BUSINESS REQUIREMENTS Flashcards
REFERRALS AND INTRODUCTIONS
You must ensure that you comply with the following stan-
dards when you refer a client to some other person or body of persons; when a third party introduces business to you; or when you share your fees with a third party.
1.Client Must Be Informed of Interest
The client must be informed of any fonancial or other interest (like a relative relation) which you or your business or employer has in referring the client to another person, or which an introducer has in referring the client to you.
- Fee Sharing Agreements
All fee sharing agreements with a third party must be in writing. Additionally, the client must be informed of any fee sharing arrangement that is relevant to their matter.
3.Payments with Respect to Criminal
Proceedings Prohibited
You must not receive or make payments relating to a referral, or make payments to an introducer in respect of clients who are the subject of criminal proceedings.
What Is a Prohibited Referral Fee?
Currently, the Legal Aid, Sentencing and Punishment of Of-
fenders Act 2012 (LASPO) prohibits the payment or receipt
of referral fees in claims for damages following** personal
injury or death**. An example would be a solicitor paying a claims management company for referral to the frm of a personal injury client. The prohibition applies not only to per-sonal injury or death claims but also ancillary claims arising from the same circumstances (for example, an uninsured loss recovery claim resulting from the accident).
Must Demonstrate Compliance
When it appears to the SRA that you have made or received a prohibited referral fee, the payment will be treated as a
prohibited referral fee unless you demonstrate otherwise.
Therefore, you should retain records and management infor-mation to enable you to demonstrate that any payments you receive are not prohibited referral fees.
SEPARATE BUSINESSES
A ‘separate business’ is a business:
(1) which you own, or are owned by, or actively participate in or control, or are other-wise connected with; and
(2) which is not an authorised body, an authorised non-SRA frm, or an overseas practice.
The following actions require the client’s informed consent:
seperate business
- Referring, recommending, or introducing the client to a
separate business (The client is entitled to know the solicitor’s connection with the seperate business); or - Dividing a client’s matter between you and a separate
business, or allowing the client’s matter to be so divided.
EXAMPLE
If a client needs advice about a specifc mortgage prod-
uct, the solicitor is not permitted to give this advice so the solicitor may suggest an independent fnancial adviser.
Or a solicitor may refer a client to a surveyor if the client
is buying a house and wants to know about the state and
condition of the property. In these instances, the client
must consent to the passing of their details to these third
parties.
Best practice would be for the solicitor to give details of
more than one of these advisers to the client and suggest that the client make direct contact with them.
OTHER BUSINESS REQUIREMENTS FOR SOLICITORS
- Must Only Associate with Authorised Bodies
- Annual Return
- Indemnity Insurance When Practising with Non-Commercial Body
Must Only Associate with Authorised Bodies
You must not be a manager, employee, member, or interest
holder of a business that has a name which includes the
word ‘solicitors’, or describes its work in a way that suggests it is a solicitor’s frm, unless it is an authorised body (that is, a body that has been recognised by the SRA).
Annual Return
If you hold a practising certifcate, you must complete and
deliver to the SRA an annual return in the prescribed form.
Indemnity Insurance When Practising with Non-Commercial Body
If you are carrying on any** reserved legal activities** in a
non-commercial body (that is, a no**t-for-proft body, a com-
munity interest company, or a trade union), you must ensure that the body takes out and maintains indemnity insurance.
Although the carrying on of reserved legal activities is what
triggers the insurance obligation, the indemnity insurance
must provide adequate and appropriate cover in respect
of all services that you provide, regardless of whether they
comprise reserved legal activities.
‘Reserved legal activities’ are defned by the Legal Services Act 2007 as:
*The exercise of a** right of audience** (meaning, the right to
appear before and address a court, including the right to
call and examine witnesses);
*Conducting litigation (that is, issuing, commencing, pros-
ecuting, or defending proceedings before any court in
England or Wales, or performing in ancillary functions in
relation to these proceedings);
*Preparing instruments relating to real or personal estate;
OTHER BUSINESS REQUIREMENTS FOR FIRMS
- Business Systems
2.Records - Accountability
- Monitoring of Business Affairs
- Roles of Managers and Compliance Offcers
Business Systems
A frm must have efective governance structures, arrange-
ments, systems, and controls in place that ensure:
*Compliance with the terms and conditions of the frm’s
authorisation;
*That the frm’s managers, employees, and interest hold-
ers comply with all applicable SRA regulatory arrange-
ments;
*That the frm’s managers and interest holders, and those
who the frm employs or contracts with, do not cause or
substantially contribute to a breach of the SRA’s regulato-
ry arrangements by the frm, the managers, or its employ-
ees; and
*That the frm’s compliance ofcers are able to discharge
their duties.
Records
A frm must keep and maintain records to demonstrate com-pliance with the SRA’s regulatory arrangements.
Accountability
A frm must remain accountable for compliance with the
SRA’s regulatory arrangements even where the frm’s work is carried out through others (the managers and employees of
the frm, and other persons with whom the frm contracts).
Monitoring of Business Affairs
- A firm must actively monitor its fnancial stability and** busi-ness viability**.
- It must also** identify, monitor, and manage** all material risks to its business, including those which may arise from the frm’s connected practices.
a.Ceasing Operations
If a firm becomes aware that it will cease to operate, it must effect** an orderly wind-down **of its activities.
