Professional Conduct MCQS Flashcards

Question

**You represent a man suspected of the offence of battery and is charged with common assault. He is currently out of work and so receives welfare benefits.** **Which of the following best explains whether you client is eligible for public funding?** A) 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 B) He will receive public funding because the offence of battery is an imprisonable offence C) He will pass the means test if he can show that his income and capital are below a certain limit D) He will automatically qualify for public funding because he is in receipt of welfare benefits E) He will have to pass both the means test and the merits test in order to be granted public funding

Answer 1

A) 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 (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 2

C) He will not obtain a representation order as will fail the means test (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 3

B) It is in the interests of her daughter that she is represented (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)

Answer 4

E) From a woman on behalf of her and her civil partner. You met them both initially in which they confirmed that you can accept instructions from either of them on behalf of the other. (Correct. As they have given you authority, you can rely on that)

Answer 5

C) Your duty of confidentiality to the couple overrides your duty to disclose. You must inform the lender that you cannot now act for professional reasons.

Answer 6

B) If you, personally, were to act for both the landlord and the company, there is a risk you would breach CCS 6.2 (Correct. In negotiating the lease you will not be able to act in both the landlord’s and the company’s best interests leading to a conflict of interests under CCS 6.2. There are more clauses in the lease to be agreed than just the rent)

Answer 7

C) Sending details of your client's property to solicitors acting for the client's buyer (Correct. You are likely to have either express (in your client care letter) or implied consent to provide this information which is necessary to progress the sale)

Answer 8

A) All firms (including sole practices) the SRA regulates, including all who manage or work within them (Correct. The SRA make this clear in their introduction to the SRA Accounts rules and in Rule 1)

Answer 9

D) The managers of an authorised body are jointly and severally responsible. (Correct. Rule 1.2 states that: ‘The authorised body’s managers are jointly and severally responsible for compliance by the authorised body, its managers and employees with these rules)

Answer 10

D) Client money and client accounts (Correct. Rules 2-8 (of 13) are on this topic and are the largest section of the SRA Accounts Rules)

Answer 11

A) The money is client money because it is held by you on behalf of a third party in relation to regulated services delivered by you (Correct. This situation falls within Rule 2.1(b))

Answer 12

C) It is client money because it has been received in respect of an unpaid cost or expense. (Correct. It is client money under Rule 2.1(d))

Answer 13

A) If you receive money from a client in respect of a paid disbursement, it is non-client money (Correct. It will fall outside Rule 2.1(d) and the definition set out there of client money and so it will be non-client money)

Answer 14

D) To obtain, at least every week, bank statements for all client accounts and business accounts which you hold or operate (Correct. Whilst this looks like the requirement under Rule 8.2, the correct frequency in Rule 8.2 is at least every five weeks not at least every week. The time period (at least every five weeks) matches that of the reconciliation required in Rule 8.3)

Answer 15

D) Client side of the client ledger for Dr Jones’ property purchase and the client cash book. (Correct. See Rules 8.1(a)(i) and 8.1(c) as well as Rule 8.1(a) and SRA guidance ‘Helping you keep accurate accounting records’)

Answer 16

B) 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 17

A) The claim can be issued in either the County Court or the High Court (Correct. As this is a personal injury claim exceeding £50,000, both the County Court and High Court have jurisdiction. You will need to consider the factors of the value, complexity and importance to the public when making a final decision about whether to issue in the County Court or the High Court)

Answer 18

A) …a reasonable and proportionate sum.

Answer 19

C) The wholesaler is likely to be awarded its costs, but not the full £85,000 (Correct. The general rule indicates that the wholesaler should recover its costs, so this is the 'likely' outcome on the facts presented, but the court will assess these costs, so it is unlikely that the full £85,000 will be recovered)

Answer 20

D) The unsuccessful party will be ordered to pay the costs of the successful party. (This is the general rule. In terms of the other answers, it is correct that the court has a discretion to determine whether one party will pay the other party's costs, but this is not what you would describe as a 'general rule'. It is very occasionally true that the party paying costs is stipulated in the CPR, but this is the exception rather than the rule)

Answer 21

C) A decision of the Court of Appeal

Answer 22

C) The Supreme Court is bound by its previous decisions pursuant to the Practice Statement 1966 and will only depart from a previous decision when it appears right to do so (Correct. This is incorrect. A Supreme Court by virtue of the Practice Statement 1966 is not bound by its previous decisions. It rarely will depart and will do so when it appears right to do so)

Answer 23

E) Where the Court of Appeal does not agree with an earlier Court of Appeal decision (Correct. This answer is incorrect. Young v Bristol Aeroplane sets out the three circumstances where a Court of Appeal can depart from a previous Court of Appeal judgement on the same issue)

Answer 24

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

Answer 25

C) 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

Answer 26

C) 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 27

A) 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.

Answer 28

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

Answer 29

A) VanH will not be able to claim the premium (Correct. Well done. ATE insurance premiums are not recoverable from an opponent)

Answer 30

A) “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 31

C) 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 32

C) 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 33

A) A desire to get the best outcome for your client, whatever the circumstances (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 34

D) 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. 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 35

B) Your colleague has breached the standards expected of a legal professional (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 36

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

Answer 37

C) 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 38

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

Answer 39

C) Act in the best interests of your employer (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 40

B) 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 41

A) 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 42

A) 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 43

A) 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 44

B) 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. 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 45

C) 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 46

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

Answer 47

C) 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 48

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

Answer 49

D) 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. (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 50

C) 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

Answer 51

D) 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. 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 52

A) CCS 2.2 (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 53

B) 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.)

Answer 54

A) … 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)

Answer 55

B) CCS 8.8 (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 56

A) This arrangement is an introduction and Price Prior will need to comply with CCS 5.1 (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 57

C) It applies to you and everyone in your workplace. (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 58

C) 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.

Answer 59

B) 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 60

A) 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 61

C) 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 62

B) CCS 6.3 (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 63

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

Answer 64

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

Answer 65

B) CCS 6.2

Answer 66

B) If you would be breaching the law in accepting the client’s instructions (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 67

A) 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 68

C) 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 69

B) 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

Answer 70

B) 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 (This is the correct position as set out in CCS 6.2)

Answer 71

C) 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.

Answer 72

A) Acting for a client on a dispute against your spouse (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 73

C) 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 74

C) 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)

Answer 75

A) 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 76

B) 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 77

B) 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. 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 78

C) 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 79

D) 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 80

A) 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 81

D) 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 82

B) 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 83

A) 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 84

C) 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 85

B) 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 86

D) 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 87

A) (i), (ii), (iii) and (iv) (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 88

B) 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 89

D) 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. This is one benefit of a clearly written client care letter as described in the SRA’s Guidance on Client Care letters)

Answer 90

D) 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 (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 91

B) It is in the interests of her daughter that she is represented (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)

Answer 92

B) He will not obtain a representation order as will fail the means test (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 93

C) 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 94

B) 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 95

A) '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. '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 96

B) 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 97

C) 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. 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 98

C) 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 99

C) 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. 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 100

C) 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 101

C) 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 102

B) 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 103

A) 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 104

B) 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 105

B) 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 106

A) 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 107

C) Incorporated companies can raise finance by issuing shares to investors and can borrow money from lenders. (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 108

B) 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 109

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

Answer 110

C) 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 111

B) A high risk instruction occurs where you have a suspicious attribute and a suspicious activity.

Answer 112

A) Sections 327, 328 and 329 PoCA (Correct. Section 327 contains the direct involvement offences are contained in s. 327 ( concealing, disguising, converting or transferring criminal property), 328 (enters arrangements concerning criminal property) and 329 (acquisition, use and possession of criminal property). S. 330 relates to the offence of failure to disclose which is not a direct involvement, s. 333A relates to the offence of tipping off (also not a direct involvement offence) and s. 340 contains definitions including the definition of criminal property)

Answer 113

A) “report your suspicion to a nominated officer” (Correct. You have a defence to the offence of concealing, disguising, converting or transferring criminal property under s. 327 PoCA if you made an authorised disclosure. Under s. 338 the disclosure should be made to a constable, customs office or a nominated officer. In practice the most practical thing to do is therefore to report your suspicion to your employer’s nominated officer)

Answer 114

C) 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 115

A) 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. 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 116

B) Regulation 4 (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

C) Regulation 33 (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

A) 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 119

B) 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 120

A) 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. 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 121

A) Assuming you meet your client face to face, producing a valid passport or photocard ID should meet the CDD requirements (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 122

A) 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. 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 123

A) 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 124

A) 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. 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 125

B) There are two regulators of financial services in the UK, the Prudential Regulation Authority and the Financial Conduct Authority (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 126

B) 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 127

C) Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (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 128

A) 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 129

C) 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 130

B) Section 22 (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 131

C) Rights under a contract of insurance (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 132

A) 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 133

B) 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 134

A) 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. 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 135

B) 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. 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 136

A) 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 137

C) 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. 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 138

C) Does the activity fulfil the basic conditions in s 327 of FSMA and the SRA Financial Services (Scope) Rules 2019? (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 139

B) 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 140

B) 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 141

A) An exemption to the rule that you cannot offer shares to the public without an approved prospectus arises where the offer is made to fewer than 150 persons. (Correct. If the offer is made to or directed at fewer than 150 persons, an approved prospectus is not required. The recipients do not need to be qualified investors)

Answer 142

D) Every solicitor’s. (Correct. The SRA Risk Outlook says that it every solicitor's responsibility to keep client money safe)

Answer 143

A) They can lead to proceedings before the Solicitors Disciplinary Tribunal, with results that can include striking off (Correct. The SRA Risk Outlook states that: ‘We treat client money breaches particularly seriously. They can lead to proceedings before the SDT, with results that can include striking off.’ The SDT is the Solicitors Disciplinary Tribunal)

Answer 144

B) 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 145

A) 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 146

A) 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 147

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

Answer 148

B) 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 149

C) 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)

Answer 150

B) 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. See Rule 9.1)

Answer 151

B) Rule 11.1 only applies when the authorised body is delivering regulated services to the client (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)

Answer 152

C) The third party managed account must be held at a bank or building society.

Answer 153

A) 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 154

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

Answer 155

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

Answer 156

C) 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 157

A) 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 158

C) 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. 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 159

A) 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. 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 160

B) 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)

Answer 161

A) 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.

Answer 162

A) A bill may only be introduced into the House of Commons (Correct. A bill can be introduced in either House, though certain parliamentary rules or conventions determine which House in certain situations, for example bills on taxation)

Answer 163

E) 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 164

E) 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 165

A) 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. Check your materials on statutory interpretation)

Answer 166

B) 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 167

D) 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 168

C) 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 169

A) 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 170

C) 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. 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 171

C) 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. 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 172

C) 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 173

A) Debit client ledger client account of the executors Credit client ledger client account of the beneficiary (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 174

A) 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 175

B) Credit client ledger client account Debit cash sheet client account (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)

Answer 176

E) 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 177

A) 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 178

A) Debit client ledger client account seller Credit client ledger client account lender (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 179

C) 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 180

B) 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 181

C) Debit interest payable ledger Credit cash sheet business account (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 182

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

Answer 183

C) 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 184

B) 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 185

C) 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))

Answer 186

A) 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. 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 187

C) Credit client ledger business account £300 Debit profit costs £300 Credit client ledger business account £60 Debit VAT account £60

Answer 188

D) 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 189

D) 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 190

A) 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.

Answer 191

A) The solicitor recorded an entry for £120 in the VAT account [ledger] when making the payment (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 192

C) Debit client ledger business account £800 Credit cash sheet business account £800 Debit VAT account £160 Credit cash sheet business account £160 (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 193

B) 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))