Professional Conduct

Question 1

What should a solicitor do where they have reason to suspect that the instructions given to them do not represent the client’s wishes?

Answer 1

The solicitor must not act unless they have satisfied themselves that the instructions do represent the clients wishes.

They should arrange to see the client alone, if appropriate, with either an independent third party or interpreter.

Question 2

What are the solicitor’s obligations to their clients if things go wrong?

Answer 2

They must be honest and work to either put things right or explain fully what has happened and the likely impact.

Question 3

What should be the proper conduct of solicitors in response to clients giving a gift?

Answer 3

Generally speaking, it’s not a breach of the SRA to accept a gift.

Question 4

What are the restrictions on a solicitor with regards to referring a client to a separate business?

Answer 4

The SRA restricts referrals to a separate business connected to you which is not part of the practice. This includes businesses that you own, you are owned by, you actively participate in, and you are actively connected with.

Question 5

How should a solicitor deal with unrepresented parties?

Answer 5

A solicitor must not act towards anyone in a way which is fraudulent, deceitful and they must not take advantage of their role as a solicitor.

Question 6

What is a solicitor’s duty to the court in relation to statute and irregularities?

Answer 6

Solicitor’s must draw the court’s attention to relevant cases and statutory provisions, or procedural irregularities of which the solicitor is aware. To act otherwise would be a breach.

Question 7

Explain how a law firm and solicitors may become involved in financial services work in conveyancing.

Answer 7

Advising, and / or arranging for a client to enter into a regulated mortgage contract or insurance contract when buying a property is the most common and likely example of becoming involved in financial services work.

Question 8

What is the next step if an investment is a ‘specified investment’?

Question 9

Financial services: what is a regulated activity?

Answer 9

S 19(1) FSMA 2000 states that only authorised or exempt persons may carry out a “regulated activity”. This means a “specified activity” which relates to an “investment of a specified kind”.

Question 10

What is a specified investment under FSMA?

Answer 10

Includes investments such as:
- Rights under a contract of insurance
- Shares
- Instruments creating or acknowledging indebtedness
- Regulated mortgage contracts which, at the time they are entered into: entail a lender providing credit to an individual or trustee borrower, are a first legal mortgage over land, or where at least 40% of the land that is the subject of the mortgage is intended to be used as a a dwelling by the borrower.

Question 11

What is the ‘introducing’ exclusion?

Answer 11

Simply introducing a client to an authorised person or exempt person, with a view to that person providing independent financial advice is covered by the Article 33 RAO Exclusion.

Question 12

Can a solicitor or law firm arrange, advise on or administer an RMC?

Answer 12

An RMC is a regulated mortgage contract. A solicitor could potentially take on the specified activities of arranging, advising or administering an RMC under Article 25.

Question 13

What are the consequences of carrying on an investment business activities in breach of s 19 FSMA?

Answer 13

If no exclusion applies, then acting in breach of s 19 FSMA could lead to disciplinary action by the SRA including a maximum prison sentence of 2 years and an unlimited fine.

Question 14

What are the retention requirements for records of commissions?

Answer 14

Firms must keep records of commissions received in relation to regulated activities for at least SIX YEARS.

Question 15

What are the three stages of money laundering?

Answer 15

1. Placement
2. Layering
3. Integration

Question 16

What is an ‘appropriate consent’ defence?

Answer 16

Once the SAR is submitted, the NCA has seven working days, starting the net working day after the report is filed, to respond to the report. If the NCA grants consent, or does not respond within seven working days, the transaction may proceed and the disclosure defence will be available.

Consent is also deemed to have been given if there has been an initial refusal of consent but a period of 31 days has elapsed since the initial refusal and no further steps have been taken since.

Question 17

What are the customer due diligence (CDD) requirements with regard to individual clients?

Answer 17

You will require:

The name of the company // the company number // address of the registered office // the law to which it is subject // constitutional documents (E.g. articles of association) // the names of the directors and senior management.
This information should be available on Companies House

You will also need to identify // verify the ‘beneficial owner’ of the Company.
This is the person who ultimately owns or controls more than 25% of the shares or voting rights.

Question 18

How should simplified due diligence be conducted and when? (Reg 37 MLR)

Answer 18

If there is a low risk of money laundering, e.g. the customer is a public administration or publicly owned enterprise, then you can carry out simplified CDD.

Steps:
Adjust the extent, timing, or type of CDD measure to reflect your assessment that the risk of money laundering is low.
Carry out sufficient monitoring to detect any unusual transactions.

Question 19

What kind of controls should you put in place under the MLR?

Answer 19

A relevant person must establish, maintain and regularly review and update policies, controls and procedures to mitigate and manage effectively the risks of money laundering and terrorist financing identified in any risk assessment undertaken by the relevant person.

PCP’s (policy control procedure) must:
- Provide for identification and scrutiny of transactions that are either complex or unusually large.
- They must also provide for assessment and mitigation of the risks associated with new products and new business practices.