Chapter 7: PRPG Other client handling issues Flashcards
7.2 Disclosing information to other parties
The disclosure of advice, reports or other documents to third parties may give rise to a number of potential risks, including the following:
• Breach of client confidentiality
• Unintended consequences for the client
• A claim against a member from a third party
It is likely that a member will have a contractual obligation under the engagement letter, as well as a professional obligation, to maintain client confidentiality. This is a fundamental to the client relationship. Unless required to do so by law or reasonably necessary for the administration of justice, a member must not release confidential information to a third party without obtaining the clients consent. It may be appropriate to obtain the client’s confirmation that they will not hold a member responsible for any unintended consequences of releasing the information. A member must not inadvertently assume a duty of care towards the third party. A member can manage this by:
• Including a clear notice in the information stating that no liability is accepted to any third parties who choose to make use of the information
• Requiring as a term of engagement that the client seeks consent before information associated with them is released by the client to third parties
• Requiring the third party or its advisors to undertake in writing that a member will be excluded from liability or held harmless as a consequence of making the information available to them.
• Communicating to the third parties the terms upon which the information is released, stating the advice was only prepared for the client may not apply in all circumstances. This approach may be appropriate in medium risk situations. Relying only on disclaimers in the original information is also appropriate when the risk is low. Seeking an indemnity from the client in respect of any claims against a member by a third party, is appropriate when the client has a strong interest in the information being provided to the third party
• Declining to provide the information may be appropriate if the request is excessive, inappropriate or commercially impractical.
In some cases, it may be appropriate for the member to accept he owes a duty of care to the third party. This might be done by binding the third party to the original engagement or entering into a separate agreement. Possible situations include:
• A member’s client is a company, but the shareholder wishes to rely personally on a member’s advice to the company
• A client’s spouse wishes to use the advice given to the client
7.3 Managing client needs
If a member does not have expertise or resources to meet their clients’ needs, they should consider how to manage this, and the risks involved. Solutions could be hiring a subcontractor, referring another adviser or declining to act. When making a referral a member should remind the client it is their decision to engage with the other adviser and that the member is not responsible for the work undertaken with that adviser.
7.4 Working alongside other professional advisers
If other advisers are also involved in a project, it is important to define the respective areas of responsibility and record this in the engagement letter. A member should advise the client of the advantages of permitting communication between the advisers on a project, but equally ensure the client skill makes key decisions and is aware of discussions between advisers. When a client does not authorise communication, a member should ensure that their advice draws the client’s attention to the matters of which the other adviser should be informed.
7.5 working in a subcontractor relationship with another professional adviser
A member should ensure there is a written record of engagement between the two parties. Lead adviser remains responsible to the client for all the services, which should be made clear in the engagement letter. The scope and basis of the work undertaken should be clear. The advisors should agree how the subcontractor’s advice will be communicated to the client. A member working as a subcontractor should consider PII and AML.
7.6 Clients money
Means any money which a member holds or receives for or from a client and which is not immediately due and payable on demand to a member for his own account. Fees paid in advance which is clearly identifiable are excluded. A member should give careful consideration before agreeing to hold client money and should consider the money laundering legislation. A member who receives client money in connection with the carrying on by the member of investment business must handle that money in accordance with the regulations of the authority which they are registered to. Clients’ money must be kept separate from money belonging to the firm in a separate account, can be in a bank or building society account in the name of the member or firm but must include the work client in the title of the account. Clients’ money can be kept in a general client account or in separate clients’ accounts. The following conditions apply:
• Written notice must be given to bank stating it is client money, the bank is not entitled to combine the accounts with any other or off-set the money in that account against any money the firm owes
• Any interest shall be credited to that account
• The bank must describe the account to make it clear the money does not belong to the member
• The bank should be required to acknowledge in writing that it accepts the terms
Clients’ money must only be used for purposes agreed by the client and pay immediately back to the client on their request. If a cheque or transfer includes client and non-client money, that goes into the clients account and any non-client money transferred out. Where money of one client in excess of £10,000 is held for more than 30 days it is recommended money be paid into a separate interest-bearing account designated to that client. Money may be withdrawn anywhere properly authorised by the client. A firm must maintain records to show clearly the money it has received from the client and the client account must be reconciled against the balances shown in the client’s ledger at least at 6 month intervals, the records of that should be kept for at least 6 years from the date of the last transaction recorded therein.
7.7 Tribunals and advocacy
With authorisation of the appellant client, a member may appear before the first-tier tax tribunal or the upper tribunal, however they must be competent to perform this service. Even where a member has previous experience and is competent where it appears likely that there will be an appeal to the court of appeal or court of session, they should consider whether counsel or a solicitor with a high court advocacy should be briefed. Same case when it is to do with tax evasion. The FTT is the only tribunal of fact in the tax appeal process, it is important to find all the facts and present them clearly.
