Legal Services

Question 1

What is the Solicitors Regulation Authority (SRA)?

Answer 1

The SRA is the regulatory body with authority to regulate solicitors and ensure compliance with professional standards.

Question 2

What are “reserved legal activities”?

Answer 2

Activities that can only be carried out by a person authorized by a regulatory body, such as conducting litigation, preparing court documents for probate or land transfers, and administering oaths.

Question 3

Is professional indemnity insurance required for freelance solicitors?

Answer 3

Freelance solicitors are not required to hold professional indemnity insurance unless performing a reserved legal activity.

Question 4

What must a solicitor discuss with clients regarding fees?

Answer 4

Solicitors must provide clear, transparent advice on costs at the start of the engagement and update clients if costs deviate significantly from the original discussion.

Question 5

What is a conditional fee agreement?

Answer 5

An agreement where the solicitor charges a success fee if the client wins; otherwise, no fees are charged, but the client may still bear opponent and disbursement costs.

Question 6

What is “after the event” insurance?

Answer 6

Insurance taken after the event giving rise to litigation, covering the other party’s costs and disbursements if the client loses.

Question 7

What does the Equality Act 2010 prohibit for solicitors?

Answer 7

It prohibits both direct and indirect discrimination in practice.

Question 8

Name the protected characteristics under the Equality Act 2010.

Answer 8

Age, disability, sex, sexual orientation, gender reassignment, marital status, pregnancy, race, and religion.

Question 9

What is the solicitor’s obligation for clients or employees with disabilities?

Answer 9

They must make reasonable adjustments if the disabled person is at a substantial disadvantage compared to non-disabled persons.

Question 10

What is money laundering?

Answer 10

The process of making money from criminal activities appear legitimate.

Question 11

What constitutes the offence of “concealing” under the Proceeds of Crime Act 2002?

Answer 11

Concealing, converting, transferring, or removing criminal property from the UK, knowing or suspecting its criminal origins.

Question 12

What is the offence of “tipping off”?

Answer 12

Disclosing to a client that a Suspicious Activity Report (SAR) has been submitted or an investigation is underway.

Question 13

What does the Financial Services and Markets Act 2000 prohibit?

Answer 13

It prohibits carrying on regulated activities without authorisation from the Financial Conduct Authority or exemption.

Question 14

What are examples of regulated activities?

Answer 14

Advising on investments, arranging purchase or sale of investments, managing assets, and safeguarding assets.

Question 15

What is the “Designated Professional Bodies Exemption”?

Answer 15

Solicitors’ activities incidental to legal advice and regulated by the SRA are exempt from Financial Conduct Authority authorisation.

Question 16

Can a person conduct reserved legal activities without authorisation?

Answer 16

Yes, but only if acting on their own behalf, not for others.

Question 17

What factors must firms consider for indemnity insurance adequacy?

Answer 17

Historic claims experience and the value of matters handled annually.

Question 18

What is a “damages-based agreement”?

Answer 18

An agreement where the solicitor takes a percentage of the client’s recovery if successful, capped at 25% for personal injury cases and 50% for others.

Question 19

What is third-party funding?

Answer 19

Funding where a third party covers solicitor’s costs and disbursements; if successful, the funder takes a fee from the recovery.

Question 20

What is “union cover” in legal funding?

Answer 20

Some trade unions provide plans that pay legal fees for members.

Question 21

Who automatically qualifies for criminal legal aid?

Answer 21

Defendants under 18 and those on Job Seekers Allowance or Universal Credit.

Question 22

What is indirect discrimination?

Answer 22

Neutral conduct that disproportionately impacts individuals with a protected characteristic.

Question 23

When is direct discrimination permissible under the Equality Act 2010?

Answer 23

For age or disability, if it is a proportionate means of achieving a legitimate aim.

Question 24

Can costs prevent a solicitor from making reasonable adjustments for disabled clients?

Answer 24

Yes, if the cost significantly outweighs the benefit, it may not be deemed reasonable.

Question 25

Who handles money laundering enforcement in the UK?

Answer 25

The National Crime Agency (NCA).

Question 26

What are the defences to the offence of “concealing”?

Answer 26

Making an authorized disclosure to the firm’s Money Laundering Reporting Officer (MLRO), the NCA, or police before the transaction occurs

Question 27

What is the duty of solicitors regarding suspicious activity reports (SARs)?

Answer 27

They must report suspicious activity to their MLRO or directly to the NCA

Question 28

What is the time frame for keeping client due diligence records?

Answer 28

At least five years after the client relationship ends.

Question 29

When is tipping off not an offence?

Answer 29

When disclosing to a colleague working on the same undertaking or another legal professional to prevent money laundering.

Question 30

What are “specified investments”?

Answer 30

These include shares, pension schemes, insurance contracts, funeral plans, and mortgage contracts.

Question 31

When is a solicitor exempt from the Regulated Activities Order?

Answer 31

When safeguarding investments as a trustee, advising as an estate representative, or introducing clients to authorized advisors.

Question 32

Can solicitors provide financial advice casually without authorization?

Answer 32

Yes, if the advice is not given in the course of business, e.g., at a social event.

Question 33

Does the exemption for incidental financial activities cover all legal services?

Answer 33

No, it does not apply to managing assets or activities involving insurance policies.

Question 34

What are examples of documents relating to land transfers considered reserved legal activities?

Answer 34

Preparing deeds of transfer, mortgages, and other documents affecting land charges.

Question 35

What happens if an unauthorized person performs reserved legal activities for someone else?

Answer 35

They may be subject to penalties for unauthorized practice unless specifically exempted.

Question 36

What is “before the event” insurance?

Answer 36

Insurance purchased in advance to cover legal costs, often included in policies like car insurance.

Question 37

How does civil legal aid differ from criminal legal aid?

Answer 37

Civil legal aid applies to specific disputes like housing and requires financial and merits tests, while criminal legal aid focuses on defending against criminal charges with additional tests such as the “interests of justice.”

Question 38

Are solicitors allowed to ask for their fees upfront?

Answer 38

Yes, solicitors can request upfront fees without restriction.

Question 39

What constitutes a “substantial disadvantage” under the Equality Act 2010?

Answer 39

A significant difficulty or disadvantage compared to non-disabled persons in accessing services or employment.

Question 40

What is the defense for indirect discrimination claims?

Answer 40

The action must be a proportionate means of achieving a legitimate aim.

Question 41

What is “arranging” under the Proceeds of Crime Act 2002?

Answer 41

Facilitating the acquisition, retention, or use of criminal property by another person, knowing or suspecting its criminal origins.

Question 42

What is “adequate consideration” as a defense under the Proceeds of Crime Act?

Answer 42

Receiving property in good faith for its market value as part of an arm’s length transaction.

Question 43

What does a solicitor’s “duty of suspicion” involve?

Answer 43

The duty to act if a reasonable person would suspect money laundering in the circumstances.

Question 44

What steps should solicitors take for client verification under the Money Laundering Regulations?

Answer 44

Exercise due diligence when establishing business relationships, handling transactions above £15,000, or suspecting money laundering.

Question 45

What are high-risk scenarios for solicitors in money laundering cases?

Answer 45

Misuse of client accounts, large cash transactions, creation of trusts or companies, or handling property tied to criminal activity.

Question 46

What is the “general prohibition” under the Financial Services and Markets Act 2000?

Answer 46

A restriction against engaging in regulated financial activities without proper authorization.

Question 47

How can solicitors avoid breaches related to financial advice?

Answer 47

By limiting advice to incidental legal services and avoiding separate billing for financial activities.

Question 48

When does the prohibition not apply to land-related advice?

Answer 48

When the advice concerns land or national savings products like Premium Bonds, as these are not specified investments.

Question 49

What is an excluded activity under the Regulated Activities Order for trustees?

Answer 49

Safeguarding investments as a trustee or acting as a personal representative in a will or estate matter without additional compensation.

Question 50

What should you look for in questions involving indemnity insurance?

Answer 50

Indicators of high-value work, suggesting a need for more than the minimum coverage.

Question 51

How can you identify money laundering risks in an exam scenario?

Answer 51

Look for red flags like cash-intensive transactions, high-risk jurisdictions, or unusual client behavior.

Question 52

When analyzing discrimination cases, what key phrases should you note?

Answer 52

Terms like “reasonable adjustments” or “substantial disadvantage” for disability cases and “proportionate means of achieving a legitimate aim” for indirect discrimination.

Question 53

How should solicitors handle cases where the Equality Act conflicts with client preferences?

Answer 53

They must prioritize compliance with anti-discrimination laws over client instructions.

Question 54

What key factors determine the availability of criminal legal aid?

Answer 54

Household income, case merit, and potential consequences for the defendant, such as job loss.

Question 55

Question
A solicitor works for a charity for elderly people, providing advice to its clients on legal matters including preparing probate documents and court proceedings relating to probate matters. The solicitor believes that he does not have to comply with any Solicitors Regulation Authority requirement for professional indemnity insurance in these circumstances.

Is the solicitor correct in his belief?

Answer 55

No, because he is carrying out a reserved legal activity so must ensure that the charity has taken out adequate and appropriate insurance cover.

Question 56

A solicitor facilitated a client’s purchase of a house in Paris. It turns out the house was purchased with proceeds from the client’s sale of illegal drugs. The solicitor is concerned they might have committed the offence of concealing under the Proceeds of Crime Act 2002 (‘POCA’).

Describe the solicitor’s necessary mental state to have committed the offence of concealing under POCA?

Answer 56

The solicitor must have actually known or suspected the purchase money represented a benefit from criminal conduct.

Question 57

A firm of solicitors is assessing the level of professional indemnity insurance it needs to comply with the Solicitors Regulation Authority requirements.

Describe factors which the firm should take into account when making this assessment?

Answer 57

The firm’s client profile, the value of matters taken on each year, and the historical claims experience of the firm.

Question 58

A junior solicitor at a large firm became suspicious that a client he was representing might be involved in money laundering. The client’s transaction is scheduled to close in two weeks. The solicitor sent an email to the nominated officer but got an ‘Out of Office’ reply that indicates the nominated officer is not coming back for another three weeks.

What action should the solicitor now take?

Answer 58

Determine whether the firm has appointed a deputy nominated officer and report his suspicions to this person.

Question 59

A firm of solicitors pays for continuing professional development training for its female employees but requires its male employees to fund the training themselves. The rationale behind this decision is to help female employees progress in the profession after taking time out for childcare.

Under the Equality Act 2010, is the firm’s policy discriminatory?

Answer 59

Yes, the policy is directly discriminatory on the grounds of sex which cannot be justified by the employer.

Question 60

A solicitor is bringing a claim against her firm for direct discrimination on the grounds of age because she was passed over for promotion due to being too young.

Can the firm seek to justify the age discrimination under the Equality Act 2010?

Answer 60

Yes, if it can show that it has a legitimate aim and the means of achieving that aim are proportionate.

Question 61

A newly qualified solicitor decided to work freelance. Business is slow. In an attempt to obtain clients and generate income, the solicitor would like to advertise himself as a financial adviser as well as a solicitor, because he has been making financial investments for himself for the past five years with moderate success.

Under what circumstances would the solicitor have to be authorised under the Financial Services and Markets Act 2000 (‘FSMA’)?

Answer 61

Any time when in the course of business the solicitor is not exempt and undertakes an activity specified in the Regulated Activities Order relating to an investment specified in the Order to which no exclusions apply.

Under the general prohibition stated in FSMA, a person (which includes a solicitor) who carries out a regulated activity must be authorised or exempt from authorisation. A regulated activity is defined as an activity specified in the Regulated Activities Order 2001 relating to an investment specified in the Order, which is carried out in the course of business, and to which no exclusions apply.

Question 62

A firm of solicitors institutes a new dress code policy which states that employees should keep jewellery to a minimum. In particular, the dress code states that employees may not wear earrings larger than a small, plain stud. Any breach of the dress code results in disciplinary action. An employee receives a written warning for wearing a large skull-shaped pair of earrings. The employee feels that this is unfair as she explained to her manager that the earrings were a gift from her late mother and held great sentimental value to her.

Under the Equality Act 2010, would the employee have a potential claim for discrimination against the firm?

Answer 62

No, the firm is not discriminating against the employee because appearance is not a protected characteristic.

Question 63

A solicitor is at a Dads’ and Kids’ coffee morning with his child. One of the other dads sits next to him and starts discussing investment opportunities. The other dad says interest rates on savings accounts are too low and that he is looking to buy shares in a particular popular technology company instead. He asks the solicitor for his view. The solicitor is not authorised by the Financial Conduct Authority to carry on a “regulated activity” as defined in the Financial Services and Markets Act 2000 (‘FSMA’) and related secondary legislation.

Can the solicitor give his view about investing in the technology company?

Answer 63

Yes, because the solicitor is at a social event so would not be advising by way of business.

Question 64

A solicitor at a large firm represented a UK-based client accused of manslaughter. After thoroughly investigating the matter, the solicitor managed to clear the client. The client paid the solicitor’s substantial bill by transferring money to the solicitor’s firm from a bank account in Yemen.

As this country has been listed as a high-risk jurisdiction, the solicitor worried that the client might be laundering money and reported the matter to the firm’s nominated officer. The nominated officer investigated the matter and decided the client’s source of funds was legitimate.

For how long must the firm keep records of the nominated officer’s investigation?

Answer 64

Five years.

Question 65

Neither a solicitor nor his firm are authorised by the Financial Conduct Authority to carry on a ‘regulated activity’ as defined in the Financial Services and Markets Act 2000 (‘FSMA’) and related secondary legislation.

What would constitute ‘arranging’ under FSMA?

Answer 65

A client has engaged the solicitor because she wants to realise some of her investments with a view to purchasing an interest in a partnership. The solicitor recommends that the client speak to a stockbroker about which shares to sell and will then take steps to sell the shares which the stockbroker identifies.

Under the general prohibition of FSMA, a solicitor may not carry on regulated activity in the UK unless they are authorised or exempt from authorisation. A regulated activity is defined as an activity specified in the Regulated Activities Order relating to an investment specified in the Order, which is carried out in the course of business, and to which no exclusions apply. The specified activities might be remembered with the mnemonic device ‘ADAMS’. Activities = Advising, Dealing as an agent, Arranging, Managing, and Safeguarding. Arranging is making arrangements for another person to buy, sell, or subscribe for a particular investment. Here, the solicitor has arranged for the client to obtain advice from a third party, a stockbroker, and will then make arrangements to implement the stockbroker’s advice on the sale of shares.

Question 66

An experienced solicitor has recently been made the nominated officer of her company. She continues to practise as a solicitor whilst performing the duties of nominated officer. One of her clients has been transferring large sums of money from Yemen. The solicitor is aware that Yemen has been listed as a high-risk jurisdiction for money laundering, so the activity has aroused her suspicions.

What is the best course of action for the solicitor?

Answer 66

Continue to represent the client and make a report to the National Crime Agency.

Question 67

A firm of solicitors gives its employees under 40 years of age an annual clothing allowance. There is an equal gender balance amongst this age group. The rationale behind this policy is to ensure that the firm’s younger employees look smart and professional in client meetings following a number of them coming to work dressed too casually.

Under the Equality Act 2010, is the firm’s policy discriminatory?

Answer 67

Yes, the policy is directly discriminatory on the grounds of age which the employer can justify if it can show this is a proportionate means of achieving a legitimate aim.

Question 68

A solicitor works at a firm regulated by the Solicitors Regulation Authority (‘SRA’). The solicitor is advising a client company in relation to an unfair dismissal claim brought by one of the client’s former employees. The client has an insurance policy covering the cost of bringing employment tribunal claims like this and asks the solicitor to make a claim under that insurance policy.

Will the solicitor need to be authorised by the Financial Conduct Authority to make the claim?

Answer 68

No, because the solicitor can rely on the Designated Professional Bodies exemption.

Question 69

A UK solicitor has undertaken conveyancing work for a client who is buying a block of flats. The solicitor believes the price the client has offered is unreasonably high. The client doesn’t seem bothered about paying the price despite the solicitor’s advice. The solicitor suspects the client is attempting to launder his money.

If the client is indeed engaged in money laundering, what stage of the money laundering process is this most likely to be?

Answer 69

Integration.

If the client is engaged in money laundering, this is most likely to be the integration stage of the money laundering process. Integration is the final stage of the money laundering process, which typically involves purchases of legitimate assets and/or businesses with a goal to integrate the proceeds into the economy. Here, the client appears to be trying to purchase a legitimate asset-the block of flats-for an unreasonably high price to integrate criminal proceeds into the economy.

Question 70

A firm was established last year specialising in low value personal injury claims arising from people tripping over uneven pavements. The work has been lucrative but is high volume, low return. The firm decided to refocus its efforts this year on higher value personal injury claims such as industrial injuries.

Which of the following best describes the professional indemnity insurance which the firm should take out this year?

Answer 70

The firm needs to consider whether its current insurance coverage is still adequate and appropriate given the increase in value of the personal injury claims.

Question 71

A client offers to sell a nearly new car to his solicitor for £5,000. The solicitor knows that a more realistic market value for the car is £25,000 and is suspicious about the legitimacy of the source of the vehicle. However, the solicitor’s own car is very old and no longer runs well and he is keen to get a replacement as soon as possible. The solicitor accepts the client’s offer and buys the car.

Which of the following best describes the direct offence under the Proceeds of Crime Act 2002 (‘POCA’) which the solicitor may have committed by purchasing the car?

Answer 71

Acquisition, Use, or Possession.

Question 72

A client has instructed a solicitor to advise in relation to the purchase of a house. The client is financing the purchase partly through savings and partly through a mortgage from a building society. The client took advice from the building society’s mortgage advisor when deciding which mortgage to take out. The building society provided the mortgage documents to the solicitor and asked him to get the client’s signature and complete a few details in the documents, which the solicitor did. Neither the solicitor nor his firm is authorised by the Financial Conduct Authority to carry on a “regulated activity” as defined in the Financial Services and Markets Act 2000 and related secondary legislation. The building society’s mortgage advisor is authorised by the Financial Conduct Authority.

Has the solicitor breached the general prohibition against carrying on a regulated activity?

Answer 72

No, because although a mortgage is a specified investment, the acting through an authorised person exclusion applies.

The solicitor has not breached the general prohibition against carrying on a regulated activity because although a mortgage is a specified investment, the acting through an authorised person exclusion applies. A regulated activity is defined as an activity specified in the Regulated Activities Order relating to an investment specified in the Order, which is carried out in the course of business, and to which no exclusions apply. Here, the solicitor is making arrangements (the specified activity of arranging) for the client to take out the mortgage (a specified investment). However, the solicitor can rely on the acting through authorised persons exclusion. A solicitor may arrange with respect to a specified investment if the client receives advice from a person authorised by the Financial Conduct Authority and the solicitor merely assists the client in acting on this advice. The mortgage advice was provided by the building society’s mortgage advisor (who is authorised by the Financial Conduct Authority), and the solicitor is merely assisting the client to act on that advice. Therefore, because the solicitor can rely on the acting through an authorised person exclusion, he is not carrying on a regulated activity in breach of the general prohibition.

Question 73

Is it correct to say that it would be a breach of the professional conduct rules for a law firm to undertake a reserved legal activity unless they were authorised to do so by the SRA?

Answer 73

Yes, unless they had an exemption.

Question 74

What is a freelance solicitor’s duty with respect to indemnity insurance?

Answer 74

They do not need to hold professional indemnity insurance unless they are carrying out a reserved legal activity.

Question 75

Under the rules of the Legal Services Board, can a sole trader act on their own behalf to issue a claim for an outstanding debt against one of their customers?

Answer 75

Yes, because they are a party to the proceedings and may carry out a reserved legal activity.

Question 76

Under the rules of the SRA, what is the minimum level of indemnity insurance required for claims against civil liability arising from private legal practice?

Answer 76

£3 million

Question 77

True or false? The standard to assess whether a law firm is carrying the correct level of insurance is ‘adequate and appropriate’.

Answer 77

True

Question 78

True or false? A solicitor is only required to discuss costs with a client at the end of the matter, when payment is due.

Answer 78

False

Question 79

Is it a breach of the professional conduct rules for a solicitor to ask a client for money up-front?

Answer 79

No

Question 80

Under the SRA’s standards and regulations, which of the following applies to solicitors when they are advising a client on costs?

Answer 80

The solicitor must provide clear and transparent advice on costs.

Question 81

In a personal injury case, the legal costs payable under a damages-based agreement can be no more than……

Answer 81

25%

Question 82

In a non-personal injury case, the legal costs payable under a damages-based agreement can be no more than _____.

Answer 82

50%

Question 83

True or false? The Equality Act 2010 prohibits a solicitor from both directly and indirectly discriminating in their practice.

Answer 83

True

Question 84

Which two protected characteristics provide exceptions to the general rule that direct discrimination cannot be justified?

Answer 84

Age and disability

Question 85

True or false? Concealing, converting, or transferring criminal property or removing it from the UK all may be the basis of the offence of ‘concealing’ under the Proceeds of Crime Act 2002.

Answer 85

True

Question 86

True or false? A solicitor may commit the offence of “failure to report” under the Proceeds of Crime Act 2002 if the solicitor should have (but did not actually) know that a suspicious activity report (SAR) was required.

Answer 86

True, the test is objective – whether a reasonable solicitor would have known a SAR was required.

Question 87

For how long must a firm keep client due diligence records?

Answer 87

For 5 years after the end of the relationship with the client.