Chapter 3 (PRPG) - Practice Governance Flashcards
3.1 Business Structure
A member is recommended to have a memorandum of understanding or other governing document setting out the basis on which business should be conducted and any arrangements between the principals.
3.2 Practice Name
A firm’s name must comply with partnership and company law and should not convey an unprofessional image. A firm’s name must not be misleading, generally it will not be misleading when based on the names of past or present members of the firm or of a firm which it has merged or to which it has succeeded.
3.3 Practice Brand
Brand means material used by a member for external communications including practice stationery, advertisements, websites and other digital media. Brands:
• Must comply with legal requirements as to names, principals and other participants
• Must comply with the practising designations guidelines
• Should not advertise any specialist service unless the firm has the relevant expertise
• Should be of a suitable professional standard
3.4 Temporary Incapacity of a sole practitioner
A member who is a sole practitioner is recommended to make suitable arrangements to ensure their firm can continue in the event of their illness or temporary incapacity. Without contingency arrangements serious difficulties can arise, potentially prejudicing the interests of clients. A member should consider whether their firm has sufficient resources to meet their obligations in their absence or whether those obligations should be discharged by another firm under a prior arrangement or a practitioner acting on a locum basis. That person should have sufficient experience and expertise.
3.5 Death or permanent incapacity of a sole practitioner
Similar considerations apply to the death or permanent incapacity of a sole practitioner. A member should ensure there are suitable arrangements in place. Arrangements should be set out in a detailed written agreement. The agreement should provide for the duration and extent of the manager’s duties and responsibilities and the legal relationship with the sole practitioner or their personal representatives. Members are recommended to consult a lawyer and should consider granting a power of attorney where appropriate. A member who acts as a manager of the firm is under the same standard of duty to the sole practitioner or their personal representatives as they are to any client.
3.6 Business Continuity Plan
A member should have in place a business continuity plan which would ensure the continuity of the business in the event of a serious incident.
3.7 Dissolution or merger of practice
A merger of two or more practices or the dissolution of a practice should normally be notified to all clients and if appropriate give them the opportunity of deciding whether they wish to continue to instruct the new constituted practice. Care should be taken to ensure that appropriate professional indemnity insurance cover remains in place. A member should also consider taking specialist legal advice in respect of matters such as the assignment of engagements and other contractual matters.
3.8 Cessation of practice
Liability in respect of services provided whilst acting for a client continues after a member has ceased to practice and continuing indemnity cover must be arranged in accordance with the CIOT and ATT PII regulations. A retiring partner is advised to consider obtaining an indemnity from the continuing partners in respect of claims made against them after their retirement.
3.9 Regulated investment business activities
Covers activities defined in the Financial Services and Markets Act 2000 and the Financial Services and Markets Act 2000 Order 2001. Regulated activities include investment and pension advice, general insurance contracts advice and establishing operating or winding up an investment scheme or personal pension scheme. For an activity to be regulated it must be carried on by way of business.
Membership of CIOT/ATT does not give any authority to provide any of the services regulated in the act. A member must be with a firm which is either authorised by the Financial Conduct Authority (FCA) or a member of a Designated Professional Body (DPB). The FCA recognises the following DPBs:
• The law society (England and Wales)
• The law society of Scotland
• The law society of Northern Ireland
• The institute of chartered accountants in England and Wales (ICAEW)
• The institute of chartered accountants of Scotland (ICAS)
• Chartered accountants Ireland
• The association of Chartered Certified accountants (ACCA)
• The institute and faculty of actuaries (IFoA)
• The council for licensed conveyancers (CLC)
• The royal institution of chartered surveyors
It is a criminal offence to carry out regulated activities if a member’s firm is not recognised by the FCA or a DPB. A member who is with a firm that is a member of a DPB may provide a restricted range of investment services, these are described as exempt regulated services.
A member who is with a firm which is neither recognised by the FCA or a DPB may advise in general terms on the benefits of setting up pension arrangements but not refer to any specific pension product provider.
Provided advice is incidental to the provision by a firm of professional services regulated by a DPB, a member with a firm registered with a DPB may also advise on benefits to setting up a pension and can comment on advice given by an authorised financial adviser regarding pensions and the selection of pension products, but cannot male alternative product recommendations.
A member who is with a firm authorised by the FCA provided they are registered with the FCA as an approved person in the area, can advise fully on pensions and can made specific product recommendations. Additional specific authorisation from the FCA is required before they advise on pension transfers or opt-outs.
