Chapter 6 Flashcards
What are the relevant rules for the provision of financial services in the SRA Code of Conduct? (7)
1) SRA Principles
2) Publicity (Parts 8.8 and 8.9)
3) Referrals, Introduction and Separate Businesses (Parts 5.1 to 5.3)
4) Prohibited Referral Fee (Part 4.3)
5) Separate Businesses (Part 5.3)
6) Duty to Account for Receipt of Commission from Third Parties (Part 5.1a)
7) Complaints Handling (Parts 8.2 to 8.5)
What are the SRA Principles that must be regarded in relation to Financial Services?
1) Independence (Principle 3)
2) Act in the client’s best interest (Principle 7)
3) Do not act where solicitor’s own interest or third party’s interests conflict with client’s interest or there is a significant risk of such a conflict unless one of the exceptions and conditions for third party conflict applies (Principle 6)
4) Do not compromise public trust and confidence in the solicitor’s profession (Principle 2)
5) Duty to uphold the proper administration of justice (Principle 1)
When a solicitor suggests to a client that the client should seek advice from a financial expert in life policies or pensions, what principles must the solicitor follow?
He must do nothing to compromise his integrity or independence (Principles 3 and 5), he must act in the best interest of the client (Principle 7).
What is the general rule when referring clients to to life assurance or pension policy product provider or an appointed representative (“tied agent”)?
As a general rule, it follows that solicitors should only refer a client for investment advice to either one specific (life assurance or pension policy) product provider or to an appointed representative (“tied agent”), if the client is informed of this limitation and it is in the client’s best interests (see 5.1). Solicitors may not receive a referral fee, which is
prohibited (5.2), or pay a prohibited referral fee in respect of an introduction to or by third parties.
The limitation referred to in this context is the restriction on solicitors to only refer a client for investment advice to either one specific product provider (such as a life assurance or pension policy provider) or to an appointed representative (also known as a “tied agent”). The limitation implies that solicitors cannot provide referrals to multiple product providers or independent financial advisors. Instead, they must inform the client about this restriction and ensure that it is in the client’s best interests to receive advice from the recommended provider or tied agent.
Are solicitors allowed to accept introductions or referrals of business from other persons?
Yes, under certain conditions.
1) He must inform the client of any financial or other interest which the solicitor or business or employer has in the referral/introduction
2) He informs the client of any fee sharing arrangement relevant for their matter
3) He ensures that the agreement is in writing
4) He does not receive or make payments in respect of a referral/introduction in respect of clients who are subject of criminal proceedings
5) He ensures that any client introduced has not been acquired in any way which would breach the SRA’s regulatory arrangements if the person acquiring the client were regulated by the SRA
Are solicitors allowed to receive or pay a referral fee?
Yes, as long as it is not a prohibited referral fee.
These are set out in the Legal Aid, Sentencing and Punishment of Offenders Act 2012.
The Solicitors Regulation Authority (SRA) provides examples of prohibited referral fees, including:
Payments for services that exceed the normal market rate.
Arrangements where receipt of referrals is contingent upon payment.
Payments made per referral or linked to the number of referrals.
Indications that a genuine service is not being provided.
The term “payment” encompasses any form of consideration, regardless of whether the benefit is received by the solicitor or a third party. However, it does not include the provision of reasonable hospitality in the given circumstances.
It is worth noting that if the referral fee is paid for the introduction of a client to another solicitor for services unrelated to personal injury or death claims, or any other claim connected to personal injury or death, it would not be considered a prohibited referral fee.
Separate Business (Part 5.3) - What does it mean?
A separate business, run by a solicitor, will not be subject to the restrictions on commissions or introductions or referrals. But SRA Principles would still apply to the business.
Solicitor firms may only refer, recommend or introduce a client to a separate business or divide a client’s matter between yours and that separate business, where the client has given informed consent to your doing so.
Duty to Account for Receipt of Commission from Third Parties (Rule 5.1(a)) - What does it mean?
Solicitors need to account for their clients if they have received commission or any financial benefit. They need to disclose in writing to their client. Only if the client agrees, the solicitor may keep it or use it to set off against any charges.
Complaints Handling (Parts 8.2 to 8.5) - What are the obligation of solicitors?
The firm must ensure that clients are informed in writing at the time of engagement about the right to complain to the firm about its services and charges, how a complaint can be made and to whom, and any right they have to make a complaint to the Legal Ombudsman and when they can make such a complaint.
What are the SRA Account Rules?
Are they applicable to the investment business?
The SRA Account Rules refer to a set of regulations and guidelines issued by the Solicitors Regulation Authority (SRA) in the UK. These rules govern how solicitors and law firms handle client money and operate client accounts. The SRA Account Rules aim to ensure the proper management, protection, and handling of client funds, maintaining the integrity and trustworthiness of the legal profession.
Yes, they are applicable.
SRA Code of Conduct Part 8.6 was not covered in the book, but in the video. It relates to information. What does it mean?
You must give clients information in a way that they can understand. You must ensure that they are in a position to make informed decisions about the services they need, how their matter will be handled and the options available for them.
Where a conveyancing client is referred to you by a bank or estate agent, you must be aware that the introducer could be well an appointed representative of a particular life insurance company. What is your duty as a solicitor?
To give independent advice would normally require you to refer the client to an independent financial adviser who is authorized to give investment advice.
