Legal Services

Question 1

What are the 7 regulators in the Legal Services Board ?

Answer 1

1. SRA - solicitors and law firms, non-lawyers who are managers or employees of such regulated law firms, registered foreign lawyers, and registered European lawyers.
2. Bar standards board - barristers
3. CILEX - legal executives
4. Intellectual property regulation board - patent and trademark attorneys
5. Council of licensed conveyancers - individuals and firms which specialise in real estate / property / probate transactions
6. Costs lawyers standards board - costs lawyers who specialise in the preparation of bills and schedule of costs
7. Master of faculties. - notaries

Question 2

What are reserved legal activities ?

Answer 2

Activities that can only be undertaken by those authorised by the regulatory bodies in the Legal Services Board.

Question 3

What are some examples of reserved legal activities?

Answer 3

1. Exercise of a right of audience - having the right to appear in and address a court, including a right to call and examine witnesses.
2. Conduct of litigation- issuing proceedings, defending proceedings.
3. Reserved instrument activities - preparing any instrument of transfer or charge, applying and lodging documents under the Land Registration Act 2002, or preparing any other instrument related to real or personal estate.
4. Probate activities - preparing any probate papers or court documents relating to probate proceedings.
5. Notarial activities - preparing, witnessing, and certifying documents and non-contentious legal work such as wills and administration of estates.
6. Administration of oaths - administering an oath or taking affidavits.

Question 4

What must law firms ensure regarding their professional indemnity insurance coverage which is required by the SRA.

Answer 4

That the insurance coverage is adequate and appropriate. This will differ from firm to firm. They must take into account the type of client, the value of matters taken on each year, the transparency of information provided to clients about insurance coverage, and the claims history of the firm.

Question 5

What are the insurance requirements for solicitors outside of firms?

Answer 5

Freelance solicitors - if they do not carry out reserved legal activities, they do not need authorisation as a sole practitioner firm with the SRA and therefore do not have an obligation to provide indemnity insurance.

If they are carrying out reserved legal activities, they can do so subject to a number of conditions without being authorised as a sole practioner firm by the SRA. These are:

1. Must have three years post-qualification experience.
2. Must not hold client money (with minor exceptions)
3. Must take out and maintain adequate and appropriate insurance. This does not have to be on the SRAs minimum terms but they need to notify the SRA they are acting as a freelance solicitor.

Question 6

What are the most common forms of funding for non-litigation matters?

Answer 6

1. Private retainer and private funding - retainer should be in writing, contain all relevant terms and be signed by the client.
2. Fixed fee financing - agreed at the outset.

Question 7

What are the most common forms of funding for litigation matters?

Answer 7

1. Private funding
2. Conditional fee agreement - ‘no win no fee’ agreement. The client will not have to pay the solicitor any fees if they are not successful with their claim. The success fee recoverable from the client cannot exceed 100% of the normal, fees charged, cannot be used in family proceedings, and in personal injury cases the fee is limited to 25% of the damages awarded.
3. Damages based agreement - solicitor agrees if claim is successful, the solicitor will be a specified percentage of the clients damages award. If the claim is unsuccessful the solicitor is not entitled to any fee or repayment of disbursements. The agreement should include a definition of success. In personal injury cases it can be no more than 25% of the sum recoverable, excluding future losses.
4. Third party funding - a third party covers the cost of the legal fees and disbursements, including barrister fees, court fees, and after the event insurance but not the other sides costs.

Question 8

What are some other forms of funding?

Answer 8

1. Legal expenses insurance
2. Union cover
3. Civil legal aid
4. Criminal legal aid

Question 9

What are two types of legal expenses insurance?

Answer 9

1. Before the event insurance
2. After the event insurance - often associated with a conditional fee agreement as it protects the claimant from the risk of having to pay their own disbursements and the other sides legal costs if they are unsuccessful at trial.

Question 10

With regards to Legal Aid, what is a means test?

Answer 10

The clients finances are considered including their household income, outgoings, and savings or capital they have. However, if they are under 18 or receive certain welfare benefits like universal credit, no means test is needed. Depending on income, a client may have to make a contribution to their legal fees.

Question 11

With regards to Legal Aid, what is a merits test?

Answer 11

The client will have to show that it is in the interests of justice for them to receive funding. This depends on a number of factors such as whether the proceedings deal with a substantial question of law, whether the client is likely to lose their livelihood or liberty, and whether the client would be unable to present their own case.

Cases heard in the Crown Court are deemed to satisfy this test automatically.

Question 12

What are protected characteristics under the Equality Act 2010?

Answer 12

1. Age
2. Disability
3. Gender reassignment
4. Marriage and civil partnership
5. Pregnancy and maternity
6. Race
7. Religion or belief
8. Sex
9. Sexual orientation

Question 13

What is direct discrimination?

Answer 13

Treating person A less favourably than person B because of a protected characteristic.

Question 14

What is indirect discrimination?

Answer 14

When a policy or provision is apparently neutral but on closer examination puts individuals with a protected characteristic at a disadvantage compared with individuals who do not have that characteristic.

Question 15

What are the exceptions to direct and indirect discrimination?

Answer 15

Age and disability discrimination for which the action can be justified if it is shown to be a proportionate, appropriate, and necessary means of achieving a legitimate aim.

Question 16

What is victimisation?

Answer 16

Occurred when a person is disadvantaged or punished because they have complained (or intend to complain) about discrimination or harassment in the workplace, or because they helped someone who has been discriminated against.

Question 17

What is harassment?

Answer 17

Unwanted behaviour that is offensive or hostile which makes a person feel uncomfortable, intimidated, or humiliated on the basis of a protected characteristic. The test is whether the behaviour made the person feel that way and whether it is reasonable for the person to feel that way.

Question 18

Must firms provide reasonable adjustments for clients and employees?

Answer 18

Yes, under the Equality Act, firms have a legal obligation to provide reasonable adjustments to ensure that disabled clients and employees are not placed at a substantial disadvantage compared to those who are not disabled, and must not pass on the costs of these adjustments to others.

Question 19

What is money laundering?

Answer 19

Money laundering is disguising financial assets so they can be used without detection of the illegal activity that produced them.

Question 20

What are the stages of money laundering?

Answer 20

1. Placement - cash generated from crime is placed in the financial system.
2. Layering - involves obscuring the origins of the proceeds by passing them through complex transactions. This stage has the goal of losing the audit trail, making it difficult for authorities to trace proceeds.
3. Integration - criminal makes the funds appear legitimate funds or assets.

Solicitors most likely get involved in the layering and integration stages.

Question 21

What is the maximum penalty for any of the principle money laundering offences?

Answer 21

14 years of imprisonment and/or an unlimited fine.

Question 22

What are the principle money laundering offences under POCA?

Answer 22

1. Concealing - offence if you conceal, disguise, convert, or transfer criminal property or remove criminal property from the UK. This includes property derived from criminal conduct such as money, real and personal property etc. Concealing also includes disguising the property’s source, location, ownership etc.
2. Arrangements - usually at layering or integration stage, covers arrangements which the defendant knew or suspected facilitated the acquisition, retention, use or control of criminal property by or on behalf of another person.
3. Acquisition, use, or possession - offence if a person acquires, uses, or has possession of criminal property. Possession means having physical custody of criminal property.

Question 23

What are the defences to the offence of concealing committed under POCA?

Answer 23

1. Authorised disclosure by the offender - disclosure should be made before the prohibited act takes place. If disclosure is made during the prohibited act, the disclosure will be a defence if:

i. The person had no relevant knowledge or suspicion when the act was started.
ii. The disclosure was made as soon as practicable after relevant knowledge or suspicion was acquired
iii. The disclosure was made on the persons own initiative.

2. A solicitor is excused from the duty to disclose if legal professional privilege applies. However it does not apply if a solicitor knows that the transaction they are working on will constitute a money laundering offence.

Question 24

What are the defences to the offence of arrangement committed under POCA?

Answer 24

The same as concealment.

1. Authorised disclosure by the offender - disclosure should be made before the prohibited act takes place. If disclosure is made during the prohibited act, the disclosure will be a defence if:

i. The person had no relevant knowledge or suspicion when the act was started.
ii. The disclosure was made as soon as practicable after relevant knowledge or suspicion was acquired
iii. The disclosure was made on the persons own initiative.

2. A solicitor is excused from the duty to disclose if legal professional privilege applies. However it does not apply if a solicitor knows that the transaction they are working on will constitute a money laundering offence.

Question 25

What are the defences to the offence of acquisition, use, or possession committed under POCA?

Answer 25

The same as concealing and arrangement. Also, adequate consideration - person cannot be charged if they paid a reasonable amount, in good faith, for an item that they did not know was stolen.

Question 26

Do solicitors have an obligation under POCA to make disclosures of suspicions of money laundering?

Answer 26

Yes, solicitors have obligations to make reports known as suspicious activity reports or SARs. Failure to make suspicious activity reports is an offence. It is also possible to commit this offence by failing to report any information which raises reasonable grounds for suspicion. The offence can be committed if a person should have known or been suspicious in the circumstances.

Question 27

What are the defences to failure to report suspicious activity?

Answer 27

1. Privilege and privileged circumstances - defence if the information falls within a privilege that has not been excluded by the anti-money laundering laws or that it has come to the solicitor in privileged circumstance. 2. Lack of training - employees of firms who have no knowledge or suspicion of money laundering, even though there were reasonable grounds for suspicion, have a defence if they have not received training from their firm. However, the firms partners may be prosecuted for a breach of the Regulations if they fail to train staff.

Question 28

What are two ripping off offences under POCA?

Answer 28

1. Disclosing to a third person that a suspicious activity report has been made to the police, HMRC, the NCA, or the firms nominated officer/MLRO, if that disclosure might prejudice any investigations that might be carried out. 2. Disclosing an investigation to a third person. A tipping off disclosure can be made in writing or orally and it might be direct or indirect, including through inclusion of relevant details in published information.

Question 29

What is POCA?

Answer 29

Proceeds of Crime Act 2002

Question 30

What are exceptions to the offence of tipping off?

Answer 30

1. Normal enquiries about instructions and retainer 2. Language included in standard terms of engagement

Question 31

What are defences to the offence of tipping off?

Answer 31

1. Disclosures within an undertaking or group - not an offence if discloses to a fellow employee, officer, or partner involved in the same undertaking that a SAR has been made. 2. Disclosures between institutions - not an offence if the disclosure is made to another legal professional in the UK, a European Economic Area state or another state with an equivalent anti-money laundering regime. Also if the disclosure relates to a client or former client of both parties or a transaction involving them both, or the disclosure made for the purpose of preventing a money laundering offence.

Question 32

What is the offence of prejudicing an investigation under POCA?

Answer 32

Committed when a person knows or suspects that a money laundering, confiscation, or civil recovery investigation is being conducted or is about to be conducted and discloses this to any person that is likely to prejudice the investigation or falsifies, conceals, or destroys documents relevant to the investigation or causes that to happen.

Question 33

What is a defence for the offence of prejudicing an investigation?

Answer 33

1. Person making disclosure did not know or suspect the disclosure would be prejudicial, did not know or suspect the disclosure would be prejudicial or did not intend to conceal any facts from the person carrying out the investigation. 2. Disclosure made in connection with legal proceedings - disclosure made by a professional legal adviser or other relevant professional adviser to a client or a client’s representative, in connection with the giving of legal advice or to any person in connection with legal proceedings or contemplated legal proceedings, provided the disclosure is not made with the intention if furthering criminal purpose.

Question 34

What are the Money Laundering, Terrorist Financing, and Transfer of Funds (information on the payer) Regulations 2017?

Answer 34

They outline specific customer due diligence requirements which certain professionals must follow in order to know their clients and to monitor the use of their services by clients. Activities covered include: 1. Buying and selling real property or business entities 2. Managing client money, securities, or other assets, 3. Organising contributions necessary for the creation, operation, or management of companies 4. Creating, opening, or managing trusts, companies, foundations, or similar structures.

Question 35

What is a nominated MLRO?

Answer 35

Money laundering reporting officer. They are appointed to receive disclosures under POCA and to make disclosures to the NCA. The role should be undertaken by an appropriately experienced individual. They should be sufficient seniority to make decisions on reporting which can impact a businesses relations with its clients and its exposure to criminal, civil, regulatory, and disciplinary sanctions.

Question 36

In what circumstances must customer due diligence be conducted?

Answer 36

When they: 1. Establish a business relationship 2. Carry out an occasional transaction 3. Suspect money laundering or terrorist financing 4. Doh f the veracity or adequacy of documents, data, or information previously obtained for the purpose of customer due diligence.

Question 37

How long should records of customer due diligence and business relationships be kept?

Answer 37

5 years after the end of the relationship.

Question 38

What is the Financial Services and Markets Act 2000 (FSMA)?

Answer 38

Legislation to help make sure banks and other financial instructions have good management so they don’t make bad investments or take too many risks. As solicitors are often involved with financial services, they will be subject to the financial regulatory scheme.

Question 39

What activities are regulated under the FSMA?

Answer 39

1. Advising - giving advice to an investor or potential trial investor on the merits of buying, selling, subscribing for, or underwriting a particular investment. 2. Arranging - making arrangements for another person to buy, sell, subscribe for, or underwrite a particular investment. 3. Dealing as agent - buying, selling, subscribing for, or underwriting investments as agent for a client. 4. Managing - managing assets belonging to another person in circumstances which involve the exercise of discretion. 5. Safeguarding - safeguarding assets belonging to another person and administering them.

Question 40

What investments are regulated?

Answer 40

1.Insurance contracts 2. Shares in a company and other securities 3. Debentures 4. Mortgage contracts 5. Pension schemes 6. Funeral plans

Question 41

When can a solicitor deal as an agent, arrange, or advise with respect for a client who is buying or selling?

Answer 41

When a client is buying or selling 50% or more of the voting shares of a company or when the object of the transaction otherwise may be reasonably regarded as taking control of the daily running of a company.

Question 42

When can a solicitor advise, arrange, manage, and safeguard investments?

Answer 42

When they are acting as a trustee, nominee, or personal representative.