made by the seller’s solicitor once they receive the deposit. However, in this question we are acting for the buyer and how the deposit will be held by the seller’s solicitor once it has been paid to them is irrelevant to our accounting entries. The deposit is client money under Rule 2.1(a) and the entries to record its receipt will simply be the usual ones for client money received.

Answer 167

Receipt of mortgage funds by a buyer’s solicitor from the lender where the buyer’s solicitor has a separate client ledger for the lender. The solicitor acts for the buyer and the lender. Credit client ledger client account for the (lender) client Debit cash sheet client account AND Debit client ledger client account for the (lender) client Credit client ledger client account for the (buyer) client ----- Receipt of mortgage funds by a buyer’s solicitor from the lender where the buyer’s solicitor does not have a separate client ledger for the lender. The solicitor acts for the buyer and the lender. Credit client ledger client account for the (buyer) client Debit cash sheet client account ----- Paying back a mortgage to the lender when the seller sells a property. The solicitor acts for the seller and the lender. The solicitor does not have a separate client ledger for the lender. Debit client ledger client account for the (seller) client Credit cash sheet client account ---- Paying back a mortgage to the lender when the seller sells a property. The solicitor acts for the seller and the lender. The solicitor has a separate client ledger for the lender. Debit client ledger client account for the (seller) client Credit client ledger client account for the (lender) client AND Debit client ledger client account for the (lender) client Credit cash sheet client account

Answer 168

Credit client ledger client account for the (buyer) client Debit cash sheet client account Correct. In this case the firm does not have a separate client ledger for the lender so the entries will be the normal entries for the receipt of client money into the client account for the buyer. The details in the ledger would state that the mortgage funds have come from the lender.

Answer 169

Debit client ledger client account seller Credit client ledger client account lender Correct Correct. These are the entries showing the transfer of the redemption money (which is client money and already in the client account) between clients (from the seller to the lender). After this step, the redemption money will be paid out to the lender using the client money paid out entries.

Answer 170

Interest payable ledger The record of the interest paid out by the firm Client ledger separate designated client account The client ledger set up by a firm to record transactions affecting the separate designated client account opened by a firm to hold an individual client’s money. Cash sheet separate designated client account The record of money received into or paid out of the separate designated bank account opened by a firm to hold an individual client’s money. Interest receivable ledger The record of the interest received by the firm.

Answer 171

Debit client ledger separate designated client account for the client Credit cash sheet separate designated client account for the client Credit client ledger client account for the client Debit cash sheet client account Correct. The transfer is from one bank account (the separate designated account) to another (the general/main client account) and so it involves two double entries ie four entries in total. One pair of entries to record taking the money out of the separate designated client account and the second pair of entries to record the paying in of the money to the general/main client account.

Answer 172

Debit interest payable ledger Credit cash sheet business account Correct Correct. These entries record the withdrawing of the interest monies from the firm’s business account which is the first step in the transfer of the interest monies from the firm’s business account to their client account and happens prior to the second step which is the payment of the interest monies into the client account.

Answer 173

Yes, provided that a written agreement is entered into with the client as to interest not being paid and provided that sufficient information has been provided to the client to enable them to give informed consent. Correct. Rule 7.1 provides that a fair sum of interest on client money held by the firm must be paid to the client. Rule 7.2 allows the firm and the client to come to a different arrangement as to the payment of interest but this must be by written agreement and the firm must provide sufficient information to enable the client to give informed consent.

Answer 174

Profit costs account The record of bills of costs (or profit costs) issued by a law firm. Client ledger business account The business side of the client ledger account where the amount of money owed by the client to the firm is recorded. VAT account The record of VAT charged by a law firm

Answer 175

The VAT account [ledger] entry to record the VAT charged on the profit costs in the bill will be a credit. correct

Answer 176

Credit client ledger business account Debit cash sheet business account Correct. These are the accounting entries for recording the receipt of non-client money (which the cheque in payment of the bill is).

Answer 177

When paying a disbursement plus VAT as agent, there are no separate VAT entries; the payment is for the total of the cost plus the VAT. Correct.

Answer 178

The solicitor recorded an entry for £120 in the VAT account [ledger] when making the payment. Correct Correct. The solicitor was paying the invoice using the principal method as the solicitor was acting as principal (the solicitor instructed the agency and the invoice was addressed to the solicitor). When paying as principal there are separate accounting entries for the cost and for the VAT. The VAT accounting entries involve recording the VAT in the VAT account [ledger] and in the cash sheet business account.

Answer 179

Debit client ledger client account £2400 Credit cash sheet client account £2400 Correct. The solicitor will be paying the invoice as agent because the client instructed the surveyor and the invoice was addressed to the client. The cost and the VAT are added together and there is no separate entry for the VAT element. The firm holds sufficient money on client account for the client (£5000) and therefore payment should be made out of the law firm’s client account. The payment will be recorded as a credit in the cash sheet client account and a debit in the client ledger client account (showing that the solicitor now holds less money for the client).

Answer 180

Debit client ledger business account £800 Credit cash sheet business account £800 Debit VAT account £160 Credit cash sheet business account £160 Correct Correct. The solicitor is paying the invoice as principal. The VAT and the cost are kept separate and the payment is made from the business account.

Answer 181

Debit client ledger business account for the lender £1000 Credit profit costs £1000 Debit client ledger business account for the lender £200 Credit VAT account £200 Correct. Because the firm has a separate client ledger for the ledger, the entries will be made in the client ledger business account for the lender, plus the profit costs and VAT accounts.

Answer 182

A bill is issued to a borrower client’s lender (for whom you also act) and you do not have a separate client ledger for the lender. The borrower client agrees to pay the lender’s costs by a transfer from the client account. There will be four (two pairs) accounting entries to record the transfer. Correct. The issue of the bill plus VAT will be recorded in the borrower client’s client ledger and the transfer from the client account to the business account to pay the debt will involve four entries (as it is a transfer from one bank account to another). The entries would be: Debit client ledger client account Credit cash sheet client account Credit client ledger business account Debit cash sheet business account In each entry the amount transferred will be the total of the bill plus VAT (as one figure). Incorrect If a bill is issued to a borrower client’s lender (for whom you also act) and you do not have a separate client ledger for the lender, the accounting entries for the issue of the bill will include records being made in the borrower client’s client ledger client account. Incorrect. The accounting entries would include records being made in the borrower client’s client ledger business account (which is where money owed by the client to the firm is recorded) not in the borrower client’s client ledger client account (which is where money owed by the firm to the client is recorded) If a borrower client has agreed to pay their lender’s costs (you also act for the lender and have opened a separate client ledger for them), the accounting entries involved in recording the transfer of the costs will include an entry being made in the cash sheet client account. Incorrect. For a transfer of costs (the debt owed) only the client ledger client accounts for each of the transfer parties are used. The client account is not involved as no money is moving (being paid in or taken out) – simply a debt is being reallocated to a different client’s client ledger business account.

Answer 183

Debit client ledger client account for the borrower £6000 Credit cash sheet client account £6000 Credit client ledger business account for the borrower £6000 Debit cash sheet business account £6000 Correct Correct. As the firm does not have a separate client ledger for the lender, the issue of the bill plus VAT will have been recorded in the borrower client’s client ledger business account, because the profit costs is money due to the firm, not client money. Paying the bill by a transfer from the borrower’s client account involves two steps: (1) money needs to be transferred out of the borrower’s client account (debit client ledger client account, and credit cash sheet client account); and (2) the money needs to be paid into the firm’s business account (credit client ledger business account, and debit cash sheet business account). In each entry the amount transferred will be the total of the bill plus VAT (as one figure).

Answer 184

Credit client ledger business account £300 Debit profit costs £300 Credit client ledger business account £60 Debit VAT account £60 Correct Correct. These are the correct entries and figures.

Answer 185

Credit client ledger business account £2800 Debit bad and doubtful debts £2800 Credit client ledger business account £560 Debit VAT Account £560 Correct. These are the correct entries for the correct figures. The VAT on the bill of £2800 is £560 (20%). The debt and VAT need to be written off separately in separate double entries.

Answer 186

Client ledger business account, profit costs and VAT account. Correct. Two entries are made in the client ledger business account and one each in profit costs and VAT account to record the reduction of the profit costs and VAT.

Answer 187

Lay justices, District Judges or Deputy District Judges Correct. Lay justices (also known as Justices of the Peace), District Judges (a salaried judge) or a Deputy District Judge (a solicitor or barrister with a part-time judicial post) can conduct trials in the magistrates’ court.

Answer 188

Tribunal of fact Correct. There are certain circumstances in which the judge may also act as a tribunal of fact such as when hearing a submission of no case to answer, a voir dire or a Newton hearing which will be considered in separate elements.

Answer 189

Correct. This is arguably an unsatisfactory position when the magistrates make a ruling of law that certain evidence is inadmissible but hear the evidence in order to make that decision. In contrast, in the Crown court it would be the judge that would make a ruling of law that certain evidence is inadmissible and the jury would never hear the evidence.

Answer 190

Correct. This is arguably an unsatisfactory position when the magistrates make a ruling of law that certain evidence is inadmissible but hear the evidence in order to make that decision. In contrast, in the Crown court it would be the judge that would make a ruling of law that certain evidence is inadmissible and the jury would never hear the evidence.

Answer 191

Correct. This is arguably an unsatisfactory position when the magistrates make a ruling of law that certain evidence is inadmissible but hear the evidence in order to make that decision. In contrast, in the Crown court it would be the judge that would make a ruling of law that certain evidence is inadmissible and the jury would never hear the evidence.

Answer 192

one Correct. The Crown Court is regarded as a single court that sits in different places.

Answer 193

A bill may only be introduced into the House of Commons.

Answer 194

Royal Assent is governed by the Royal Assent Act 1967. On the date of Royal Assent, a bill becomes an Act of Parliament and may not come into force until later. Correct Correct CONFUSED Commencement An Act of Parliament takes effect from the day it receives Royal Assent, unless there is a contrary provision in the statute. Legislation does not always come into force on the same day it was enacted. It is more usual for an Act to include a commencement section detailing when the Act is to come into force. Typically, the power is delegated to the Secretary of State with responsibility in the area with which the statute is concerned to issue a statutory instrument bringing the Act into force.

Answer 195

Constitutional responsibility for interpreting statute rests jointly with Parliament and the judiciary. Correct. This is not correct – once legislation has been passed by Parliament, it is the constitutional function of the courts to determine its meaning.

Answer 196

Where general words follow specific words, the presumption of ejusdem generis means that the general words are interpreted so as to restrict them to the same kind of matters or objects as the preceding specific words correct

Answer 197

The purposive approach to statutory interpretation is employed across the board nowadays and is equally applicable to all areas of societal regulation. Correct. Though it is clear that this contextual approach is far more common in the modern era, the scope of its application will be varied by the courts, depending on the nature of the legal question before it.

Answer 198

You can advise the client on the purchase because the client is purchasing 50% or more of the shares in the company. This question tested your understanding of the exclusion under article 70 RAO (sale of a body corporate). The key point here is that you do not need to be regulated by the FCA to advise on a share sale or acquisition where your client is buying or selling 50% or more of the shares or ‘day to day control’ of the entity. This is a useful exclusion for solicitors in practice. It is covered in the BLP induction session and students read about it in the element ‘introduction to financial services regulation’ under the topic ‘Equity Finance’ in the Business Law and Practice knowledge stream in Adapt, as their prep for the BLP induction session. Incorrect. The specified activity is in this scenario is advising on the merits of investing in shares under article 53 RAO. Incorrect. You have identified the wrong exclusion here. The necessary part exclusion under article 67 RAO does not apply because advising on the merits of buying shares in the son’s company is not a necessary part of advising the client on the sale of his business. However the sale of a body corporate exclusion under article 70 RAO does apply because the client is buying 50% or more of the shares in the son’s company. Incorrect. The sale of a body corporate exclusion does apply, but it applies where the client is buying 50% or more of the shares, (not more than 25%). Incorrect. Looking at step 4 of the FSMA decision tree, you are correct that advising the client on whether to invest the sale proceeds in shares in the son’s company is a separate piece of work to advising him on the sale of his business and is not complementary for the purposes of SRA Scope Rule 2. However giving the advice to the client is a small part of the overall work being offered by the firm and would therefore be incidental under s.327 FSMA. In any event you do not need to get as far as step 4 on the decision tree because the exclusion in art 70 – sale of a body corporate applies.

Answer 199

You cannot represent the client at the hearing because, as you are two weeks’ qualified, you will not have completed the additional assessment requirements to obtain Higher Rights of Audience. This question required you to understand the requirements on a solicitor to obtain rights of audience in the high court. This was covered in the element 'the civil court system’ in the topic ‘client care and professional conduct’ in the Civil Litigation and Disputes Resolution knowledge stream in Adapt as well as the DR Induction session. Incorrect. Solicitors wishing to carry out advocacy in the High Courts must undertake training and pass assessments to obtain Higher Rights of Audience. A newly qualified solicitor is very unlikely to have done this. Incorrect. Solicitors wishing to carry out advocacy in the High Courts must undertake training and pass assessments to obtain Higher Rights of Audience,they do not obatin rights of audience automatically after a set period of time. Incorrect. Solicitors who have undertaken training and passed assessments to obtain Higher Rights of Audience do have rights to carry out advocacy in the Higher Courts which includes the High Court. However a newly qualified solicitor is very unlikely to have done this. Correct. The Higher Courts for the purposes of civil disputes means the High Court, the Court of Appeal and the Supreme Court. Advocacy in these courts would ordinarily by carried out by barristers, and solicitors wishing to carry out advocacy in the High Courts must undertake training and pass assessments to obtain Higher Rights of Audience. Such a newly qualified solicitor is very unlikely to have done this. Incorrect. Solicitors wishing to carry out advocacy in the High Courts must undertake training and pass assessments to obtain Higher Rights of Audience. A newly qualified solicitor is very unlikely to have done this.

Answer 200

You should write to the client giving them a revised cost estimate as soon as practicable. This question related to private retainers and tested understanding of CCS 8.7 requiring solicitors to give clients the best possible information about fees. This was covered in the WAE induction session and the element ‘Client Care: Information Requirements’ in the topic ‘Managing Client Relationships: The 3 Cs’ in the Client Care and Professional Conduct knowledge stream of BPP Adapt. Incorrect. You do not need to issue a new client care letter as only the information on costs will change in these circumstances. Incorrect. This would not be desirable and may not be commercially viable for the law firm. The amount stated in the client care letter was an estimate, not a fixed fee. Correct answer. This accords with CCS 8.7 as the obligation to ensure clients have the best possible information on pricing is a continuing obligation and therefore you should advise the client in writing of your concerns about the initial estimate as soon as practicable. Incorrect. The revised estimate must be in writing (CCS 8.7) Incorrect. Under CCS 8.7 you have an obligation to ensure clients have the best possible information on pricing. This is a continuing obligation and therefore you should advise the client in writing of your concerns about the initial estimate as soon as practicable.

Answer 201

You should write to the client giving them a revised cost estimate as soon as practicable. This question related to private retainers and tested understanding of CCS 8.7 requiring solicitors to give clients the best possible information about fees. This was covered in the WAE induction session and the element ‘Client Care: Information Requirements’ in the topic ‘Managing Client Relationships: The 3 Cs’ in the Client Care and Professional Conduct knowledge stream of BPP Adapt. Incorrect. You do not need to issue a new client care letter as only the information on costs will change in these circumstances. Incorrect. This would not be desirable and may not be commercially viable for the law firm. The amount stated in the client care letter was an estimate, not a fixed fee. Correct answer. This accords with CCS 8.7 as the obligation to ensure clients have the best possible information on pricing is a continuing obligation and therefore you should advise the client in writing of your concerns about the initial estimate as soon as practicable. Incorrect. The revised estimate must be in writing (CCS 8.7) Incorrect. Under CCS 8.7 you have an obligation to ensure clients have the best possible information on pricing. This is a continuing obligation and therefore you should advise the client in writing of your concerns about the initial estimate as soon as practicable.

Answer 202

You need to check whether any individual owns more than 25% of the shares in A Limited and if so, carry out standard CDD on such beneficial owners and on A Limited itself. This question tested the students understanding of the meaning of beneficial owner under the Money Laundering Regulations, and the need to carry out CDD on a company and it’s beneficial owner, as well as when you carry out ‘standard’ CDD, enhanced or simplified CDD and ongoing monitoring. These issues were covered in the BLP induction session and in the element ‘Money laundering: CDD’ in the topic ‘Good Business Practice: Managing Risk’ topic of Client Care and Professional Conduct in Adapt. Incorrect. The beneficial owner is the individual who owns or controls more than 25% of the shares or voting rights in the company (Regulation 5 MLR), so you need to check whether any individuals own more than 25% of the shares in A Limited. Incorrect. Ongoing monitoring applies in relation to an existing client with whom you have an ongoing relationship. This is a new client, so ongoing monitoring would not be appropriate at this stage. You should carry out standard CDD on A Limited and also check the beneficial owner(s) of A Limited and carry out standard CDD on them. Incorrect. There is nothing to suggest a particularly high risk of money laundering on these facts so enhanced CDD is not required. Standard CDD is sufficient. You will also need to check who the beneficial owner of A Limited is and carry out CDD on them. Incorrect. There is nothing on these facts to suggest a low risk of money laundering (eg the client is not listed on the London Stock Exchange) so simplified CDD would not be sufficient. You should carry out standard CDD on the client. You will also need to check who the beneficial owner of A Limited is and carry out CDD on them. Correct. This is an instruction from a new client and you will need to carry out standard CDD on that client, on both the company itself (Regulation 28(3) MLR) and on the beneficial owner (Regulation 28(4) MLR). The beneficial owner is the individual who owns or controls more than 25% of the shares or voting rights in the company (Regulation 5 MLR). There is nothing to suggest a particularly high risk of money laundering on these facts so enhanced CDD is not required. Equally there is nothing to suggest a low risk of money laundering (eg the client is not listed on the London Stock Exchange) so simplified CDD would not be sufficient. Ongoing monitoring applies in relation to an existing client with whom you have an ongoing relationship. This is a new client, so ongoing monitoring would not be appropriate at this stage.

Answer 203

You can arrange for the client to purchase the bonds because the client is entering the transaction on the advice of an authorised person. This question tested understanding of bonds being a specified investment, and the exclusion of arranging deals through an authorised person (article 29 RAO). This is covered in the BLP induction session and students read about it in the element ‘introduction to financial services regulation’ under the topic ‘Equity Finance’ in the Business Law and Practice knowledge stream in Adapt, as their prep for the BLP induction session. Incorrect. The specified investment here is bonds, article 77 RAO. The specified activity is arranging deals in investments (article 25 RAO). However the exclusion of arranging deals through an authorised person (article 29) applies here because the client is entering the transaction on the advice of her financial advisor who is authorised by the FCA. (Step 3 of the decision tree). The solicitor does not need to be authorised by the FCA. Incorrect. The specified investment here is bonds, article 77 RAO. The specified activity is arranging deals in investments (article 25 RAO). However the exclusion of arranging deals through an authorised person (article 29) applies here because the client is entering the transaction on the advice of her financial advisor who is authorised by the FCA. (Step 3 of the decision tree). The client is therefore protected from bad financial advice. The solicitor does not need to be authorised by the FCA. We also do not need to consider step 4 of the decision tree – whether the activity fulfils Rule 2 of the SRA Financial Services (Scope) Rules 2019 (‘SRA Scope Rules’), or whether the solicitor meets the other requirements of the SRA Scope Rules or the SRA Financial Services (Conduct of Business) Rules. Incorrect. The specified investment here is bonds, article 77 RAO. The specified activity is arranging deals in investments (article 25 RAO). However the exclusion of arranging deals through an authorised person (article 29) applies here because the client is entering the transaction on the advice of her financial advisor who is authorised by the FCA. (Step 3 of the decision tree). The client is therefore protected from bad financial advice. Note that the solicitor will not be receiving commission, so does not need to worry about accounting for any commission to the client. The solicitor does not need to be authorised by the FCA. We also do not need to consider step 4 of the decision tree – whether the activity fulfils Rule 2 of the SRA Financial Services (Scope) Rules 2019 (‘SRA Scope Rules’), or whether the solicitor meets the other requirements of the SRA Scope Rules or the SRA Financial Services (Conduct of Business) Rules. Correct. The specified investment here is bonds, article 77 RAO. The specified activity is arranging deals in investments (article 25 RAO). However the exclusion of arranging deals through an authorised person (article 29) applies here because the client is entering the transaction on the advice of her financial advisor who is authorised by the FCA. (Step 3 of the decision tree). The client is therefore protected from bad financial advice. Note that the solicitor will not be receiving commission, so does not need to worry about accounting for any commission to the client. The solicitor does not need to be authorised by the FCA. We also do not need to consider step 4 of the decision tree – whether the activity fulfils Rule 2 of the SRA Financial Services (Scope) Rules 2019 (‘SRA Scope Rules’), or whether the solicitor meets the other requirements of the SRA Scope Rules or the SRA Financial Services (Conduct of Business) Rules. Incorrect. Bonds are a specified investment, article 77 RAO. The specified activity is arranging deals in investments (article 25 RAO). However the exclusion of arranging deals through an authorised person (article 29) applies here because the client is entering the transaction on the advice of her financial advisor who is authorised by the FCA. (Step 3 of the decision tree). The solicitor does not need to be authorised by the FCA.

Answer 204

The man will be eligible for publicly funded legal representation by the duty solicitor at the police station. He will not be able to get a representation order in the magistrates’ court, because even if he passes the interests of justice test, he will fail the means test which applies in the magistrates’ court. This question tested students knowledge of criminal legal aid, including public funding at the police station and the interests of justice and means test for representation orders in the magistrates’ court. This was covered in the element ‘Finding overview’ in the topic ‘preliminaries to prosecution’ in the Criminal Litigation knowledge stream in Adapt and also in the Criminal Litigation induction session. Correct. Everyone is entitled to publicly funded legal representation by the duty solicitor at the police. The legal aid application for a representation order at court requires the defendant to pass the interests of justice test and a means test. In these circumstances the man is likely to pass the interests of justice test but is unlikely to pass the means test for legal aid, because of his income. Whilst the other answers sound plausible, they are each incorrect. It is incorrect to state that the man will not be eligible for publicly funded legal representation by the duty solicitor because he will fail the means test. There is no means test for advice and assistance at the police station, the man is eligible to receive publicly funded legal representation at the police station. It is correct to say that he will not be able to get a representation order as he will fail the means test. It is incorrect to state that the man will get a representation order for all hearings up to and including sentence because he will pass the interests of justice and the means test. Due to the man’s income, he is unlikely to pass the means test. It is incorrect to state that the man will be eligible for publicly funded representation at the police station, limited to telephone advice only. There is no means testing for advice and assistance at the police station so the man will be eligible for legal representation by the duty solicitor at the police station. It is correct to say that he will not get a representation order at the magistrates’ court because he will fail the means test. It is incorrect to state that the man will get a representation order at the magistrates’ court provided that he passes the interests of justice test, because there is no means test in the magistrates’ court. To be granted a representation order in the magistrates’ court, the man must pass the interests of justice and the means test. Please review your materials on legal aid, including public funding at the police station and the interests of justice and means test for representation orders in the magistrates’ court.

Answer 205

Yes, it is client money. This question tested your understanding of the definition of ‘client money’. This was introduced to the students in the PLP induction session and is covered in the element ‘what is client money? Rule 2.1’ in the topic ‘Solicitors Accounts’ in the Client Care and Professional Conduct section of BPP Adapt. Mortgage money received from a lender is given as an example of client money in the BPP Adapt element, ‘what is client money?’. Correct. It is client money under Rule 2.1(b). The firm has received the money on behalf of a third party (the mortgage company) in relation to regulated services delivered by the firm (dealing with the purchase of the property). Incorrect. As the money is held by the solicitor on behalf of a third party in relation to regulated services delivered by the solicitor it is client money under Rule 2.1(b). Mortgage money received from a lender is given as an example of client money in the BPP Adapt element, ‘what is client money?’. The money has been sent to the purchaser’s solicitor to enable completion of the purchase to take place.

Answer 206

As the court fees have not yet been paid and a bill has not been delivered to the client for them, the money is client money. This question tested your understanding of the definition of ‘client money’. This was introduced to the students in the PLP induction session and is covered in the element ‘what is client money? Rule 2.1’ in the topic ‘Solicitors Accounts’ in the Client Care and Professional Conduct section of BPP Adapt. Correct. Under Rule 2.1(d), money received by a firm in respect of your fees, and also any unpaid disbursements is client money if it is held or received prior to delivery of a bill for the same. The client sent you the cheque for the court fees (i.e an unpaid disbursement) prior to delivery of the bill, so it is client money. Under Rule 2.3 this money must be paid promptly into the client account.

Answer 207

The solicitor will need to be authorised by the SRA and comply with the SRA’s rules including the Code of Conduct for Solicitors and the SRA Accounts Rules because probate activities are reserved legal activities under the Legal Services Act. This question tested students’ application of the definition of reserved legal activities. This was covered in the recording ‘Introduction to the regulation of firms’ which is located in the ‘Knowledge Stream Information’ section of the Professional Conduct page of the hub. Correct. Probate activities are one of the reserved legal activities under the Legal Services Act 2007 and can only be provided by someone authorised by an approved regulator. The approved regulator for solicitors is the SRA. The SRA Code of Conduct for Solicitors applies to all individuals authorised by the SRA to provide legal services. The SRA Accounts Rules apply to law firms and individuals authorised by the SRA to receive or deal with money belonging to clients. As the solicitor will be receiving and distributing client money when administering estates, he will need to comply with the SRA Accounts Rules.

Answer 208

Inform your firm’s Money Laundering Reporting Officer about the transaction. Do not work on the file until they have carried out the relevant checks. This question is about the procedure to follow under the Proceeds of Crime Act 2002 (PoCA) if you suspect money laundering. It is covered in the element ‘money laundering: offences under PoCA’ and the risk factors are covered in the element ‘ money laundering; warning signs’ both are in the topic ‘Good Business Practice: Managing Risk’ in the Client Care and Professional Conduct section of Adapt. It was also covered in the BLP induction session. Correct. There are factors here that indicate a risk of money laundering: paying a large sum of money in cash, the price being 20% below the value of the property, buying the property from a relative, and the seller being based in a tax haven. In order to avoid liability under s.327 – 329 Proceeds of Crime Act you should make an authorised disclosure to your firm’s Money Laundering Reporting Officer. You should not carry out any work until the relevant checks have been completed.

Answer 209

The claim must be issued in the County Court. This question required you to understand the court in which a personal injury claim with a value of less than £50,000 should be commenced. This was covered in the element, ‘the civil court system’ in the ‘Introduction to dispute resolution’ topic in the Civil Litigation and Disputes Resolution knowledge stream in Adapt. It was also covered in the Dispute Resolution induction session. Correct. Personal injury claims cannot be commenced in the High Court unless their value is £50,000 or more. As this is personal injury claim worth £40,000, it must be commenced in the County Court.

Answer 210

Decisions of the Court of Appeal, the Supreme Court and the House of Lords. This question required an understanding of court decision binding on the Court of Appeal. This was covered in the element 'Rules of Precedent’ in the topic (Client Care and Professional Conduct) in the Civil Litigation and Disputes Resolution knowledge stream in Adapt, and the DR induction session. Correct. A court decision binds all the courts below, so the Court of Appeal is not bound by decisions of the High Court or the Crown Court but is bound by the decisions of the Supreme Court, and the House of Lords. In addition the Court of Appeal binds itself, subject to three exceptions established in Young v Bristol Aeroplane Co. Ltd. [1944] KB 718. Note that the Supreme Court was established by Part 3 of the Constitutional Reform Act 2005 and replaced the House of Lords and assumed its jurisdiction on 1 October 2009. The Court of Appeal will still be bound by decisions of the House of Lords before it was replaced by the Supreme Court.

Answer 211

£60,000 This question tested your knowledge of damages based agreements which was covered in the DR induction workshop and the element ‘funding’ in the topic ‘Client care and professional conduct’ in the Civil Litigation and Dispute Resolution knowledge stream in adapt. You considered a similar MCQ involving working out the amount the firm could invoice in relation to a conditional fee agreement in the DR induction session. The MCQ in in the induction session came from the Kaplan sample SQE questions. Correct. The solicitor is entitled to 50% of the damages. 50% of £120,000 is £60,000. Unlike a conditional fee agreement, with a DBA, if the case is successful, the solicitor will be paid a proportion of the damages awarded to the client by way of a remedy, rather than getting their charges plus a success fee, so £80,000 is wrong. £75,000 is 50% of the amount claimed by the claimant, not the amount of damages awarded by the court, and is therefore wrong. £30,000 is wrong because it is 25% of the damages awarded by the court – the maximum amount a lawyer can recover is capped at 25% in personal injury cases, 35% in employment tribunal cases and 50% in all other cases so the solicitor can recover 50% of the damages. £50,000 is 25% of the damages (rather than 50%) plus the solicitor’s charges (which the solicitor does not recover in a damages based agreement), so is wrong.

Answer 212

Debit client ledger client account. Credit cash sheet client account. This question requires students to recognise that the payment would be made out of client money and therefore the client account and correctly identify the ledger entries to do this. This was introduced in the PLP induction session. You also read the element ‘basic client ledger entries’ as prep for the WAE induction session and for this session. This is a useful element that you should revisit if you found this question difficult as it walks through examples of paying in and withdrawing client money and also withdrawing non-client money and shows the ledger entries. Correct. The client has paid £500 to the firm on account of costs. This is money received by the firm relating to regulated services (under SRA Accounts Rule 2.1(a)) and is therefore client money. It must be paid into the client bank account promptly and the entries when the £500 was received were a credit in the client side of the client ledger and a debit in the cash sheet for the client account. The solicitor will use this client money to pay the land registry fee, so the entries will be to debit client ledger client account and credit cash sheet client account.

Answer 213

The firm will pay the court fees from the business account. This question tests whether a payment should be made out of client account if the client has insufficient funds for the full payment on client account. Client money was introduced to the students in the PLP induction session and is covered in the element ‘what is client money? Rule 2.1’ in the topic ‘Solicitors Accounts’ in the Client Care and Professional Conduct section of BPP Adapt. Note that although you have not covered Rule 5.1 yet, but the question is included to see if you can work out the answer on the basis of common sense. Correct. Ms Z does not have sufficient money in the client account to make the payment. She has £500 and the court fees payment is £800. If the client account was used to make the payment another client’s money would be being used. This would breach Rule 5.3 of the SRA Accounts Rules which states that you only withdraw client money from a client account if sufficient funds are held on behalf of that client to make the payment. To avoid breaching the SRA Accounts Rules, the firm must make the payment from their business account.

Answer 214

Report the matter to the Money Laundering Reporting Officer (‘MLRO’) at your firm. Undertake no further work on the matter until you hear back from the MLRO, and ensure that you do not alert the client to your suspicions. This question is about the procedure to follow under the Proceeds of Crime Act 2002 (PoCA) if you suspect money laundering. It is covered in the element ‘money laundering: offences under PoCA’ and the risk factors are covered in the element ‘ money laundering; warning signs’ both are in the topic ‘Good Business Practice: Managing Risk’ in the Client Care and Professional Conduct section of Adapt. It was also covered in the BLP induction session. Correct. There are a number of factors here that indicate a risk of money laundering including, the significant over payment of £100,000, the request to transfer the excess to a relative and to an account in on off-shore bank account. The best course of action to take is to report your suspicions to your firm’s Money Laundering Reporting Officer (‘MLRO’) and not to alert the client, otherwise you could commit the offence of tipping off. If you do not report your suspicions you may be guilty of offences under sections 327, 328, 329 and 300 Proceeds of Crime Act 2002 (‘PoCA’). Tipping off is a non-direct involvement offence under PoCA and applies to people working in the regulated sector. Creating, operating or managing trusts falls within the definition of ‘regulated sector’, so you would be guilty of tipping off if you alerted your client to your suspicions. Once you have reported your suspicions to your MLRO you should avoid undertaking further work on the matter unless your MLRO is authorised to do so by the National Crime Agency or the notice period has expired.

Answer 215

You can give generic advice on the difference between different types of pensions, but you cannot give specific advice on the merits of investing in the pension provided by the new employer. This question tested your knowledge of the meaning of ‘advising on the merits’ and therefore whether the solicitor would be advising on investments which is a specified activity under RAO. This was covered in the in the BLP induction session and students read about it in the element ‘introduction to financial services regulation’ under the topic ‘Equity Finance’ in the Business Law and Practice knowledge stream in Adapt, as their prep for the BLP induction session. Pensions weren’t specifically stated as specified investments in the BLP induction session, but it is a matter of common sense that a pension is a financial product and therefore you would expect it to be regulated. Correct. Rights under a pension scheme are a specified investment (art 82 RAO). This is logical as a pension is a financial product. The specified activity is advising (on the merits) of an investment (art 53). However note that giving generic advice on the difference between different types of pension is NOT a specified activity. To be caught the advice requires an element of opinion on the part of the solicitor and a recommendation as to the course of action. So you would not need to be authorised by the FCA to advice on the difference between the types of pension. You WOULD need to be authorised by the FCA to advice on whether the client should invest in the pension offered by the new employer – so the solicitor cannot give this advice unless they are authorised by the FCA, which they are not.

Answer 216

You should take on the new client despite your concerns. This question tested your understanding of the requirement to make reasonable adjustments under the Equality Act 2010. It was covered in the WAE inductions session (where students attempted a similar MCQ from the Kaplan sample questions) and in the element ‘the Equality Act 2010’) in the topic Regulatory and Legal Environment in the Client Care and Professional Conduct section of Adapt. Correct. Your firm has an obligation to make reasonable adjustments necessary to ensure that a disabled person is not placed at a substantial disadvantage compared to those who are not disabled. On the facts the client has a good case and the only reason you would not be taking her on as a new client is because of her disability and additional needs.

Answer 217

Proceedings will be commenced in the magistrates’ court and the case will be sent to the Crown Court. This question tested your understanding of the court in which a murder charge will be heard. This was covered in the element 'Criminal Courts Structure’ in the topic ‘ Introduction’ in the Criminal Limitgation knowledge stream in Adapt and also in the Criminal Litigation Induction session. Correct. Almost all cases involving adults are commenced in the magistrates’ court, although as murder is an indictable only offence, it will be sent to the Crown Court after the first hearing. The High Court has limited jurisdiction on criminal matters and would not try a murder case. Any appeal would be from the Crown Court to the Court of Appeal, Criminal Division.

Answer 218

Debit client ledger business account. Credit cash sheet business account. This question requires students to recognise that the payment would be made out of non-client money and correctly identify the ledger entries to do this. This was introduced to the students in the PLP induction session. You also read the element ‘basic client ledger entries’ as prep for the WAE induction session and for this session. This is a useful element that you should revisit if you found this question difficult as it walks through examples of paying in and withdrawing client money and also withdrawing non-client money and shows the ledger entries. Correct. These are the correct entries to record the payment out of non-client money. Non-client money will be used to make the payment because the client does not have any client money in the client account and Rule 5.3 states that you only withdraw client money from a client account if sufficient funds are held on behalf of that client to make the payment.

Answer 219

£36,000 This question concerns the conditional fee agreements which was covered in the element ‘Funding’. The success fee is 80%. 80% of £20,000 is £16,000. This can be charged on top of the ‘normal’ fee of £20,000. So the total charge is £36,000.

Answer 220

Civil CLS funding may be available, but only if his case is sufficiently strong and he meets the means test. Civil CLS funding is subject to a means test and a merits test. If the client’s income is too high and/or the client has too much capital, they will be ineligible. Also, if the client’s position is insufficiently meritorious, they will not receive CLS funding. The majority of civil legal work is not eligible for CLS funding, but it is available for family disputes provided the client meets the means test and the merits test.

Answer 221

You would be only able to review the articles of the company and advise about the rights attaching to the shares. This question concerns the general prohibition on providing financial advice under s 19 FSMA. Shares are a specified investment under Article 76 RAO and advising on the merits is a specified activity under Article 53(1) RAO, therefore the advice under point 2 should not be provided. None of the exceptions apply here. The exclusion under article 70 will not apply as the client is not buying more than 50% of the shares in a Plc. This advice is a new piece of work and does not arise out of the original sale of the shares in the construction business therefore it is not complementary to advising on the sale of shares in the construction business. Advising the client on the merits of the share purchase is not a necessary part of advising them on the share purchase transaction. Advising on the rights attaching to shares is permitted since this is generic advice and will not therefore fall under Article 53(1).

Answer 222

The law centre must be authorised by the SRA because the conduct of litigation is a reserved legal activity. Law centres must be authorised by the SRA if they provide reserved legal activities regardless of whether the solicitor works on a voluntary basis. Reserved legal activities are set down in section 12 and Schedule 2 to the Legal Services Act 2007. Rights of audience (the right to appear before court) is a reserved legal activity, but so is the conduct of litigation, so the law centre will need to be authorised in this case. The solicitor must comply with the Code of Conduct for Solicitors, but the law centre must also be authorised by the SRA. This was covered in Adapt: Good Business Practice: Managing Risk, element ‘types of legal businesses’ and the recording, ‘Introduction to the regulation of law firms’.

Answer 223

You should carry out standard CDD on Company A and identify and verify the man as he is the beneficial owner of Company A. This question is about the level of CDD that must be carried by a solicitor when they are carrying out an occasional transaction or establishing a business relationship. This was covered in the element on ‘Money laundering – CDD’. There is nothing to suggest Company A presents a high risk of money laundering (which would require enhanced CDD), adn simplified CDD is only appropriate where there is a low degree of risk of money laundering. Where the client is a company, you must also identify and verify the beneficial owner (the person who owns more than 25% of the voting shares in the company).

Answer 224

You cannot pay the Referral Fee to the other firm. You could act for the client without paying the Referral Fee if this was agreed with the other firm. Section 56(1) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (‘LASPO’) prohibits solicitors from referring or receiving referrals in respect of a claimant’s claim for damages in respect of personal injury or death to each other in consideration for a referral fee. You would therefore not be able to accept the instructions and pay the Referral Fee. You could however accept the instructions and not pay the referral fee to the other firm, if this was agreed with the other firm. It is not clear from the question that the other firm is insisting on payment of the Referral Fee, so it would not be necessary to report the firm to the SRA. These points were covered in the recording ‘Introduction to the regulation of law firms’.

Answer 225

Yes, because an exclusion applies if the transaction involves at least 50% of the voting shares in the company. This question concerns the general prohibition on providing financial advice under s 19 FSMA. Shares are a specified investment under Article 76 RAO. The specified activity is arranging deals in shares (Article 25). However, the exclusion under article 70 RAO applies because the client will be buying 50% or more of the shares in the company, therefore there is no breach of s 19.

Answer 226

The claim can be issued in the High Court or the County Court. This question required you to understand the court in which a non-personal injury claim with a value of more than £100,000 should be commenced. This was covered in the element, ‘the civil court system' in Adapt. As this is a non-personal injury claim exceeding £100,000, both the County Court and High Court have jurisdiction. You will need to consider factors of value, complexity and importance to the public when making a final decision about whether to issue in the County Court or the High Court. The Technology and Construction Court is a specialist court within the Queens Bench Division of the High Court. The Circuit Commerical Court is a specialist court within the Queens Bench Division of the High Court.

Answer 227

The solicitor can represent the client at the hearing because solicitors can carry out advocacy in the County Court. This question required you to understand solicitors’ rights of advocacy in the Magistrates’ Court. Solicitors can carry out advocacy in the Magistrates’ Court, County Court, Tribunals and Appeal Tribunals. Solicitors are not generally authorised to carry out advocacy in the Higher Courts. Advocacy in these courts would ordinarily by carried out by barristers, and solicitors wishing to carry out advocacy in the Higher Courts must undertake training and pass assessments to obtain Higher Rights of Audience.

Answer 228

You can only advise the client about gifting the vintage cars. You must not provide advice in relation to the purchase of the shares. This question concerns the general prohibition on providing financial advice under s 19 FSMA. Shares are a specified investment under Article 76 RAO and therefore you cannot advise on the share purchase unless one of the exemptions applies or you are an authorised person. You can advise about gifting of the vintage cars, since this is a general tax issue and not covered by FSMA.

Answer 229

Transferring criminal property; becoming concerned in an arrangement which you suspect facilitates the use of criminal property; using or possessing criminal property; failure to disclose your suspicions to your firm’s nominated officer. This question concerns recognising the factors which indicate a risk of money laundering and understanding the direct and non direct involvement offences under POCA. This was covered in the element on ‘ML offences under POCA’. You will be transferring criminal property from the firm’s client account and therefore potentially becoming concerned in an arrangement that facilitates the use of criminal property by your client/purchaser. Whilst the monies remain in your firm’s client account, you will be in possession of criminal property. If you do not disclose your suspicions to the nominated officer, you are also guilty of failure to disclose. The offence of tipping off the client does not arise on the facts.

Answer 230

You can proceed with the transaction provided you are authorised to do so by the NCA. This question is about understanding what steps a solicitor can take once a suspicious activity report has been made by the firm’s MRLO to the NCA. If the MLRO makes a suspicious activity report to the NCA, you cannot proceed until the NCA provides authorisation, the MLRO cannot authorise you to proceed once an SAR has been made to the NCA. The correct notice period is 7 working days, not 5. You also need to be aware of the offence of ‘tipping off’ when acting in a transaction in the regulated sector (which this is). This was covered in the element on ‘ML offences under the PoCA’.

Answer 231

You can only advise the client about purchasing the holiday cottage, provided you are competent to do so. This question concerns the general prohibition on providing financial advice under s 19 FSMA. The pension scheme is a specified investment under Article 82 ROA, therefore you cannot advise on the pension scheme unless one of the exemptions applies or you are an authorised person. You can advise on the purchase of the holiday cottage since this is not covered by FSMA. You must however be competent to give this advice, otherwise you would be in breach of CCS 3.2.

Answer 232

Yes, since the transaction here is the sale of a body corporate. No authorisation is therefore required to provide the advice. This question concerns the general prohibition on providing financial advice under s 19, the restriction on financial promotions under s 21 and the requirement for a prospectus under s 85 FSMA. Since this is a sale of 50% of the shares to a single person, the transaction is a sale of a body corporate, and as such falls within the exclusions to both s 19 and s 21 FSMA. The advice sought may therefore be provided. No prospectus would be required because an exemption would apply to the requirement under s 85 FSMA.

Answer 233

Proceedings will be commenced, tried and sentenced in the Magistrates’ Court. Any appeal will be made to the Crown Court. This question concerns jurisdiction of the criminal courts. The client is charged with assault. Students needed to recognise that assault is a summary only offence and is therefore only capable of being tried and sentenced in the Magistrates’ Court. Any appeal will be made to the Crown Court. This was covered in the element 'Criminal Courts Structure’ in the topic 'Legal System of England and Wales' in the Professional Conduct + section in Adapt

Answer 234

The junior solicitor and the supervisor have both breached the Code. This question concerns the obligations of competence on solicitors under the Code of Conduct for Solicitors (‘CCS’). CCS applies to all solicitors and lawyers authorised by the SRA to provide legal services. CCS 3.3 requires solicitors to maintain their competence and keep their professional knowledge and skills up to date. CCS 3.5 requires solicitors who supervise others to effectively supervise work being done for clients. CCS 3.6 requires lawyers to ensure the individuals they manage are competent to carry out their role. The junior solicitor has breached CCS 3.3, the supervisor has breached CCS 3.5. The partner may have breached CCS 3.6, but he has taken action to rectify the error. It is possible that the COLP has failed to ensure the firm complies with all its regulatory obligations here, but this is a breach of the Code of Conduct for Firms, not the Code of Conduct for Solicitors. These points were covered in the recording ‘Introduction to the regulation of law firms’.

Answer 235

If the candidate is the best person for the role, the law firm must appoint her and must provide the ramp and railings. This question concerns the requirement to make reasonable adjustments and not to discriminate against a person because of their disability under the Equality Act. The Equality Act 2010 puts a positive obligation on organisations to make reasonable adjustments to make sure that a disabled person is not placed at a substantial disadvantage compared to a non-disabled person. If the adjustments are reasonable which they are here (minimal cost and disruption to the business), there is no discretion to make the adjustments. In addition, the firm must not discriminate against a person because of their ‘protected characteristic’ which includes a disability, e.g. blindness. If this candidate is the best candidate for the job, she should be offered the role and the firm should pay for the adjustments.

Answer 236

You should carry out standard customer due diligence because there is nothing to suggest the client presents a high risk of money laundering. This question concerns the level of CDD that must be carried by a solicitor when they are carrying out an occasional transaction for client based overseas. This is covered in the element ‘Money laundering – CDD’. You should carry out standard customer due diligence. There is nothing on the facts to suggest this client presents a high risk of money laundering. The client is not from a high risk country and the transaction is not complex. You have identified how the client is funding the purchase so there is no need for enhanced CDD. For simplified CDD to apply there would need to be a reason to consider this particularly low risk, for example the client being a local authority, a listed company or other trusted party, which is not the case here.

Answer 237

Do not accept the monies into the firm’s client account and make an authorised disclosure to your firm’s Money Laundering Reporting Officer without alerting the man to your concerns. These are suspicious facts raising a concern about money laundering as the man is buying property quickly, in cash from a relative. You should not accept monies on account in these circumstances nor should you alert the man of your concerns to avoid the risk of "tipping off" under s 333A. This course of action accords with s 327-329 and the firm will have a defence if it makes an authorised disclosure to the MLRO/Police under s 338 PoCA. The SRA is not the appropriate body to report money laundering concerns to. The referral from a trusted client is no defence to money laundering offences.

Answer 238

She must invoice the client £500 and write off the additional £200. This question concerns fixed fee agreements which are common for drafting a will or conveyancing. With a fixed fee the law firm must invoice the client for the fixed amount agreed with the client regardless of the time spent by fee earners. In the absence of any agreement with the client to vary the fee, any time spent by fee earners in excess of the fixed fee must be written off. If the firm had incurred less time on the file, the firm would still be able to charge the fixed fee of £500. Transferring £200 to another file of the client would be a very serious breach of the SRA’s regulations and potentially fraud.

Answer 239

You should cease to act. In failing to disclose the document, the wholesaler is failing to comply with a disclosure obligation and is also misleading the court and the opponent. Pursuant to Rule 1.4 of the Code of Conduct, you cannot be complicit in the actions of others that mislead the court. You will therefore need to cease to act. You cannot notify the court or the retailer of the email (whether by an application to court or otherwise) as this would be to breach the obligation of confidentiality owed to the wholesaler.

Answer 240

You cannot pay the Referral Fee to the other firm. You could act for the client without paying the Referral Fee if this was agreed with the other firm. Section 56(1) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (‘LASPO’) prohibits solicitors from referring or receiving referrals in respect of a claimant’s claim for damages in respect of personal injury or death to each other in consideration for a referral fee. You would therefore not be able to accept the instructions and pay the Referral Fee. You could however accept the instructions and not pay the referral fee to the other firm, if this was agreed with the other firm. It is not clear from the question that the other firm is insisting on payment of the Referral Fee, so it would not be necessary to report the firm to the SRA. These points were covered in the recording ‘Introduction to the regulation of law firms’.

Answer 241

The claim can be issued in the High Court or the County Court. This question required you to understand the court in which a non-personal injury claim with a value of more than £100,000 should be commenced. This was covered in the element, ‘the civil court system' in Adapt. As this is a non-personal injury claim exceeding £100,000, both the County Court and High Court have jurisdiction. You will need to consider factors of value, complexity and importance to the public when making a final decision about whether to issue in the County Court or the High Court. The Technology and Construction Court is a specialist court within the Queens Bench Division of the High Court. The Circuit Commerical Court is a specialist court within the Queens Bench Division of the High Court.

Answer 242

The law centre must be authorised by the SRA because the conduct of litigation is a reserved legal activity. Law centres must be authorised by the SRA if they provide reserved legal activities regardless of whether the solicitor works on a voluntary basis. Reserved legal activities are set down in section 12 and Schedule 2 to the Legal Services Act 2007. Rights of audience (the right to appear before court) is a reserved legal activity, but so is the conduct of litigation, so the law centre will need to be authorised in this case. The solicitor must comply with the Code of Conduct for Solicitors, but the law centre must also be authorised by the SRA. This was covered in Adapt: Good Business Practice: Managing Risk, element ‘types of legal businesses’ and the recording, ‘Introduction to the regulation of law firms’.

Answer 243

The junior solicitor and the supervisor have both breached the Code. This question concerns the obligations of competence on solicitors under the Code of Conduct for Solicitors (‘CCS’). CCS applies to all solicitors and lawyers authorised by the SRA to provide legal services. CCS 3.3 requires solicitors to maintain their competence and keep their professional knowledge and skills up to date. CCS 3.5 requires solicitors who supervise others to effectively supervise work being done for clients. CCS 3.6 requires lawyers to ensure the individuals they manage are competent to carry out their role. The junior solicitor has breached CCS 3.3, the supervisor has breached CCS 3.5. The partner may have breached CCS 3.6, but he has taken action to rectify the error. It is possible that the COLP has failed to ensure the firm complies with all its regulatory obligations here, but this is a breach of the Code of Conduct for Firms, not the Code of Conduct for Solicitors. These points were covered in the recording ‘Introduction to the regulation of law firms’.

Answer 244

If the candidate is the best person for the role, the law firm must appoint her and must provide the ramp and railings. This question concerns the requirement to make reasonable adjustments and not to discriminate against a person because of their disability under the Equality Act. The Equality Act 2010 puts a positive obligation on organisations to make reasonable adjustments to make sure that a disabled person is not placed at a substantial disadvantage compared to a non-disabled person. If the adjustments are reasonable which they are here (minimal cost and disruption to the business), there is no discretion to make the adjustments. In addition, the firm must not discriminate against a person because of their ‘protected characteristic’ which includes a disability, e.g. blindness. If this candidate is the best candidate for the job, she should be offered the role and the firm should pay for the adjustments.

Answer 245

She must invoice the client £500 and write off the additional £200. This question concerns fixed fee agreements which are common for drafting a will or conveyancing. With a fixed fee the law firm must invoice the client for the fixed amount agreed with the client regardless of the time spent by fee earners. In the absence of any agreement with the client to vary the fee, any time spent by fee earners in excess of the fixed fee must be written off. If the firm had incurred less time on the file, the firm would still be able to charge the fixed fee of £500. Transferring £200 to another file of the client would be a very serious breach of the SRA’s regulations and potentially fraud.

Answer 246

Civil CLS funding may be available, but only if his case is sufficiently strong and he meets the means test. Civil CLS funding is subject to a means test and a merits test. If the client’s income is too high and/or the client has too much capital, they will be ineligible. Also, if the client’s position is insufficiently meritorious, they will not receive CLS funding. The majority of civil legal work is not eligible for CLS funding, but it is available for family disputes provided the client meets the means test and the merits test.

Answer 247

£36,000 This question concerns the conditional fee agreements which was covered in the element ‘Funding’. The success fee is 80%. 80% of £20,000 is £16,000. This can be charged on top of the ‘normal’ fee of £20,000. So the total charge is £36,000.

Answer 248

You can only advise the client about gifting the vintage cars. You must not provide advice in relation to the purchase of the shares. This question concerns the general prohibition on providing financial advice under s 19 FSMA. Shares are a specified investment under Article 76 RAO and therefore you cannot advise on the share purchase unless one of the exemptions applies or you are an authorised person. You can advise about gifting of the vintage cars, since this is a general tax issue and not covered by FSMA.

Answer 249

You can only advise the client about purchasing the holiday cottage, provided you are competent to do so. This question concerns the general prohibition on providing financial advice under s 19 FSMA. The pension scheme is a specified investment under Article 82 ROA, therefore you cannot advise on the pension scheme unless one of the exemptions applies or you are an authorised person. You can advise on the purchase of the holiday cottage since this is not covered by FSMA. You must however be competent to give this advice, otherwise you would be in breach of CCS 3.2.

Answer 250

You would be only able to review the articles of the company and advise about the rights attaching to the shares. This question concerns the general prohibition on providing financial advice under s 19 FSMA. Shares are a specified investment under Article 76 RAO and advising on the merits is a specified activity under Article 53(1) RAO, therefore the advice under point 2 should not be provided. None of the exceptions apply here. The exclusion under article 70 will not apply as the client is not buying more than 50% of the shares in a Plc. This advice is a new piece of work and does not arise out of the original sale of the shares in the construction business therefore it is not complementary to advising on the sale of shares in the construction business. Advising the client on the merits of the share purchase is not a necessary part of advising them on the share purchase transaction. Advising on the rights attaching to shares is permitted since this is generic advice and will not therefore fall under Article 53(1).

Answer 251

Yes, since the transaction here is the sale of a body corporate. No authorisation is therefore required to provide the advice. This question concerns the general prohibition on providing financial advice under s 19, the restriction on financial promotions under s 21 and the requirement for a prospectus under s 85 FSMA. Since this is a sale of 50% of the shares to a single person, the transaction is a sale of a body corporate, and as such falls within the exclusions to both s 19 and s 21 FSMA. The advice sought may therefore be provided. No prospectus would be required because an exemption would apply to the requirement under s 85 FSMA. 50 OR MORE

Answer 252

Yes, because an exclusion applies if the transaction involves at least 50% of the voting shares in the company. This question concerns the general prohibition on providing financial advice under s 19 FSMA. Shares are a specified investment under Article 76 RAO. The specified activity is arranging deals in shares (Article 25). However, the exclusion under article 70 RAO applies because the client will be buying 50% or more of the shares in the company, therefore there is no breach of s 19.

Answer 253

Do not accept the monies into the firm’s client account and make an authorised disclosure to your firm’s Money Laundering Reporting Officer without alerting the man to your concerns. These are suspicious facts raising a concern about money laundering as the man is buying property quickly, in cash from a relative. You should not accept monies on account in these circumstances nor should you alert the man of your concerns to avoid the risk of "tipping off" under s 333A. This course of action accords with s 327-329 and the firm will have a defence if it makes an authorised disclosure to the MLRO/Police under s 338 PoCA. The SRA is not the appropriate body to report money laundering concerns to. The referral from a trusted client is no defence to money laundering offences.

Answer 254

You can proceed with the transaction provided your firm is authorised to do by the NCA This question is about understanding what steps a solicitor can take once a suspicious activity report has been made by the firm’s MRLO to the NCA. If the MLRO makes a suspicious activity report to the NCA, you cannot proceed until the NCA provides authorisation, the MLRO cannot authorise you to proceed once an SAR has been made to the NCA. The correct notice period is 7 working days, not 5. You also need to be aware of the offence of ‘tipping off’ when acting in a transaction in the regulated sector (which this is). This was covered in the element on ‘ML offences under the PoCA’.

Answer 255

You should carry out standard CDD on Company A and identify and verify the man as he is the beneficial owner of Company A. This question is about the level of CDD that must be carried by a solicitor when they are carrying out an occasional transaction or establishing a business relationship. This was covered in the element on ‘Money laundering – CDD’. There is nothing to suggest Company A presents a high risk of money laundering (which would require enhanced CDD), adn simplified CDD is only appropriate where there is a low degree of risk of money laundering. Where the client is a company, you must also identify and verify the beneficial owner (the person who owns more than 25% of the voting shares in the company).

Answer 256

You should carry out standard customer due diligence because there is nothing to suggest the client presents a high risk of money laundering. This question concerns the level of CDD that must be carried by a solicitor when they are carrying out an occasional transaction for client based overseas. This is covered in the element ‘Money laundering – CDD’. You should carry out standard customer due diligence. There is nothing on the facts to suggest this client presents a high risk of money laundering. The client is not from a high risk country and the transaction is not complex. You have identified how the client is funding the purchase so there is no need for enhanced CDD. For simplified CDD to apply there would need to be a reason to consider this particularly low risk, for example the client being a local authority, a listed company or other trusted party, which is not the case here.

Answer 257

Transferring criminal property; becoming concerned in an arrangement which you suspect facilitates the use of criminal property; using or possessing criminal property; failure to disclose your suspicions to your firm’s nominated officer. This question concerns recognising the factors which indicate a risk of money laundering and understanding the direct and non direct involvement offences under POCA. This was covered in the element on ‘ML offences under POCA’. You will be transferring criminal property from the firm’s client account and therefore potentially becoming concerned in an arrangement that facilitates the use of criminal property by your client/purchaser. Whilst the monies remain in your firm’s client account, you will be in possession of criminal property. If you do not disclose your suspicions to the nominated officer, you are also guilty of failure to disclose. The offence of tipping off the client does not arise on the facts.

Answer 258

Proceedings will be commenced, tried and sentenced in the Magistrates’ Court. Any appeal will be made to the Crown Court. This question concerns jurisdiction of the criminal courts. The client is charged with assault. Students needed to recognise that assault is a summary only offence and is therefore only capable of being tried and sentenced in the Magistrates’ Court. Any appeal will be made to the Crown Court. This was covered in the element 'Criminal Courts Structure’ in the topic 'Legal System of England and Wales' in the Professional Conduct + section in Adapt

Answer 259

The solicitor can represent the client at the hearing because solicitors can carry out advocacy in the County Court. This question required you to understand solicitors’ rights of advocacy in the Magistrates’ Court. Solicitors can carry out advocacy in the Magistrates’ Court, County Court, Tribunals and Appeal Tribunals. Solicitors are not generally authorised to carry out advocacy in the Higher Courts. Advocacy in these courts would ordinarily by carried out by barristers, and solicitors wishing to carry out advocacy in the Higher Courts must undertake training and pass assessments to obtain Higher Rights of Audience.

Answer 260

A special resolution is required to change the name of the company. Any three shareholders will have sufficient voting power to pass the resolution at a general meeting.

Answer 261

The solicitor should pay the whole of the sum into client account and promptly transfer £800 to business account This is a PLP question, which assesses your understanding of the rules governing solicitors accounts. When there is a mixed payment of client money and non-client money, it must be paid into client account, and the non-client money transferred to business account. Correct – when there is a mixed payment of client money and non-client money, it must be paid into client account, and the non-client money transferred to business account.

Answer 262

Credit client ledger client account and debit cash sheet client account This is a PLP question, which assesses your understanding of the rules governing solicitors accounts, specifically accounting entries for deposits in property transactions. Correct. The deposit is being held by the seller’s solicitor as agent. The deposit is client money (Rule 2.1(b)) and will be paid into the seller’s solicitor’s client account and it will be credited to the seller’s client ledger (client side as it is client money). The stakeholder ledger is only used by the seller’s solicitor to record receipt of a deposit when they are holding the deposit as stakeholder (not the case on these facts). --- Credit stakeholder ledger and debit cash sheet client account - Please review your materials on the accounting entries for deposits in property transactions. The deposit is being held by the seller’s solicitor as agent. The stakeholder ledger is only used by the seller’s solicitor to record receipt of a deposit when they are holding the deposit as stakeholder (not the case on these facts).

Answer 263

To check for any problems with a shortfall or timing of the funds earlier rather than later, and to find out if they intend for you to act for their mortgage lender This is a PLP question which assesses your understanding of a freehold transaction and the different issues that arise at the initial instructions stage. A solicitor should identify any issues with funding. For example, a client may not have considered Stamp Duty Land Tax or Land Transaction Tax. If the solicitor is to act for the mortgage lender then they will need to know this; for example, to check that they are on that lender’s panel. A solicitor will not generally be authorised to give financial advice in respect of interest rates. Finding issues with the property that would enable a reduction in the purchase price is not likely to happen in most cases and is not the main reason that a solicitor needs to discuss funding. It is also not accurate to say that a first-time buyer will be paying in cash. Finally, residential lenders will issue standard forms of legal charge and certificate of title, and there is no scope for these to be negotiated.

Answer 264

You should promptly replace the client money wrongly withdrawn by doing the following: Debit client ledger business account £100. Credit cash sheet business account £100. Credit client ledger client account £100. Debit cash sheet client account £100. This is a Solicitors Accounts question in the context of wills and estates. This question relates to the obligation to correct any breaches of the SRA Accounts Rules promptly. Here money had been withdrawn from the client account when there was no money for that client in the client account. This meant that another client’s money was being used. The firm must make a transfer of money from their business account to their client account and two steps are involved: 1. Withdraw money from the business account (debit the client ledger business account for the client, and credit the cash sheet business account), and 2. Pay the money into the client account (credit the client ledger client account for the client and debit the cash sheet client account).

Answer 265

Debit profit costs £2,000. Credit client ledger business account £2,000. Debit VAT account £400. Credit client ledger business account £400. This is a Solicitors Accounts question in the context of wills and estates. This question relates to the entries required to reduce a bill issued to a client. The bill was for £35,000 plus VAT and was reduced by £2,000. The accounting entries need to show that as well as the firm’s costs being reduced by £2,000 (for which you would debit profit costs and credit client ledger business account) you also separately need to record that the VAT charged on the bill will also be reduced. The VAT on £2,000 is £400 (VAT being charged at 20%). The entries for the reduction of VAT are debit VAT account and credit client ledger business account. This is covered in the element ‘Bad debts and the abatement of bills’ in the Solicitors Accounts topic.

Answer 266

Your friend should make an enquiry when she returns to the office as to whether the firm has an equality, diversity and inclusion policy. She should ask her employers for training in this area because the Code of Conduct for Solicitors contains a requirement not to unfairly discriminate which binds not only the partners and managers of the firm, but also the rest of the staff, including apprentices. Correct. Whilst responsibility rests mainly with the partners and managers for ensuring that the firm has systems in place to comply with its regulatory and legal requirements (SRA Code of Conduct for Firms (‘CCF’) 2.1), individuals working for the firm, including apprentices, are still required not to discriminate unfairly under CCS 1.1. A responsible and prudent apprentice would and should raise the issue with the firm’s management.

Answer 267

In the meeting Aarya reveals she is transgender and she has been denied the right to compete as a female at her local archery club and she would like to challenge the decision. Your supervisor believes that women who are transgender should not be able to compete in such circumstances and refuses to act for her. It is likely your supervisor will be found to be in breach of the requirement not to unfairly discriminate in the Code of Conduct for Solicitors. Correct. Under CCS 1.1 you must ensure that you do not unfairly discriminate by allowing your personal views to affect your professional relationships and the way in which you provide your services, the supervisor will have breached this provision if they refuse to act for Aarya even though Aarya is not yet a client of the firm. Sexual orientation is a protected characteristic under the Equality Act (‘EA’). and refusing to act for Aarya on the grounds of her sexual orientation would be discriminatory and unlawful under EA. In addition the supervisor would be breaching CCS 1.1. In relating to transcribing the notes for the meeting, you have an obligation under CCS 3.4 to take account of your client’s attributes, needs and circumstances. You will therefore need to transcribe the notes. You also have a duty to make reasonable adjustments to the service you provider under section 29 EA. Given you work at a large international firm, it is unlikely that the cost involved in transcribing meeting notes will be so great as to make the adjustment unreasonable. You will not be able to pass on the costs for these adjustments, see the Guidance on the SRA’s approach to equality, diversity and inclusion.

Answer 268

It is your firm’s policy not to accept instructions in relation to corporate acquisitions where the purchase price is less than £1 million Race and religion or belief are both protected characteristics under the Equality Act. Under section 29, a person concerned with the provision of a service to the public, or a section of the public must not discriminate against a person requiring the service by not providing the person with the service. It would be discriminatory to refuse to provide the service because of either of these protected characteristics. In relation to the language issue, while there may be a communication problem, this can be resolved by making arrangements for a translator to assist in translation of documents and to attend meetings. In relation to religious knowledge it is unlikely that religious knowledge is necessary to complete the legal work in purchasing the business. The client will be looking to the solicitor for legal advice, not advice on the religious aspects of slaughtering animals in an abattoir, and to the extent knowledge of Islamic practice is needed, the solicitor will need to obtain this from the client. Not having enough time to complete the work might be a good reason in a small firm with a limited number of lawyers. However this is a large firm so the supervisor should be able to refer the work to a colleague if they themselves are too busy. Turning down the instructions because the supervisor is vegetarian would amount to a breach of the obligation not to unfairly discriminate by allowing your personal views to affect your professional relationships and the way you provide your services under CCS 1.1. The policy not to accept instructions where the purchase price is less than £1 million is not discriminatory and would apply regardless of the race or religion of the client.

Answer 269

She should refer her complaint to the Legal Ombudsman Correct. As the firm’s internal complaints procedure has been exhausted, Nisha, as an individual should refer the complaint to the Legal Ombudsman. Clients can refer complaints concerning misconduct, dishonesty or breaches of the SRA’s rules to the SRA, but there is nothing on these facts to suggest misconduct or dishonesty or breach of the SRA’s rules. It is possible the firm has breached CCS 3.2 which requires solicitors to provide a service that is competent and delivered in a timely manner, but we do not know enough in this scenario to determine whether there is a breach of this provision or whether there is a reason for the perceived delay. The SDT deals with serious breaches of the SRA’s rules. The Law Society would not be the appropriate body as it represents solicitors in England and Wales and supports them in their careers. The Legal Services Board is also not the appropriate body.

Answer 270

You should take on the new client despite your concerns Correct. Your firm has an obligation to make reasonable adjustments necessary to ensure that a disabled person is not placed at a substantial disadvantage compared to those who are not disabled. On the facts the client has a good case and the only reason you would not be taking her on as a new client is because of her disability and additional needs.

Answer 271

Yes, because the information is material to the client’s matter. CORRECT: this is a situation where the solicitor has received information from the acquaintance which is material to the client’s matter. The solicitor must disclose it to the client under CCS 6.4 unless one of the exceptions applies. None of the exceptions apply.

Answer 272

You should tell Mary about the document in order to comply with Principle 1 (act in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice). Correct. This is an example of where your duty under Principles 1 (and 2) come into conflict with your duty to your client under Principle 7. The introduction to the Principles makes it clear that in these circumstances the Principles which safeguard the wider public interest such as the rule of law take precedence over an individual client’s interest.

Answer 273

Your words amount to an enforceable undertaking and you must therefore do what you have promised to do. Correct Correct. Undertaking is defined in the SRA Glossary as “a statement, given orally or in writing, whether or not it includes the word “undertake” or “undertaking”, to someone who reasonably places reliance on it, that you or a third party will do something or cause something to be done, or refrain from doing something.” An undertaking can be given by anyone provided the recipient reasonably places reliance on it. So it can be given by an apprentice or any other employee of the law firm. It can be given orally, and it does not have to contain the work “undertake’ or ‘undertaking’. Your words do therefore amount to an undertaking, and under CCS 1.3 you must ensure that you perform the undertaking within the time you specified. As a legal professional, you will be deemed to comply with your word and do what you promise to do. You need to be careful that you do not give undertakings unwittingly.

Answer 274

You should not act for BCD because you would be under a duty to disclose the Employment Tribunal Decision to them, which conflicts with your duty of confidentiality to Andrew. Correct. You have a duty of confidentiality to Andrew under CCS 6.3. This duty applies to current and former clients unless disclosure is required by law or the client consents. If you accepted the instructions from BCD you would have a duty to disclose information of which you have knowledge which is material to the matter under CCS 6.4. The information about the Employment Tribunal finding in favour of Andrew’s former employer in his unfair dismissal case is material to this matter. However CCS 6.5 applies here. You cannot act for a client (BCD) in a matter where that client has an interest adverse to a former client (Andrew) for whom you hold confidential information which is material to that matter. Andrew and BCD have adverse interests here and the information is material to BCD’s matter. Condition (a) is that effective measures have been taken which result in there being no real risk of disclosure of the confidential information – here you already know the information so it is not possible to put effective measures in place. Condition (b) is that the former client (Andrew) consents to you acting. It is very unlikely that Andrew would consent to you acting for his employer on this matter. The issue here is confidentiality, not conflicts of interest.

Answer 275

Although the Case is prejudicial to your client’s claim, you should provide the court with details of it. You do not need your client’s prior consent to do this.

Answer 276

A client seeking advice on a dispute against their former landlord. Correct. Under CCS 5.1(d) you do not make payments to an introducer in repost of clients who are the subject of criminal proceedings. You cannot therefore accept the referral in relation to the client who has been charged with assault or with theft. Section 56(1) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (‘LASPO’) prohibits solicitors from referring or receiving referrals in respect of a claimant’s claim for damages in respect of personal injury or death to each other in consideration for a referral fee. You would not therefore be able to accept the instructions in relation to the client seeking damages for personal injury and pay the Referral Fee to the other firm. Note that under CCS 5.2, your firm would have to show that the Referral Fee was not paid in breach of s. 56(1) LASPO. There is nothing to stop your firm from accepting the instructions in relation to the dispute with the former landlord and paying the Referral Fee, provided you and your firm comply with CCS 5.1. CCS 5.1 (b) states that the client must be informed of any fee sharing that is relevant to their matter. Your firm therefore would not be able to accept the referral of the employment dispute where the solicitor introducing the client insists on the Referral Fee being kept confidential.

Answer 277

Handing out leaflets referring to the case to individuals leaving the local family law court. Correct. CCS 8.9 states “you do not make unsolicited approaches to members of the public, with the exception of current or former clients, in order to advertise legal services provided by you or your business or employer”. Handing leaflets to recipients leaving the family law court would breach this provision. As there is an exception under CCS 8.9 for current and former clients, emailing the article to current and former family law clients of the firm would not breach CCS. Writing an article with the permission of the client and their former spouse would not breach CCS and neither would referring to your involvement in the case in an interview with a legal magazine, with your client’s consent.

Answer 278

No, because a solicitor cannot act if there is an own interest conflict or a significant risk of an own interest conflict. Correct. There is an outright prohibition on acting where there is an own interest conflict.The SCI and CSO exceptions only applies to conflicts of interest.Receiving written consent is one of the conditions that applies to an exception to the rule that you cannot act if there is a conflict of interest.

Answer 279

The solicitor may draft wills for the client and the brother if the brother has given written authorisation, in advance, of the client’s authority to give instructions on his behalf. CORRECT: this is the position under CCS 3.1: ‘You only act for clients on instructions from the client or from someone properly authorised to provide instructions on their behalf. If you have reason to suspect that the instructions to not represent your client’s instructions, you do not act unless you have satisfied yourself that they do.’

Answer 280

Your firm may be able to act for SML because both SML and KCL are competing for the same objective. However in order to do so, both KCL and SML must give informed consent to your firm acting; you must put in place effective safeguards to protect KCL and SML’s confidential information; and you must be satisfied it is reasonable for you to act for both KCL and SML. Correct. There is a potential conflict of interests here. If your firm accepted the instructions from KCL and SML it would have separate duties to act in the best interests of KCL and SML in relation to their bids for the shares in BS and there is a risk that these duties may conflict. Under CCS 6.2 your firm should not act for both KCL and SML unless one of the exceptions applies. Substantially common interest means “a situation where there is a clear common purpose between the clients and a strong consensus on how it is to be achieved”. There is no clear common purpose or strong consensus on how it is to be achieved here (KCL and SML will be competing against each other for BS, not working together to purchase it), so the exception in CCS 6.2(a) does not apply. The exception under CCS 3.2(b) applies where the clients are competing for the same objective, defined in the SRA Glossary as: “any situation in which two or more clients are competing for an objective which if attained by one client will make that objective unattainable to the other client and objective means an asset, contract or business opportunity which two or more clients are seeking to acquire or recover through a liquidation (or some other form of insolvency process) or by means of an auction or tender process or a bid or offer, but not a public takeover…” Here the objective is buying the shares in BS at the auction. Both KCL and SML are competing for that objective, as they are bidding against each other in the auction. If one client wins the auction, the other will not be able to attain the objective. The firm might therefore be able to act for both KCL and SML if it can comply with the conditions listed in CCS 6.2 (i) – (iii).

Answer 281

The solicitor should write to the client to inform him about the agent’s fees and ask for his instructions because the original estimate is no longer accurate. Correct. Under CCS 8.7 solicitors must ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred. The solicitor therefore needs to update their estimate.

Answer 282

‘Because of the uncertainty and complexity of this particular litigation, it is impossible to provide you with an accurate estimate as to costs at this stage. We will charge our fees on a time basis, in accordance with our standard hourly rates (attached). I suggest that we review the costs on a monthly basis. I will ensure that we do not incur more than [£*] plus VAT in costs and disbursements without your further approval.’ Correct. This option most closely meets the requirements of CCS 8.7 which requires that clients receive the best possible information about how their matter will be priced, and both at the time of engagement and when appropriate as their matter progresses about the likely cost of the matter and any costs incurred. This option sets out the hourly rates of the firm and gives a commitment not to incur more than a specified amount in fees without the agreement of the client. It also explains why it is not possible for the firm to give an accurate estimate at this stage. A commitment that the costs will be fair and reasonable does not give the client enough information about the likely overall cost of the matter. It is also not enough to refer to the firm’s standard hourly rates, the firm should set these out in the letter or in an attachment to the letter. Postponing giving a cost estimate until the firm has completed a review of the evidence also does not give a clear indication of the overall costs.

Answer 283

The man will be eligible for publicly funded legal representation by the duty solicitor at the police station. He will not be able to get a representation order in the magistrates’ court, because even if he passes the interests of justice test, he will fail the means test which applies in the magistrates’ court. Correct.

Answer 284

£38,000 Correct Correct. The success fee is 90%. 90% of £20,000 is £18,000. This is on top of the 'normal' fee of £20,000. So the total charge is £38,000.

Answer 285

£80,000 Correct. The solicitor is entitled to 50% of the damages. 50% of £160,000 is £80,000. Unlike a conditional fee agreement, with a DBA, if the case is successful, the solicitor will be paid a proportion of the damages awarded to the client by way of a remedy, rather than getting their charges plus a success fee, so £125,000 is wrong. £100,000 is 50% of the amount claimed by the claimant, not the amount of damages awarded by the court, and is therefore wrong. £40,000 is wrong because it is 25% of the damages awarded by the court – the maximum amount a lawyer can recover is capped at 25% in personal injury cases, 35% in employment tribunal cases and 50% in all other cases so the solicitor can recover 50% of the damages. £45,000 is the amount of the solicitor’s fees recoverable from the other side, but under the damages based agreement, the firm can recover 50% of the damages in the event the claim succeeds.

Answer 286

The COLP must take all reasonable steps to ensure compliance by the firm, its managers, employees or interest holders with the SRA’s regulatory arrangements which apply to them. Correct Correct. See CCF 9.1. The COLPs role is to take reasonable steps to ensure compliance, however ultimately, under CCF 8.1 the managers are jointly and severally responsible for compliance by the firm with CCF, not the COLP and COFA. Under CCF 9.1, the COLP must ensure the SRA is informed of any facts of matters that amount to a serious breach of the SRA’s regulatory arrangements. It is the role of the COFA to take all reasonable steps to ensure compliance with the SRA Accounts Rules. Under CCS 7.7 all individual lawyers must report promptly to the SRA or other approved regulator any facts or matters they reasonably believe are capable of amounting to a serious breach of their regulatory arrangements (including the SRA Codes of Conduct).

Answer 287

Your work on client files can be supervised by Kirk provided Kirk has suitable experience, knowledge and competence to deal with any issue that may arise and he has clear guidance as to when and to whom matters outside his competence or authority should be referred. Correct. Under CCF 4.4 a law firm is responsible for ensuring that it has an effective system for supervising client matters. This means that appropriate procedures need to be put in place for suitable persons to check regularly the work being carried out for clients. Although most people supervising client files will have a legal qualification, they do not necessarily have to be legally qualified. As long as they have suitable experience, knowledge and competence to deal with any issue that may arise and clear guidance as to when and to whom issues should be referred ‘upward’ they are permitted to supervise client files.

Answer 288

The solicitor will need to be authorised by the SRA because he will be carrying out reserved legal activities under the Legal Services Act. He will also need to comply with the SRA’s rules including the Code of Conduct for Solicitors and the SRA Accounts Rules Correct. Advising on property transactions including selling and leasing land will involve preparing instruments of transfer relating to land and other instruments relating to real estate, which, as one of the reserved legal activities under the Legal Services Act 2007, can only be provided by someone authorised by an approved regulator. The approved regulator for solicitors is the SRA. The SRA Code of Conduct for Solicitors applies to all individuals authorised by the SRA to provide legal services. The SRA Accounts Rules apply to law firms and individuals authorised by the SRA to receive or deal with money belonging to clients. As the solicitor will be receiving and dealing with client money when purchasing land, he will need to comply with the SRA Accounts Rules.

Answer 289

The law centre must be authorised by the SRA because Aron is carrying out reserved legal activities. Correct. Law centres must be authorised by the SRA if they provide reserved legal activities regardless of whether the solicitor works on a voluntary basis. Reserved legal activities are set down in section 12 and Schedule 2 to the Legal Services Act 2007.Advising on immigration appeals falls within the conduct of litigation which is a reserved activity, in addition appearing before immigration tribunals involves rights of audience which is also a reserved legal activity.

Answer 290

Report your concerns to the SRA. Correct. A breach of the SRA Accounts Rules involving suspected misappropriation of client money would amount to a serious breach of the SRA’s rules. CCS 7.7 requires you to promptly report to the SRA any facts or matters that you reasonably believe are capable of amounting to a serious breach of their regulatory arrangements by any person regulated by them (in this case the partner). You have already raised the matter with the COFA and heard nothing further. Given the severity of the breach, it would be appropriate to report your concerns to the SRA.

Answer 291

The solicitor is under an obligation to identify and verify the identity of the company’s shareholder because the shareholder owns more than 25% of the shares. Correct: If your client is a company, you are required to identify and verify the identity of the ‘beneficial owner’ of the company, and beneficial owner is the person who ultimately owns or controls more than 25% of the shares or voting rights in the company.

Answer 292

You should carry out standard CDD on the client because there is nothing to suggest that this client presents a high risk of money laundering. Correct. There is nothing on these facts to suggest that this client present a high risk of money laundering. The client is not from a high risk country, the transaction is not complex. She is funding 50% of the purchase through a mortgage and although 50% being funded in cash is quite a high amount, you have identified that she is funding this through the sale of some share, so there is no need to carry out enhanced CDD. For simplified CDD to apply there would need to be a reason to consider this particularly low risk, for example the client being a local authority, a listed company or other trusted party, which is not the case here. As this is a one-off transaction, it will be an occasional transaction and you should obtain standard CDD on the client before you start working for her.

Answer 293

Proceed with the transaction only after receiving authorisation from the relevant authority. Correct. Once the solicitor has reported their suspicion to the nominated officer, they must wait for consent from the nominated officer or relevant authority before proceeding. If the solicitor receives no response within seven working days (not three), then the solicitor can proceed. Note that acting on the acquisition of a private limited company falls within ‘participating in financial and real property transactions’, which falls within the definition of the ‘regulated sector’ and therefore the non-direct involvement offences apply here. If the solicitor told the client that they had made a suspicious activity report to the client they would be guilty of the offence of tipping off, s 333A PoCA.

Answer 294

Agreeing to act as the business address for a Bermuda-based corporate client which has customers in England and wants to have an English address in case its customers need to contact it. Correct. In this example the firm would be acting as a ‘trust or company service provider’ which is defined in Regulation 12(2) as including a firm ‘providing a registered office, business address, correspondence or administrative address for a company…’. A trust or company service provider falls within the definition of ‘relevant person’ under Regulation 8 and would be required to carry out customer due diligence under the MLR. Arranging for the cash purchase of a work of art and conducting litigation work does not fall within the definition of independent legal professional or trust or company service provider in Regulation 12. While it might be good practice to carry out CDD, CDD is not required under MLR.

Answer 295

You need to report the matter to the Money Laundering Reporting Officer (‘MLRO’) at your firm. You must ensure that you do not inadvertently alert James to your suspicions. Correct. There are a number of factors here that indicate a risk of money laundering including, it is unusual for a client to instruct a firm in London for a transaction in Manchester and to instruct a junior lawyer directly. The friend was going to give the client an unusually large sum of money in cash and then transferred an exceptionally large sum of money “in error” to the firm and claimed it was a mistake. The best course of action to take is to report your suspicions to your firm’s MLRO and not to alert the client, otherwise you could commit the offence of tipping off. If you do not report your suspicions you may be guilty of offences under sections 327, 328, 329 and 300 Proceeds of Crime Act 2002 (‘PoCA’).

Answer 296

Report the matter to the Money Laundering Reporting Officer (‘MLRO’) at your firm. Undertake no further work on the matter until you hear back from the MLRO and ensure that you do not alert the client to your suspicions. Correct. There are a number of factors here that indicate a risk of money laundering including, the significant over payment of £100,000, the request to transfer the excess to a relative and to an account in on off-shore bank account. The best course of action to take is to report your suspicions to your firm’s Money Laundering Reporting Officer (‘MLRO’) and not to alert the client, otherwise you could commit the offence of tipping off. If you do not report your suspicions you may be guilty of the direct offences under sections 327, 328, 329 and 300 Proceeds of Crime Act 2002 (‘PoCA’) which apply whether or not you are operating in the regulated sector. Tipping off (s333A) and failure to make a disclosure (s330) are non-direct involvement offence under PoCA and apply to people working in the regulated sector. Creating, operating or managing trusts falls within the definition of ‘regulated sector’, so you would be guilty of tipping off if you alerted your client to your suspicions and failure to make a disclosure if you did not report your concerns to your firm’s MLRO. Once you have reported your suspicions to your MLRO you should avoid undertaking further work on the matter unless your MLRO is authorised to do so by the National Crime Agency or the notice period has expired.

Answer 297

No, because an exclusion applies if the transaction involves at least 50% of the voting shares in the company. Correct. The specified investment here is shares, article 76 RAO. The specified activity is arranging deals in shares. However the exclusion under article 70 RAO applies because the client will be buying 50% or more of the shares in the company.

Answer 298

Yes, because the provision of generic advice is outside the scope of the Financial Services and Markets Act 2000. Correct. The specified investment here is a mortgage. Advising on the merits of investments is a specified activity under article 53 RAO. However giving generic advice is not a specified activity. To be caught the advice requires an element of opinion on the part of the solicitor and a recommendation as to the course of action. Giving generic advice on the difference between a repayment mortgage and an endowment mortgage is therefore outside the scope of the Financial Services and Markets Act 2000.

Answer 299

Your supervisor could advise the Smiths in relation to the purchase of the property as long as he accounts to the client for the commission he is due to receive from the Bank. Correct. The specified investment here is a ‘regulated mortgage contract’, which is defined in article 61(3) RAO. The mortgage falls within this definition as the lender is providing credit to an individual, the mortgage is secured on land in the EEA and at least 40% of the land is to be used as a dwelling. The specified activity is making arrangements for another person to enter into a regulated mortgage contract, under article 25A RAO. Looking at the exclusions, the exclusion in article 29 applies because Mr and Mrs Smith are acting on the advice of their mortgage broker who is authorised by the FCA. However, the supervisor must comply with article 29 in full, which means under article 29(2)(b), they must account to the client for the commission.

Answer 300

You will not need to be authorised by the FCA to act for Ruth because Ruth will be buying 50% or more of the shares in the company. Correct Correct. The specified investment here is shares, article 76 RAO. The specified activity is advising on the merits, article 53 RAO. However the exclusion under article 70 RAO applies because Ruth will be buying 50% or more of the shares in the company.

Answer 301

You would not be able to advise Herbert without being authorised by the FCA because the advice would not arise out of or be complementary to the provision of professional services to Herbert. Correct. The specified investment here is shares, article 76 RAO. The specified activity is advising on the merits, article 53 RAO. Note however that advising on the merits involves giving an element of opinion and a recommendation as to a course of action. Advising on whether shares generally are a good investment at the moment and also whether Herbert should buy the shares in MEP involves giving an element of opinion and a recommendation as to a course of action, so does fall within the definition of advising on the merits of an investment. There are no exclusions that apply here. Article 67 would apply if giving the advice on the merits of buying the shares in MEP could reasonably be regarded as a necessary part of advising Herbert on the sale of his personal training business. However, advising how to invest the proceeds of the sale of a business is not a necessary part of the job of a solicitor acting for the seller on the sale of that business. Looking at step 4 of the FSMA decision tree, giving the advice to Herbert is a small part of the overall work being offered by the firm and would therefore be incidental under s.327 FSMA. However advising Herbert on whether to invest the sale proceeds in shares in MEP is a separate piece of work to advising him on the sale of his business and is not complementary for the purposes of SRA Scope Rule 2. You would therefore need to be authorised by the FCA to give this advice.

Answer 302

The solicitor can send the information memorandum to the potential buyers without getting it approved by an authorised person because the transaction is to sell 50% or more of the shares in the subsidiary. Correct. S 21 FSMA provides that it is a criminal offence for an unauthorised person to communicate a financial promotion unless an authorised person has approved its contents or a relevant exemption applies. The exemption that applies here is the sale of a body corporate exemption (article 62 FSMA 2000 (Financial Promotions) Order 2005) because the communication relates to a transaction to acquire 50% of more of the shares or day to day control of the company and the acquisition / disposal is between parties each of whom is a body corporate, partnership, single individual or group of connect individuals.

Answer 303

Yes, it is client money. Correct. It is client money under Rule 2.1(b).

Answer 304

The firm will pay the court fees from the business account. Correct. Sandra does not have sufficient money in the client account to make the payment. She has £500 and the court fees payment is £900. If the client account was used to make the payment another client’s money would be being used. This would breach Rule 5.3 of the SRA Accounts Rules. To avoid breaching the SRA Accounts Rules, the firm must make the payment from their business account.

Answer 305

Bank the cheque immediately in the firm’s client account and notify Sonia Jones that the money has been received. Correct. The money is client money under Rule 2.1(a) as it is received by you and relates to regulated services delivered by you to a client (Sonia Jones). Client money must be paid promptly into a client account under rule 2.3 (none of the exceptions to rule 2.3 apply). incorrect Hold the cheque and try to contact Sonia Jones to find out what she would like your firm to do with the cheque. Incorrect. Please revisit your materials on client money and payments into the client account. In particular, look at Rules 2.1 and 2.3. This is client money under Rule 2.1 and Rule 2.3 requires it to be paid promptly into the client account. Holding onto the cheque whilst you try and contact your client is unlikely to satisfy Rule 2.3 and so could breach the SRA Accounts Rules.

Answer 306

The firm can transfer £20,000 from the executors’ client account ledger to the beneficiary’s client account ledger and then transfer £2,000 to the firm’s business account. Correct. The legacy of £20,000 is client money. This is a transfer of client money between two clients of the firm (from the executors to the beneficiary). To record the transfer between the two clients only one set of double entries is needed because the money being transferred is already in your firm’s client account (there is no need to take it out of the client account and then pay it back into the client account again). The client ledger (client side as it is client money) of the person transferring the money (the executors) is debited and the client ledger (client side as it is client money) of the person receiving the transfer (the beneficiary) is credited. NB You will see that, as you know from the adapt elements, terminology for the accounts/ledgers can be different and this question uses client account ledger instead of client ledger client account or client ledger client side. Once the beneficiary has received the legacy of £20,000, they intend to use £2,000 to pay a disbursement which the firm has incurred and for which they have billed the beneficiary. This amount (£2,000) is therefore non-client money ie money belonging to the authorised body (the firm) under rule 2.1(d). As non-client money, this £2,000 will then be transferred from the firm’s client account to the firm’s business account. incorrect The firm cannot transfer the funds from the executors’ client account ledger to the beneficiary’s client account ledger. The firm must send a cheque to the beneficiary for £20,000. Incorrect Incorrect. Please review your materials on transfers between clients (both the executors and the beneficiary are clients of the firm here). This is a transfer of client money between two clients of the firm (from the executors to the beneficiary). To record the transfer between the two clients only one set of double entries is needed because the money being transferred is already in your firm’s client account (there is no need to take it out of the client account and then pay it back into the client account again). The client ledger (client side as it is client money) of the person transferring the money (the executors) is debited and the client ledger (client side as it is client money) of the person receiving the transfer (the beneficiary) is credited. The firm can transfer £2,000 from the executors’ client account ledger to the firm’s business account but must send a cheque for £18,000 to the beneficiary. Incorrect. Please review your materials on transfers between clients (both the executors and the beneficiary are clients of the firm here). The £20,000 must be credited to the beneficiary’s client ledger client account before the firm can transfer the £2,000 owed by the beneficiary to the firm to their business account. Before it is credited to the beneficiary, the £20,000 is client money belonging to the executors and they do not owe the firm any money and their client money cannot be transferred to the firm’s business account (this would breach Rule 4.1 – that client money must be kept separate from money belonging to the authorised body). NB You will see that, as you know from the adapt elements, terminology for the accounts/ledgers can be different and this question uses client account ledger instead of client ledger client account or client ledger client side.

Answer 307

You should pay the search fees immediately out of the firm’s business account. Correct. The money to pay the search fees cannot be withdrawn from the client account because the client does not have any money in the client account. If you used the client account to pay the search fees, another client’s money would be being used and SRA Accounts Rule 5.3 would be breached. As the searches are time critical in the context of the transaction, they should be undertaken immediately (rather than waiting for the money to arrive from the client) and therefore the firm’s business account must be used to pay for them.

Answer 308

They are not required to obtain an accountant’s report as an exemption applies because the amounts of client money held in the accounting period do not exceed the limits set out in the SRA Accounts Rules. Correct. Rule 12.2(b) sets out an exemption to the Rule 12.1(a) requirement to obtain an accountant’s report. These facts fall within the 12.2(b) exemption because the client money held during the accounting period does not exceed an average of £10,000 nor does it exceed a maximum of £250,000.

Answer 309

Credit client ledger client account: Arjun Patel (deceased) Debit cash sheet client account Correct. The cheque is client money under SRA Accounts Rule 2.1(a). It must be paid into the client bank account under Rule 2.3. The entries needed to record this are a credit in the client side of the client ledger and a debit in the cash sheet for the client account.

Answer 310

Credit cash sheet client account Debit client ledger client account Correct Correct. Whether the deposit is to be held as stakeholder or agent is only relevant to the seller’s solicitor. As you are the buyer’s solicitor, the accounting entries needed to send the deposit monies to the seller’s solicitor are those recording the payment out of client money from the client account. The buyer has already sent you the money to pay the deposit and it is client money under Rule 2.1(a) and will be in your client account. incorrect Credit cash sheet client account Debit client ledger stakeholder Incorrect Incorrect. Please review your materials on accounting entries for deposits in property transactions. Whether the deposit is to be held as stakeholder or agent is only relevant to the seller’s solicitor so it is the seller’s solicitor who will record the receipt of the deposit in their stakeholder ledger (as a credit not as a debit). As you are the buyer’s solicitor, the accounting entries needed to send the deposit monies to the seller’s solicitor are those recording the payment out of client money from the client account.

Answer 311

Credit client ledger client account Debit cash sheet client account Correct. Payment of a sum of interest (earned by the general/main client account) to a client is a two step process once the interest earned (non-client money) has been recorded in the firm’s business account. The first step is to withdraw the interest amount from the firm’s business account and the second is to pay the interest amount into the client account and credit it to the relevant client. These entries record the second step – the receipt of the fair sum of interest in the client’s client ledger and the client account. incorrect Credit interest receivable ledger Debit cash sheet client account Incorrect Incorrect. Please review your materials on accounting entries for the payment of interest. The interest receivable ledger is used to record the payment of interest earned by the general/main client account into the authorised body’s business account. It is not used when interest is paid to a client. Payment of a sum of interest (earned by the general/main client account) to a client is a two step process once the interest earned (non-client money) has been recorded in the firm’s business account. The first step is to withdraw the interest amount from the firm’s business account and the second is to pay the interest amount into the client account and credit it to the relevant client.

Answer 312

Credit client ledger client account Debit cash sheet client account Correct Correct. The deposit is being held by the seller’s solicitor as agent. The deposit is client money (Rule 2.1(b)) and will be paid into the seller’s solicitor’s client account and it will be credited to the seller’s client ledger (client side as it is client money). The stakeholder ledger is only used by the seller’s solicitor to record receipt of a deposit when they are holding the deposit as stakeholder (not the case on these facts). incorrect Credit stakeholder ledger Debit cash sheet client account Incorrect. Please review your materials on the accounting entries for deposits in property transactions. The deposit is being held by the seller’s solicitor as agent. The stakeholder ledger is only used by the seller’s solicitor to record receipt of a deposit when they are holding the deposit as stakeholder (not the case on these facts).

Answer 313

As a fair sum of interest on any client money held on the client’s behalf. Correct. This is stated in SRA Accounts Rule 7.1. incorrect As a proportion of the total amount of interest paid to your firm by the bank for money held on deposit in the general client account. Incorrect. This is not the provision as set out in the SRA Accounts rules as to payment of interest on client money.

Answer 314

Debit profit costs £1,000 Credit client ledger business account £1,000 Debit VAT account £200 Credit client ledger business account £200 Correct Correct. These are the entries required. The entries for abating a bill are made in the same records as the entries for issuing the bill plus VAT ie the profit costs [account] and the VAT account [ledger] (or however these accounts are known at your firm). As VAT was charged on the bill of costs at 20%, if the profit costs are reduced, there is a consequent reduction in VAT as well which also needs to be recorded. The debits and credits made when the bill plus VAT was issued are reversed to abate a bill plus VAT.

Answer 315

Debit bad and doubtful debts account £2,000 Credit client ledger business account £2,000 Debit VAT account £400 Credit client ledger business account £400 Correct. These are the correct entries to record the writing off of the bad debt. When a firm writes off a bad debt, it can recover the VAT element of the debt if it is at least six months old (as it is here – it is nine months old). Therefore, two double entries are needed. One to reflect the write off of the net amount due to the firm (excluding VAT) and the other to reflect the write off of the VAT on the bad debt (at 20% on the written off amount, here that has been worked out for you and included in the question facts - it is £400).

Answer 316

Credit client ledger business account £500 Debit profit costs £500 Correct. These are the pair of entries needed to record the reduction in the profit costs. There would also be another pair of entries (made in the client ledger business account and the VAT account) to record the consequent reduction (of £100) in VAT.

Answer 317

Credit client ledger business account £6,250 Debit bad and doubtful debts account £6,250 Correct. These are the pair of entries needed to record the writing off of the net amount of the bad debt (excluding VAT). There would also be another pair of entries (made in the client ledger business account and the VAT account) to record the write off of the VAT on the bad debt (£1,250) which can be recovered as the debt is at least six months old.

Answer 318

Debit client ledger client account £6,000 Credit cash sheet client account £6,000 Correct. Here the firm is acting as agent when paying the estate agent’s fees plus VAT. The estate agent made the supply of their services to the client (not to the firm) and the client has asked the firm to pay the estate agent on their behalf. When paying a disbursement plus VAT as agent, as here, the VAT element must not be separated from the estate agent’s fees and there are no separate VAT related accounting entries for the firm to make. On these facts, there is sufficient client money held in the client account for this client to make the payment of the total of the estate agent’s fees plus VAT ie £6,000. Therefore, the client ledger client account (which shows how much client money the firm holds for that client) is debited (because client money is being taken out of the client account to make the payment so the firm now holds less client money for the client) and the cash sheet client account is credited. Both of these entries are for the amount of the estate agent’s fees plus VAT as an inclusive figure. incorrect Debit client ledger client account £5,000 Credit cash sheet client account £5,000 Debit client ledger client account £1,000 Credit VAT account £1,000 Incorrect. Please review your materials on the accounting entries for paying a disbursement plus VAT, in particular the difference between paying as agent and paying as principal. When paying as agent, as here, there are no separate accounting entries for the VAT. The estate agent’s fees plus VAT should be paid as one total figure of £6,000. NB the VAT account is a business side account and cannot be used with the client ledger client account, only with the client ledger business account (used when non-client money is being used to make payments).

Answer 319

The claimant could issue the claim in the High Court or County Court, but the High Court is more appropriate. Correct. A claim over £100,000 (non-PI) can be issued in the High Court or the County Court, and should only be issued in the High Court where its value, complexity or importance to the public mean that it ought to be dealt with by a High Court Judge. These facts disclose complexity and importance to the public. The value is confidently over £100,000, although the value alone might not justify issuing in the High Court if the claim was straightforward and of no public importance.

Answer 320

The court should consider itself bound by the earlier decision of the Court of Appeal. Correct Correct. Privy Council decisions are not binding on the courts of England and Wales. The Court of Appeal binds itself.

Answer 321

The client can appeal both her conviction and sentence to the Crown Court. If her appeal against conviction fails, she can still appeal the sentence passed by the Magistrates’ Court. Correct. A right of appeal against conviction and sentence lies from the Magistrates’ Court to the Crown Court. The defendant / appellant can choose whether to appeal the conviction and sentence, or just the sentence. Even if the appeal against conviction fails, the Crown Court may amend the sentence imposed by the Magistrates’ Court.

Answer 322

require individuals and law firms to act: 1 -- in a way that upholds the constitutional principle of the rule of law and the proper administration of justice 2 -- in a way that upholds public trust and confidence in the solicitor's profession and in legal services provided by authorised persons 3 -- with independence 4 -- with honesty 5 -- with integrity 6 -- in a way that encourages equality, diversity and inclusion 7 -- in the best interest of each client

Answer 323

those which safeguards the wider public interest (rule of law and confidence in profession take precedence over client interest)

Answer 324

protects, prohibits, requires protects - from discrimination against a PROTECTED CHARACTERISTICS x9 -- age -- disability -- gender reassignment -- marriage and civil partnership -- pregnancy and maternity -- race, religion or belief -- sex -- sexual orientation prohibits: - discrimination and unlawful conduct including: -- direct discrimination -- indirect discrimination -- harassment -- victimisation requires - anyone providing goods, facilities or services to the public or a section of the public including employers - to make REASONABLE ADJUSTMENTS - to make sure that a disabled person is not placed at a SUBSTANTIAL DISADVANTAGE (ie can use a service as close as it is reasonably possible to get the standard usually offered to non-disabled people)

Answer 325

individual requirement x3 1 -- non-discrimination -- you do not UNFAIRLY DISCRIMATE by allowing your personal views to affect your professional relationships -- eg solicitor with strong political or religious view should not allow their views to stop them acting in the best interest of the client 2 -- unfair advantage -- you do not abuse your position by taking UNFAIR ADVANTAGE of clients or others -- eg acting opposite a party with no legal representation on a dispute 3 -- misleading others -- you do MISLEAD or attempt to mislead your CLIENTS, the COURT or OTHERS either by your own acts or omission or allowing or being complicit in the acts of omissions of others -- eg telling a client they have a strong case when they don't -- not disclosing a case which goes against your argument in court -- making false statement to third parties

Answer 326

definition: a STATEMENT give ORALLY or in WRITING, whether or not it includes the word undertake to somebody who reasonably places reliance on it, that YOU or a THIRD PARTY will do something or cause something to be done -- test: did the recipient rely on it? CCS 1.3: you perform all undertakings given by you, and do so, within an agreed timescale, or if no timescale has been agreed, within a reasonable amount of time -- failure to perform an undertaking is a serious disciplinary offence -- undertakings can be given by any individual in a law firm: partner, solicitor, apprentice, secretary etc -- oral statement included -- the word undertake does not have to be included -- NEVER promise to do something which is outside your control

Answer 327

a solicitor is an officer of the court and have an overriding duty to the court you might mislead the court if you: --draft documents or construct facts supporting your client's case which are not properly arguable -- make any allegation of crime, misconduct or fraud unless it is material to your client's case and you have reasonable grounds for doing so -- call a witness whose evidence you know is untrue if you become aware that -- you have inadvertently misled the court, you must, with YOUR CLIENT'S CONSET, immediately inform the court, if the client does not consent, you must stop acting for that client -- a client that has committed perjury or misled the court, you must CEASE TO ACT unless the client agrees to disclose the truth to the court

Answer 328

CCS 2.3 -- you do not provide or offer to provide any benefit to witnesses dependent upon the nature of their evidence or the outcome of the case CCS 2.7 -- you draw the court's attention to relevant cases and statutory provisions, or procedural irregularities of which you are aware, and which are likely to have a material effect on the outcome of the proceedings -- even if to do so runs counter to your client's argument!

Answer 329

duty + applies to + exceptions duty: 'you keep the affairs of current and former clients confidential unless disclosure is required or permitted by law or the client consents (CCS 6.3) applies to -- current and former clients -- clients of a firm you used to work for -- clients that used to instruct you but not instruct another firm -- continue to apply after a client's death exceptions -- where disclosure is permitted by law: certain govt bodies eg HMRC can require disclosure of documents; money laundering -- client consents

Answer 330

duty + applies to + exceptions duty: "where you are acting for a client on a matter, you make the client aware of all information MATERIAL to the matter of which you have knowledge (CCS 6.4) applies to -- information MATERIAL to the client's matter -- duty on INDIVIDUAL solicitor acting for the client to disclose information material to the matter of which they have PERSONAL knowledge -- not extend to information of which others in the firm might be aware exceptions -- NATIONAL SECURITY or prevention of crime -- client gives INFORMED CONSENT in writing to information not being disclosed to them -- serious PHYSICAL or MENTAL INJURY will be caused to client or another if information is disclosed -- PRIVILEGED DOCUMENT

Answer 331

You do not act for a client in a matter where that client (A) has an interest adverse to the interest of another current or former client (B) of you or your business or employer, for whom you or your business or employer holds confidential information which is material to that matter unless (rare) 1- -- effective measures have been taken which result in there being no real risk of disclosure of the confidential information -- eg information barriers, password protected documents, different teams or -- cannot put information barriers into your own head! 2 -- the current or former client, B, whose information you or your business or employer holds has given informed consent, given or evidenced in writing, to you acting, including to any measures taken to protect their information CCS and CCF 6.5

Answer 332

thank you for the introduction you welcome for the referral "Introduction" -- a relationship you/ a law firm has with a third party where the third party introduces or refers business TO YOU/THE LAW FIRM -- a firm of estate agents agrees to refer property sellers and buyers to Price Prior and PP agrees to pay the estate agent X plus VAT in respect of each introduction "Referral" -- an arrangement you/a law firm might have with a third party TO WHOM you may refer or introduce clients -- PP has an arrangement with a surveyor's firm whereby the surveyor pays PP X for each client PP introduces to the surveyor

Answer 333

prohibited for PI claims no payment for criminal proceedings CCS 5.1 A -- clients are INFORMED OR ANY FINANCIAL OR OTHER INTEREST which you or your business or employer or the introducer has B -- clients are INFORMED of ANY FEE SHARING arrangement that is relevant to their matter C -- the fee sharing agreement is in WRITING D --you do not receive payment relating to a referral or make payments to an introducer in respect to clients who are the subject of CRIMINAL PROCEEDINGS 3 -- any client referred by an introducer has NOT BEEN ACQUIRED IN A WAY WHICH WOULD BREACH THE SRA's REGULATORY ARRANGEMENT if the person acquiring the client were regulated by the SRA

Answer 334

3 Cs customer due diligence conflict check client care letter

Answer 335

you do no start acting until the correct checks have been carried out what -- identify the client -- verify their entity when -- establish a business relationship (element of duration) -- carrying out an occasional transaction -- suspect money laundering or terrorist financing -- doubt the veracity or adequacy of identification documents how -- identify: name and address -- verify: evidence ---- original documents eg ---- passport, electronic verification, information from other regulated persons (eg solicitors/banks)

Answer 336

CCS: prohibits you from acting where there is an own interest conflict of (subject to limited exceptions), a conflict of interests CCF: law firm must have systems in place to ensure there are no conflict in place at the outset of an instruction -- check whether the work conflicts with any work your firm is doing for another client or if it conflicts with your own interests -- national or international law firm: does the work conflict with work your firm is doing for an existing client in another office in this country or overseas? -- carry out a conflict check when you take on a new instruction from both new and existing clients

Answer 337

own interest conflict + conflict of interest own interest conflict -- eg buying a property from a client and acting as their solicitor on the sale -- risk is of it is enough -- no exceptions -- but rare conflict of interest -- eg instructed to act for both parties in a dispute or seller and buyer -- exceptions x2 1 -- substantially common interest -- clear common purpose between clients -- strong consensus on how it is to be achieved eg -- buying a house (common) eg -- setting up a business together where key terms are agreed: how business is owned (rare) 2 -- competing for same objective: which if obtained by one client makes it unattainable to others +3 --- all clients have given informed consent evidenced in writing -- effective safeguards where appropriate -- satisfied it is reasonable for you to act for the clients eg -- insolvency process eg -- auction process rare: usually applies only to sophisticated clients

Answer 338

CCS 8 requires you to give certain information to clients usually provided in client care letter general information + costs + complaints general information -- in a way that they can understand -- client in a position where they can make an informed decision -- who will handle case and how they will update them -- how services are regulated -- regulatory protections for them costs -- how their matter will be priced -- at time of engagement and as matter progresses -- publicity is accurate and not misleading complaints -- procedure for handling complaints -- at time of engagement ---- their right to complain ---- how to complain ---- any right to complain to legal ombudsman

Answer 339

only act on instructions from client or from someone properly authorised if you have reason to suspect, do not act until satisfied competent and timely service keep professional knowledge and skills up to date consider client attributes, needs, and circumstances

Answer 340

private: hourly (default) v fixed charge (commercial+ predictable: will/conveyancing) professional - trade union - professional organisation - eg civil or criminal litigation eg professional negligence before the event insurance - before need of legal work arises - household insurance might include BTE for neighbour dispute community legal service - aka legal aid - strict constraints - civil: rare -- individuals (not companies) -- family, domestic abuse, homelessness -- means: income and/or capital too high -- merits - criminal -- all have access at police station -- means: under 18 + welfare benefits (mags vs crown: contribution) -- merit: interest of justice test x10 --- automatic for indictable offence: only or either way to crown court CFA: conditional fee arrangement - civil litigation - no win, no fee - if successful: normal fee + success fee - cannot be claimed from opponent success fee comes out of claimants damages - PI: success fee cannot exceed 25% of damages excluding damages for future care and loss -lawful if certain conditions are met DBA: damage based agreement - no win no fee - success: solicitor will be paid proportion of damages - PI: success fee cannot exceed 25% of damages excluding damages for future care and loss - 35% employment - 50% in all other cases after the event insurance - civil litigation - often with DBA and CFA - DBA/CFA: solicitor costs - AEI: third party funding - civil litigation - banks, PE, hedge funds - success: money back + uplift - limited to commercial cases of high value

Answer 341

x10 eg i will lose my liberty automatic for indictable offence

Answer 342

authorises organisations to provide legal services standards: set and enforce sanctions: disciplinary matters

Answer 343

reserved legal activities (unless exempt) immigration services (unless regulated by OISC) claims management services (unless regulated by FCA) regulated financial activities (unless regulated by FCA)

Answer 344

issue warning to the firm impose a disciplinary sanction eg a fine reprimand the solicitor for professional misconduct order the solicitor to repay or refund the whole or party of the costs to the client impose restrictions on a lawyer's ability to practise institute disciplinary proceedings before the solicitor's disciplinary tribunal revoke recognition of a firm close down a firm

Answer 345

can only be provided by someone authorised by an approved regulator to do so -- rights of audience: right to appear/address a court including the right to call/examine witnesses -- conduct of litigation -- reserved instrument activities: any transfer/charge re land or real/personal estate in E+W -- notarial activities -- probate activities -- administration of oaths businesses that only carry out non-reserved do not need to be authorised but can choose to be (reassurance eg indemnity insurance)

Answer 346

required by SRA insurance should provide adequate and appropriate cover firm should notify of claim immediately

Answer 347

sole practice legal services body licensable body

Answer 348

a solicitor practices on their own account, providing services in their own name can employ qualified solicitors provided they are not also principals (eg partners or co-owners) an individual practising through a limited company is not a sole practice

Answer 349

managers/interest holder are lawyers partnerships, limited company or LLP once authorised by SRA = "recognised body"

Answer 350

managers/interest holders includes lawyer and non-lawyers must have at least 1 non-lawyer manager/interest holder ABS: alternative business structure non-lawyers can manage and control businesses providing reserved legal activities once authorised by SRA -- "licensed body"

Answer 351

solicitors may provide legal services on behalf of organisations not authorised by SRA Law Centres (LC) and Legal Advice Centres (LAC) In-house Multi-national law firm

Answer 352

LC gives legal advice to public and undertakes casework LAC gives legal advice but no casework Free or contribution from legal aid may not be authorised by SRA if they do not provide reserved legal activities solicitors MUST comply with CCS even in unpaid pro bono work must be covered by indemnity reasonably equivalent to that required under SRA indemnity insurance Rules

Answer 353

solicitors can work for non-legal businesses as in-house lawyers solicitors must comply with CCS

Answer 354

comprised of solicitors and registered foreign lawyers operate in E+W solicitors and registered foreign lawyers must comply with CCS and other SRA regulations

Answer 355

risk-based approach: SRA sets out the regulatory framework firms and solicitors must comply with they don't set prescriptive rules encourages firms to set and own their own standards more thought and consideration risk analysis Risk Outlook published each year to ID key risks facing legal profession and what can be done to manage those risks

Answer 356

SRA principles CCS: code of conduct for solicitors, european lawyers and registered foreign lawyers CCF: code of conduct for firms SRA account rules: regulate how law firms hold and manage clients' money

Answer 357

responsibility for compliance is on EVERYONE: you + firm firm: managers + COLP + COFA + MLRO MLRO: ensure compliance with anti-money launderers

Answer 358

individual lawyers are responsible for complying with the SRA Principles and CCS clients + third parties + colleagues + SRA clients x4 -- competent service -- keep client money safe -- not take unfair advantage -- provide information client can understand third parties x4 -- do not mislead the court or others (duty to public generally) -- duty to court -- undertakings (not just lawyers!) -- not take unfair advantage colleagues x5 -- maintain competence, keep knowledge and skills up to date -- when supervising others 1 -- accountable for their work 2 -- effectively supervise their work being done for clients -- ensure individuals you manage are competent SRA -- justify your actions to demonstrate compliance with SRA's regulatory obligations -- cooperate with SRA and other regulations -- respond promptly any matters you believe amount to serious breaches

Answer 359

CCF requires firms to have systems in place to ensure compliance and manage risk (SRA does not prescribe what systems) keep and maintain records to demonstrate compliance actively monitor financial stability and business visibility - once aware cease to operate, orderly wind down of activities identify, monitor and manage all risks to business effective system for supervising clients' matters

Answer 360

MANAGERS sole principal in a recognised sole practice member of a LLP director of a company partner in a partnership any other body: member of its governing body

Answer 361

SRA requires law firms to have -- an individual who is designated as its COLP and -- an individual who is designated as its COFA and -- whose designations the SRA has approved COLP: legal practice COFA: finance and administration one person can do both! whilst it is COLP/COFA job to ensure compliance and report breaches, RESPONSIBILITY for breaches rests with the managers/partners not individual COLP/COFA COLP ensures x4 -- firm complies with all terms and conditions of authorisation by the SRA -- firm complies with its regulatory obligations -- record any failure to comply and make records available to the SRA -- report any material failure to the SRA as soon as practicable COFA ensures x3 -- firm complies with SRA account rules 2019 -- reports any serious breaches to the SRA promptly -- informs SRA of facts which should be brought to SRA's attention to investigate whether a serious breach of regulatory obligations has occured

Answer 362

clients deposits cash in the firms account solely for onward transmission to a third party acquiring property, investing or buying an asset using cash which is the proceeds of crime setting up legal or transaction structures which are intended to be used for money laundering, and hid the source of funds a client using a firm's client account to mix clean and dirty cash to disguise the audit trail

Answer 363

suspicious fact patter: a seller and a buyer with a similar names or with the same address a seller and a buyer both from a jurisdiction outside the UK 'mistakes' regarding an overpayment to your client account monies arriving from a third party who is not your client client asking you to send monies to an unknown third party documents showing seller and a buyer with similar signatures clients attempting to pay large sums in cash offshore vehicles being made parties to a deal money coming from or to be sent to offshore tax havens

Answer 364

north korea iran yemen iraq syria afghanistan

Answer 365

customer due diligence (what, when, how: standard CDD) ongoing monitoring - ongoing relationship with client - keep ID and CDD documents up to date - scrutinise clients transactions: are they consistent with the firm's knowledge of the client?

Answer 366

identify and verify (companies house) -- name of company -- company number -- registered office -- law to which it is subject -- constitutional documents -- names of directors and senior management beneficial owner -- identify and verify the 'beneficial owner' ie the person who owns or controls the company for a company: the person who ultimately owns or controls more than 25% of the shares if beneficial owner is legal person (eg trust, company): understand ownership and control of that person

Answer 367

indicators -- high risk country -- politically exposed person -- false ID -- transaction is complex, unusually large or transactions with no apparent legal or economic purpose actions includes -- background and purpose of transaction -- additional information on client, source of funds, beneficial owner of the client -- increase degree and nature of monitoring -- obtain additional verification -- take further steps to be satisfied the transaction is consistent with the purpose and intended nature of the relationship

Answer 368

if there is a low risk of money laundering customer is a -- public administration (eg local authority) -- publicly owned enterprise -- financial or credit institution -- a company listed on a regulated market (eg london stock exchange) action -- adjust the extent, timing or type of CDD measures; and -- carry out sufficient monitoring to enable it to detect any unusual or suspicious transactions

Answer 369

both are criminal offences: direct and indirect involvement direct involvement offences -- apply to everyone, lawyers and otherwise non-direct involvement offences: apply to people in the 'regulated sector' which includes people 'participating in financial and real property transactions' concerning: -- buying and selling real property or business entities -- managing of client money, securities or other assets -- opening or management of bank, savings or securities accounts -- creating operating or managing companies -- creating, operating or managing trusts, companies or similar Advising on litigation (unless you deal with a lot of money) does not = indirect offence!

Answer 370

3 offences (one event could give rise to more than one offence) 1 -- CONCEALING, DISGUISING, CONVERTING or TRANSFERRING criminal property or removing criminal property from the UK 2 -- entering into or becoming concerned in as ARRANGEMENT which you know or suspect facilitates the acquisition, retention, use or control of criminal property 3 -- ACQUIRING, USING OR POSSESSING criminal property main DEFENCES -- make an AUTHORISED DISCLOSURE to a nominated officer (eg MLRO) ---- best defence ---- should wait for MLRO consent unless threatened but disclose asap -- conduct occurred outside the UK, was not unlawful in that jurisdiction

Answer 371

offences to fail to make a disclosure to the firm's MLRO or the National Crime Agency (NRA) if: -- you know or suspect that someone is laundering the proceeds or any criminal conduct; and -- you receive the information in the course of business in the REGULATED SECTOR; and -- you can identify the person who is laundering the proceeds or criminal conduct OR whereabouts of the laundered property how long do you wait? if the MLRO makes a suspicious activity report (SAR) to NCA, neither the MLRO nor the fee earner should undertake any further work unless -- authorised by the NCA; or -- 7 WORKING DAYS (notice period) have passed from the SAR to NCA during which time N CA has not refused to proceed; or -- THE NCA refused to consent during the notice period and the moratorium period (31 DAYS starting with the day firm received notice that consent was refused) has expired

Answer 372

x2 failure to disclose tip off

Answer 373

1 -- offence to tip off clients about any REPORT made of information that came to you in the course of business in the REGULATED SECTOR (ie if you know or suspect that an internal or external report has been made and you tell your client or a third party, thereby prejudicing any investigation- 2 -- offence to disclose that an INVESTIGATION is being contemplated or carried out if the disclosure is likely to prejudice the investigation

Answer 374

x7 shares pensions endowment policies bonds bank deposits unit trusts insurance policies

Answer 375

x4 ADVISING on the merits of investments DEALING in investments ARRANGING DEALS in investments MANAGING investments

Answer 376

to ensure that those providing financial services are approved and authorised + to protect consumers from negligent advisers

Answer 377

regulators x2 -- PRA: prudent regulation authority (supervision of deposit takers, insurers) -- FCA: financial conduct authority (conduct of business) legislation x5 -- FSMA: financial services and markets act 2000 -- RAO: // (Regulated Activities) Order 2001 -- SRA Financial Services (Conduct of Business) Rules 2019 -- Financial Services and Markets Act 2000 (Financial Promotions) Order 2005

Answer 378

breach of s19 is a criminal offence s19 FSMA: no person may carry on a regulated activity in the UK unless he is -- (a) an authorised person; or (b) an exempt person regulated activity: an ACTIVITY of a SPECIFIED kind which is carried on by way of business and (a) relates to an INVESTMENT OF A SPECIFIED kind... regulated activity = specific investment + specific activity

Answer 379

1 -- is there a specific investment? if yes 2 -- is there a specific activity? if yes 3 -- if there an exclusion available? if yes 4 -- can both s327 FSMA and SRA Scope Rule 2 be satisfied? if yes: exempt regulated activity -- law firm must comply with SRA Scope Rules + -- be authorised by SRA in relation to this activity AND must comply with SRA Financial Services (Conduct of Business Rules 2019) if no: -- the firm must be authorised by the FAC or PRA and must comply with the FCA or PRA Handbook in relation to this activity -- OR refuse to carry out the activity -- if the firm is not FCA/PRA authorised, and carries out the activity, the person carrying out the activity is likely to have breach s19.1 FMSA which is a CRIMINAL OFFENCE

Answer 380

1 -- is there a specific investment? x5 shares registered mortgages contracts contracts of insurance bonds pensions

Answer 381

2 -- is there a specific activity? if yes x4 ADVISING on the merits of investments (N/A generic advice) DEALING in investments ARRANGING DEALS in investments MANAGING investments

Answer 382

specific exclusions? general exclusions? x3 1 -- necessary part 2 -- sale of a body corporate 3 -- authorised person

Answer 383

exclusion applies to x2 (DAr) -- dealing in investments as agent -- arranging deals in investments conditions x2 -- transaction is entered into on the advice of the AUTHORISED PERSON OR -- the client is not seeking advice from the solicitor as to the merits of entering the transaction Does not apply x2 -- solicitor receives COMMISSION for which does not account to client -- CONTRACT OF INSURANCE

Answer 384

exclusion applies to x3 (DAAr) -- dealing in investments as agent -- arranging in investments -- advising on the merits conditions -- activity may reasonably be regarded as a necessary part of other services other services provided in the course or profession or business does not apply x3 - CONTRACTS OF INSURANCE - certain investment firms or credit institutions, or - the activity is remunerated separately from other services

Answer 385

exclusion applies to - dealing as agent - dealing as principal - arranging deals - advising [on the merits] x2 the transaction is to acquire or dispose of shares in a body corporate + 1 i) the share consist of 50% or MORE of the voting shares in the body corporate; OR ii) the shares together with those already held by the purchaser consist of at least 50% of such shares; AND iii) the acquisition or disposal is between parties each of whom is a body corporate, partnership, single individual or group of connected individuals (NB the buyer and seller do not need to be the same type of entity) OR 2 i) the object of the transaction is to acquire DAY TO DAY CONTROL of the company; AND iii) the acquisition or disposal is between parties each of whom is a body corporate, partnership, single individual or group of connected individuals (NB the buyer and seller do not need to be the same type of entity)

Answer 386

x4 1) must be a member of a PROFESSION -- will be met if the person carrying out the activity is a solicitor 2) must not receive COMMISSION from a third party in respect of the regulated activities, unless he accounts to his client -- easy to meet: if solicitor receives they should give it to client 3) the specific activity must be provided in a way that is INCIDENTAL to the provision professional services; and -- if the activity is a small part of the work being carried out by the firm (which in most cases it will be) then this condition is met 4) must only carry out regulated activities which he is permitted to carry out as a result of s323 (ie must comply with rules set by SRA, namely the SRA Scope Rules) -- this is the next step: does the solicitor meet the requirements of the SRA Scope Rule 2?

Answer 387

SRA Scope Rule 2 sets out the basic conditions solicitors must satisfy rule 2: the activities ARISE OUT OF or are COMPLEMENTARY to the provision of a particular professional service to a particular client Test: does the specified activity ARISE NATURALLY out of the work the solicitor is doing for the client? -- if it does not, the work is not complimentary complimentary: a property solicitor gives legal advice, drafts documents and undertakes a conveyancing transaction involving a regulated mortgage not complementary: a company solicitor is acting on the sale of a company for a client. the client asks the solicitor to advice on whether to invest the sale proceeds in a personal pension

Answer 388

s21 FSMA 1) A person (A) must not in the course of business, communicate an invitation or inducement to engage in investment activity 2) but subsection (1) does not apply if A is an AUTHORISED PERSON or the content of the communication is APPROVED BY AN AUTHORISED PERSON solicitors advising sellers on shares might produce documents that constitute an invitation to engage in investment activity -- eg an information memorandum if the shares are being sold at an auction getting the content of the document approved by a person authorised by the FCA can be time consuming and expensive for the client EXEMPTIONS x3 -- sale of a body corporate: 50 % or more of voting shares -- investment professionals (eg person authorised by FCA) -- high net worth companies or individuals

Answer 389

s85 FSMA it is unlawful for transferable securities [ie shares] to be offered to the public in the UK unless an approved prospectus has been made available to the public before the offer is made getting a prospectus approved by the FCA can be time consuming and expensive for the client exemptions x2 -- the offer is made to or directed at FEWER THAN 150 PERSONS -- the offer is sent only to QUALIFIED INVESTORS (eg banks, investment institutions, national and regional governments)

Answer 390

A Private Act of Parliament means that it has been drafted by an individual MP on either side of the House without official government sponsorship. Correct. This confuses a Private Act with a successful private member’s bill. A Private Act should instead be contrasted with a Public Act, the latter relating to a matter of general public policy and the former to a specific, often local need for statutory approval, such as a large infrastructure project.

PC Flashcards

(417 cards)