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SQE 1 - FKL1 > Legal Services > Flashcards

Legal Services Flashcards

1
Q

What are the 6 regulators for the legal profession?

A
  1. Legal services board
  2. SRA
  3. Bar Standards Board
  4. Chartered Institute of Legal Executives
  5. Council for Licensed Conveyancers
  6. Costs Lawyers Standards Board
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2
Q

What 4 places can a client complain to?

A
  1. Law Firm
  2. Legal Ombudsman
  3. SRA
  4. Solicitors Disciplinary Tribunal
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3
Q

What 6 remedies can the Legal Ombudsman offer?

A
  1. Apologise
  2. Pay compensation
  3. Correct or put right an error or omission
  4. Take specific action in the interests of the complainant
  5. Pay the costs of the complainant
  6. Limit the firm’s fees
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4
Q

Where should a client complain to for a complaint concerning misconduct, dishonesty or breaches of SRA rules?

A

The SRA

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5
Q

What complaint actions/remedies can the SRA offer?

A
  1. Issue firm a warning
  2. Impose disciplinary sanction e.g., fine
  3. Reprimand the solicitor for misconduct
  4. Order solicitor to repay or refund client costs
  5. Impose restrictions on lawyers ability to practice
  6. Disciplinary proceedings before the Solicitors Disciplinary Tribunal
  7. Revoke firm recognition
  8. Close down a firm
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6
Q

When is the Solicitors Disciplinary Tribunal appropriate?

A

For serious breaches of SRA rules

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7
Q

What 6 remedies/powers does the Solicitors Disciplinary Tribunal have?

A
  1. Strike solicitor off the roll
  2. Suspend a solicitor from practice for fixed or indefinite period
  3. Reprimand a solicitor
  4. Impose a fine
  5. Award costs against a party to the proceedings
  6. Make a restriction order, imposing a restriction on the area the solicitor can practice
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8
Q

What is the Law Society there to do?

A

Fight in your corner, support you in your career and practice

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9
Q

Does the SRA require law firms to have professional indemnity insurance?

A

Yes

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10
Q

Can professional indemnity insurance exclude liability extending to clients below the standard set out by the SRA?

A

No

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11
Q

What should a solicitor do if they become aware of a claim against them, regarding insurance?

A

Notify the insurers

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12
Q

Can businesses providing non-reserved services elect to be authorised by the SRA?

A

Yes

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13
Q

What three broad categories of business can be authorised by the SRA?

A
  1. Sole practice
  2. Legal services body
  3. Licensable body
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14
Q

If a sole practice solicitor is practicing through a company, is it the solicitor or the company who is SRA authorised?

A

The solicitor

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15
Q

What is a legal services body?

A

A firm where all the managers/interest holders are lawyers e.g., LLP

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16
Q

What are authorised legal services bodies called?

A

Recognised body

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17
Q

Is it still a sole practice if the solicitor employs other qualified solicitors?

A

Yes, as long as they are not also co-owners

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18
Q

What is an authorised sole practice called?

A

A recognised sole practice

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19
Q

What is a licensable body?

A

Where the managers/interest holders are both lawyers and non-lawyers

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20
Q

What is an authorised licensable body called?

A
  1. Licensed body
  2. Alternative business structure (ABS)
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21
Q

Can UK solicitors provide legal services to the public on behalf of organisations that are not authorised by the SRA or another approved regulator under LSA 2007?

A

Yes, for example in law centres, legal advice centres, in-house practice and multi-national law firms

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22
Q

What are advantages to the traditional partnership firm structure?

A
  • Flexible partnership agreements
  • Maintains partnership culture and tradition
  • Control and decision making
  • Profit sharing
  • Privacy
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23
Q

What are disadvantages to the partnership structure?

A
  • Raising finance is restricted to traditional methods
  • Shared-decision making (conflict)
  • Partners running the firm (if they’re bad at management)
  • Unlimited liability
  • Tax burden falls on the individual partners
  • Foreign expansion – this structure is not recognised in every jurisdiction
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24
Q

What are advantages of the LLP?

A
  1. Limited liability (partners liability is limited to their capital share)
  2. Tax – they are ‘tax neutral’
  3. Increased funding opportunities – can issue floating charges
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25
Q

What are disadvantages of the LLP?

A
  • Less tax efficient than a company
  • Increased filing responsibilities
  • External investment
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26
Q

What are the advantages of being in a company?

A
  • Limited liability
  • Clear decision making structure
  • Easier to raise money
  • Tax advantages
  • Foreign expansion
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27
Q

What are disadvantages of a company?

A
  • Administration and filings
  • Tax issues (when transitioning from a partnership)
  • Transparency
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28
Q

Are registered foreign lawyers practicing at a multi-national company in England/Wales obligated to conform to SRA rules/codes?

A

Yes

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29
Q

Are UK lawyers/firms practicing overseas still held to UK regulatory rules?

A

Yes, but there are also additional ‘overseas’ rules too

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30
Q

Can law centres/legal advice centres be SRA authorised?

A

Yes, can but not must

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31
Q

What is the rule regarding insurance for pro-bono work in legal advice centres?

A

Must be covered by an indemnity reasonably equivalent to that required under the SRA indemnity insurance rules

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32
Q

How do in-house lawyers maintain compliance with SRA rules?

A

Own judgement

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33
Q

What are the protected characteristics under the Equality Act?

A

Age
Disability
Gender reassignment
Marriage/civil partnership
Pregnancy and maternity
Race
Religion or belief
Sex
Sexual orientation

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34
Q

What are the 4 types of discrimination and unlawful conduct identified by the Equality Act?

A

Direct discrimination
Indirect discrimination
Harassment
Victimisation

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35
Q

Define direct discrimination.

A

Because of protected characteristic, A treats B less favourably

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36
Q

What type of discrimination is it, if you don’t invite a pregnant woman to a salsa evening because you assume she wouldn’t want to go because she is pregnant?

A

Direct discrimination

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37
Q

Under the Equality Act, if a woman gets special treatment in connection with pregnancy or childbirth, can that amount to discrimination against the man?

A

No

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38
Q

Define Indirect Discrimination.

A

This is when the intention is not to discriminate, but a certain practice has the effect of disadvantaging people with a certain protected characteristic

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39
Q

What type of discrimination is it, if an employer requires all employees to work full-time, from the office, without exception, and without proper/reasonable justification?

A

Indirect discrimination, especially against women with child caring responsibilities

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40
Q

What are the 3 types of harassment in the Equality Act?

A
  • General definition
  • Sexual conduct
  • Less favourable treatment because of a person’s rejection of or submission to harassment of a sexual nature or harassment related to sex or gender assignment
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41
Q

What is the general definition of harassment?

A

A engaging in unwanted conduct related to a protected characteristic which has the purpose or effect of either
(a) violating b’s dignity
(b) creating an intimidating, hostile, degrading, humiliating or offensive environment for B

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42
Q

What factors must be taken into account when deciding whether conduct has the effect of harassment?

A
  1. B’s perception
  2. The other circumstances of the case
  3. Whether it is reasonable for that conduct to have that effect
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43
Q

Who does ‘victimisation’ protect under the Equality Act?

A

Individuals who do protected acts such as:
- Bringing discrimination claims
- Complaining about harassment
- Becoming involved in another person’s claim

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44
Q

What type of discrimination is it, if two male shop assistants loudly comment on the size of a female shopper’s breasts?

A

General harassment

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45
Q

What are the protected acts under the victimisation harassment category?

A
  1. Bringing proceedings under the Equality Act
  2. Giving evidence or information in connection with proceedings
  3. Doing any other thing for the purposes of or in connection with the Equality Act
  4. Alleging (expressly or otherwise) that a person has contravened the Equality Act
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46
Q

What type of discrimination is it, if, after a gay man sues a pub owner on the basis that she makes persistent derogatory comments about him to other customers about his sexuality and after that suit, the owner bans him from the pub?

A

Victimisation

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47
Q

Can a service provider discriminate against a person requiring the service by not providing them with that service?

A

No

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48
Q

Can a service provider discriminate against a person as to the terms in which they provide the service?

A

No

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49
Q

Can a service provider discriminate against a person by terminating the provision of service?

A

No

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50
Q

Can a service provider discriminate against a person by subjecting them to broadly, any detriment?

A

No

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51
Q

Does a duty to provide reasonable adjustments apply to service providers?

A

Yes

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52
Q

What does it mean that the duty to make reasonable adjustments is anticipatory?

A

Must think in advance about what a disabled person might reasonably need

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53
Q

Who is under a duty to make reasonable adjustments?

A

Anyone providing goods, facilities or services to the public or a section of the public or carrying out public functions or running an association

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54
Q

What factors are often considered when assessing whether the adjustment is reasonable?

A
  • Size/nature of the organisation
  • Nature of the goods/facilities/services
  • Resources that are available
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55
Q

When does a disabled person have to show to bring a claim?

A

That there were barriers that should have been identified, and reasonable adjustments could have been made, and they received a poor/inferior service because those adjustments were not made

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56
Q

What can be ordered against a service-provider who failed to make reasonable adjustments?

A
  1. Pay compensation
  2. To make the reasonable adjustments
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57
Q

What are the 3 requirements that apply in terms of when making reasonable adjustments?

A
  1. Changing the way things are done
  2. Changing physical features of the premises
  3. Providing auxiliary aids/services
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58
Q

For what 3 reasons are legal practitioners more exposed to money laundering?

A
  • Firms can legitimise transactions
  • Have access to financial markets
  • Advise on property and business deals
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59
Q

Can it be money laundering if you receive or benefit from small proceeds of crime?

A

Yes

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60
Q

Are the money-laundering firms limited to just law firms?

A

No

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61
Q

Who is responsible for ensuring that the firm takes all steps necessary to comply with MLR?

A

COLP, COFA and managers

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62
Q

What is an MLRO?

A

Money Laundering Reporting Officer

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63
Q

Must all law firms have an MLRO?

A

Yes

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64
Q

Must all firms come up with their own policies and procedures to compel ML reporting or comply with PoCA?

A

Yes

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65
Q

What do law firms have to do regarding money laundering risk assessments?

A
  1. Do one
  2. Keep a written record of everything they are doing/have done
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66
Q

What are the 4 ways a solicitor can be at risk of money laundering?

A
  1. Criminal source of funds is disguised
  2. Form of funds will be converted (e.g., paper to bank account)
  3. Trail by which the conversion occurs will be disguised
  4. Launderer will retain control of the funds, directly or indirectly
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67
Q

Why should solicitors be careful as to who they give the client account details to?

A

Launderers can deposit money without them knowing, posing a money laundering risk if they withdraw/pay it back

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68
Q

Why would complex trust structures be a ML red flag?

A

They are sometimes used to hide the source of funds

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69
Q

When is a client depositing cash in the client account suspicious for ML?

A

If they do it solely for onward transmission to a third party

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70
Q

How can deposits into a client account disguise an audit trail?

A

By depositing a mixture of clean and dirty funds

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71
Q

What are 5 ML warning signs?

A
  1. Instructions outside the firm’s area of expertise
  2. Unusual retainers
  3. Use of client accounts
  4. Setting up a trust
  5. Property purchase
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72
Q

What could a dispute that settles too easily be?

A

A sham litigation for the purposes of money laundering

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73
Q

What could it be if a client ends a transaction for no reason, after depositing money into the client account?

A

Money laundering

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74
Q

When would a property purchase be suspicious for ML?

A
  1. Large payments from private funds
  2. Client is low income
  3. Payments from a number of different individuals or sources
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75
Q

What are the FATF’s list of high risk money laundering jurisdictions?

A
  1. Republic of Korea
  2. Iran
  3. Myanmar
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76
Q

Who do direct involvement offences apply to?

A

Everyone

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77
Q

What are the 3 direct involvement/principal offences?

A
  1. Concealing, disguising, converting or transferring criminal property or removing it from the UK
  2. Entering into or becoming concerned in an arrangement which you know or suspect facilitates the acquisition, retention, use of control of criminal property by or on behalf of another person
  3. Acquiring, using or possessing criminal property
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78
Q

What is an authorised disclosure in an ML context?

A

It is a defence to the direct involvement defences, where you say you told a constable, customs officer, or nominated officer and at least 1 of 3 other criteria also apply

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79
Q

What distinguishes which one of the 3 criteria for an authorised disclosure to apply?

A

1 is for disclosures made before
2 is for disclosures made during the transaction
3 is made for disclosures after the transaction

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80
Q

When seeking to rely on authorised disclosure, for a disclosure made during the transaction, what must you show?

A
  1. That they began to do the act because at the time they did not know or suspect that the origins of the property represented a person’s benefit from criminal conduct
  2. The act they did was not itself prohibited
  3. Disclosure was made from their own initiative as soon as practicable
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81
Q

When seeking to rely on authorised disclosure, for a disclosure made AFTER the transaction, what must you show?

A
  1. There must be a good reason for why the solicitor failed to disclose earlier
  2. The disclosure must be made on their own initiative as soon as practicable
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82
Q

Was an offence committed, if the solicitor was out of jurisdiction for the ML act and it wasn’t unlawful in the territory they were in?

A

No

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83
Q

What is the ML golden rule?

A

If you suspect something, report to your MLRO or nominated officer

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84
Q

What is a non-direct involvement offence?

A

You had an indirect involvement e.g., knowledge

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85
Q

Give examples of some types of things/businesses that are considered to be in the list of the regulated sector under PoCA 2002?

A

Insurance
Investment services
Accountancy
Insolvency
Tax advice
Financial and real property transactions

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86
Q

What are the 2 non-direct involvement offences?

A
  1. Failure to disclose
  2. Tipping off
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87
Q

Are all types of legal work a part of the regulated sector?

A

No

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88
Q

What 3 criteria must be met for failure to disclose to apply?

A
  1. Know/suspect/have reasonable grounds to suspect that somebody is laundering
  2. Receiving the information in the course of business in the regulated sector
  3. Can identify the person laundering, or the whereabouts of laundered property or that the information of which you have knowledge could assist in identifying the person
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89
Q

What three things must a disclosure contain (if you’re seeking to avoid liability for failure to disclose)?

A
  1. The identity of the person if you know it
  2. The whereabouts of the laundered property if you know it
  3. The information on which your information/knowledge is based
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90
Q

Once you make a disclosure, what do you have to wait for before you can act?

A
  1. NCA approval
  2. Seven working days and NCA hasn’t refused authority to proceed
  3. NCA refused consent during the notice period and the moratorium period (31 days) has passed
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91
Q

What is the tipping off offence?

A

Telling clients about any ML report that was made about them or is being contemplated etc

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92
Q

What are the possible punishments for the direct involvement offences?

A
  1. On summary conviction, imprisonment for a term not exceeding 6 months, or to a fine not exceeding the statutory maximum or both
  2. On conviction of an indictment, to imprisonment for a term not exceeding 14 years or a fine or both
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93
Q

What are the potential punishments for the non-direct involvement offences?

A
  1. On summary, prison not exceeding 6 months or fine not exceeding statutory maximum or both
  2. On indictment, imprisonment for a term not exceeding 5 years, a fine or both
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94
Q

What are the possible punishments for the direct involvement offences?

A
  1. On summary conviction, imprisonment for a term not exceeding 6 months, or to a fine not exceeding the statutory maximum or both.
  2. On conviction of an indictment, to imprisonment for a term not exceeding 14 years or a fine or both.
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95
Q

What are the potential punishments for the non-direct involvement offences?

A
  1. On summary, prison not exceeding 6 months or fine not exceeding statutory maximum or both.
  2. On indictment, imprisonment for a term not exceeding 5 years, a fine or both.
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96
Q

Who do the MLR 2017 apply to?

A

Credit institutions, financial institutions, auditors, insolvency practitioners, external accounts and tax advisors, independent legal professionals, trust or company service providers, estate agents, high value dealers, casinos.

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97
Q

Does the MLR 2017 apply to all types of legal work?

A

No.

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98
Q

What are the two most common examples of activities that frequently fall outside of money laundering statute?

A
  • Employment cases
  • Litigation cases
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99
Q

What is the financial threshold for one-off transactions, after which CDD must be carried out?

A

1000 euros.

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100
Q

What things must you do in standard CDD (customer due diligence)?

A
  1. Identify and verify the person or company.
  2. Identify the beneficial owner.
  3. Ongoing monitoring of the business relationship.
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101
Q

How do you identify a person for CDD?

A

Name and address.

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102
Q

What sorts of documentation can be used to verify a person’s identity?

A

Documents/data from reliable independent sources e.g., government ID.

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103
Q

What do you need to identify/verify for a company under standard disclosure?

A

Name, company number, address of registered office, principal place of business, law to which it is subject, constitutional documents, names of directors of its management body and senior management.

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104
Q

What is a beneficial owner for CDD purposes?

A
  • Person who owns or controls the customer on whose behalf the work is being undertaken.
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105
Q

For a private company, what percentage of shares or voting rights must an individual own to be considered a beneficial owner?

A

25%.

106
Q

Can you rely on the person of significant control register to identify beneficial owners?

A

No.

107
Q

In what 4 circumstances must you employ enhanced CDD?

A
  1. Any case where there is a high risk of money laundering.
  2. Transactions or business relationships with a person established in a high-risk country.
  3. In relation to correspondent relationships.
  4. If a relevant person has determined that a customer or potential customer is a PEP or a family member or known close associate of a PEP.
108
Q

What is a PEP?

A

A politically exposed person.

109
Q

Do you have to do enhanced CDD if a customer provided false/stolen identification documentation?

A

Yes.

110
Q

Do you have to do enhanced CDD if a transaction is complex?

A

Yes.

111
Q

Do you have to do enhanced CDD if the transaction is unusually large?

A

Yes.

112
Q

Do you have to do enhanced CDD if there is an unusual pattern of transactions, or the transactions have no apparent economic or legal purpose?

A

Yes.

113
Q

Do you have to do enhanced CDD if for any reason, the case can present a higher risk of money laundering?

A

Yes.

114
Q

What 5 things must enhanced CDD include, as far as reasonably possible?

A
  1. Examine background and purpose of transaction.
  2. Increase the degree and nature of monitoring.
  3. Getting additional independent verification of information.
  4. Taking additional measures to understand the background and financial situation of the customer and takes steps to confirm it.
  5. Take steps to be satisfied that the transaction is consistent with the purpose and intended nature of the relationship.
115
Q

What additional things must be obtained for enhanced CDD due to a high-risk country?

A
  1. Additional information on the client/beneficial owner, intended nature of business relationship, source of funds and source of wealth, reasons for the transactions.
  2. Approval of senior management of the practice to continue the business relationship.
  3. Conduct enhanced monitoring by increasing the number and timing of controls applied.
116
Q

What is the difference between standard CDD and simplified CDD?

A

In simplified, everything from standard still applies, except that you can adjust the extent, timing and type of CDD measures you use (e.g., be less strict).

117
Q

What must you still do in simplified CDD?

A

Carry out sufficient monitoring to enable detection of unusual or suspicious transactions.

118
Q

What types of customers are considered low risk, and possibly eligible for CDD?

A

Public administrations (e.g., council), publicly owned enterprise, financial or credit institution, public company, individual resident in an area of low risk.

119
Q

What product/services/transactions can also be considered low risk?

A
  1. Life insurance policy with low premium.
  2. Pension scheme meeting certain conditions.
  3. Child trust fund.
  4. Junior ISA.
120
Q

What does ongoing monitoring mean in the CDD context?

A

You keep scrutinising transactions and review existing records, keeping documents and measures for the purposes of applying CDD up to date.

121
Q

When should CDD be carried out?

A

Before establishing a relationship/doing the transaction.

122
Q

What 2 criteria need to be satisfied to delay CDD?

A

Delay is necessary not to interrupt the normal conduct of business and there is little risk of laundering/terrorist financing.

123
Q

Can a new solicitor, taking over a client from an old solicitor rely on the old solicitor’s CDD?

A

Yes, subject to some actions.

124
Q

What 2 things must an incoming solicitor do, to rely on CDD from the previous solicitor on the case?

A
  1. Obtain all the info needed to satisfy the MLR.
  2. Enter into a written agreement with the first solicitor which enables incoming solicitor to obtain any relevant documentation about the client/beneficial owner on request and requires outgoing solicitor to retain copies of the data and documents for a specific period.
125
Q

What classes of people can you rely on to have performed your CDD for you?

A

Authorised credit/financial institutions, auditors, insolvency practitioners, external accountants and tax advisors, independent legal professionals.

126
Q

If you rely on another entity for your due diligence, who is liable you or them?

A

You.

127
Q

Under AMLG, what are examples of evidence of a UK natural person?

A

Current passport, current photo card driving license.

128
Q

Under AMLG, what additional document should be requested if a government ID is provided with no DOB or address?

A

Other supporting documents detailing DOB and address.

129
Q

Under AMLG, is a government ID with just name and DOB sufficient identification?

A

Yes.

130
Q

Under AMLG, is a government ID with just name and address sufficient identification?

A
131
Q

Can electronic data service providers be used to verify UK natural persons?

A

Yes.

132
Q

For individuals in partnerships do you have to conduct the same CDD as if they were individuals?

A

Yes.

133
Q

Can you treat large partnerships as companies for CDD purposes?

A

Generally, yes.

134
Q

What info do you collect on a partnership/unincorporated business/LLP being treated as a company for CDD purposes?

A

Name, registered address (if exists), trading address, name of business.

135
Q

Does an unincorporated business have to be large to be treated as a company for CDD?

A

No.

136
Q

Does an LLP have to be large to be treated as a company for CDD?

A

No.

137
Q

What must you obtain and verify for a company?

A

Name, company number/other registration number, address of registered office and if different, principal place of business.

138
Q

What must you obtain and identify for other types of legal persons e.g., trusts?

A

Verify the identity of the beneficial owner.

139
Q

Must you obtain the same info/verification for public and private companies?

A

Yes.

140
Q

For public companies undergoing simplified CDD, do you need to verify beneficial owners?

A

No.

141
Q

For public companies undergoing simplified CDD, do you need to take reasonable measures to determine and verify the law to which it is subject or the names of its directors or senior persons?

A

No.

142
Q

Is it sufficient CDD to obtain confirmation of a company’s listing on the regulated market?

A

Yes.

143
Q

Is it sufficient CDD to obtain confirmation of a company’s listing on the regulated market via a photocopy of the listing in a reputable daily newspaper?

A

Yes.

144
Q

Is it sufficient CDD to obtain confirmation of a company’s listing on the regulated market via a photocopy of the listing in a copy of the dated page of the website of the relevant stock exchange showing the listing?

A

Yes.

145
Q

Is it sufficient CDD to obtain confirmation of a company’s listing on the regulated market via a photocopy of the listing from a reputable electronic verification service provider or online registry?

A

Yes.

146
Q

Under AMLG can you treat companies listed on markets other than the London Stock Exchange the same as those meeting the definition of ‘regulated markets’?

A

Yes, subject to risk sensitivity (being rational).

147
Q

If treating a public company on a foreign exchange as ‘regulated’ do you have to verify their identity?

A

No, here you need to verify the identity of the company.

148
Q

Do you need the same basic things to verify identity a public company as a private company?

A

Yes e.g., name, number, address.

149
Q

What additional verifications are there for private companies?

A
  • The law to which the company is subject and its constitution.
  • The full names of the board of directors and senior persons responsible for operations.
150
Q

What examples of verification sources for private companies can you think of?

A

Certificate of incorporation, articles, filed audited accounts, details from the relevant company registry, info from a reputable electronic service provider.

151
Q

What are the 3 main regulators of financial services in the UK?

A
  1. Bank of England.
  2. Prudential Regulation Authority.
  3. Financial Conduct Authority.
152
Q

What is the Bank of England specifically responsible for regulation wise?

A

UK monetary policy, maintaining the supply of money in UK economy.

153
Q

What is the PRA specifically responsible for, regulation wise?

A

It is a subsidiary of BOE, prudential supervision of deposit takers, insurers and a small number of significant investment firms.

154
Q

What is the FCA specifically responsible for regulation wise?

A

Conduct of business, supervision of PRA and FCA firms, regulating firms not regulated by the PRA (e.g., law firms).

155
Q

Give some examples of when a lawyer might encounter financial regulations.

A
  1. Working in-house, for something that is FCA/PRA regulated.
  2. Working as a corporate lawyer, dealing with investment banks, transactions etc.
  3. Acting as a litigator for a client authorised by the FCA in relation to an enforcement action.
  4. Be asked to arrange a life insurance policy for a client as a condition of them being granted a mortgage for their residence.
156
Q

What are examples of regulated activities?

A

Dealing investments, managing investments, advising on the merits of investments.

157
Q

Is it a criminal offence, to provide financial advice as a lawyer if you are not authorised or exempt?

A

Yes.

158
Q

Can a solicitor refer a client to an independent financial advisor?

A

Yes.

159
Q

What does the Designated Activities Regime do?

A

Provides a mechanism for regulating financial markets activities where HM Treasury considers that it would be disproportionate or inappropriate to bring those activities within the scope of the regulated activities regime.

160
Q

What is the general prohibition under FSMA?

A

No person may carry on a regulated activity unless authorised or exempt.

161
Q

How is ‘regulated activity’ defined?

A

Activities of a specified kind carried on by way of business and relating to an investment of a specific kind.

162
Q

How is ‘investment of a specific kind’ defined?

A

Investment = any asset, right or interest. Specified means in an order made by the Treasury.

163
Q

What does the FSMA tree help you figure out?

A

Whether the activity the solicitor is proposing to carry out, is a regulated activity that could be a criminal offence if you did it.

164
Q

What is Step 1 of the FSMA tree?

A

Is the investment ‘specified’? If no – FSMA does not apply. If yes – apply Step 2.

165
Q

Is specified investment defined by FSMA?

A

No, and the Treasury is still updating things.

166
Q

Give examples of things that are regulated and specified by the Treasury.

A

Rights under a contract of insurance, shares in a company, instruments creating or acknowledging debt, government and public securities, rights under a pension scheme, regulated mortgage contracts.

167
Q

What 3 conditions need to be present for something to be a regulated mortgage contract for FSMA?

A
  1. Lender is providing credit to a borrower.
  2. Contract obliges the borrower to repay secured by a mortgage in the EEA.
  3. At least 40% of that land is used or intended for use for an individual or in connection with a dwelling, in connection with an individual beneficiary or related person via a trustee.
168
Q

Can a loan to buy an office be a regulated mortgage?

A

No.

169
Q

Can a loan to a company be a regulated mortgage contract?

A

No.

170
Q

What is FSMA tree Step 2?

A

Are you also carrying out a specified activity in relation to the specified investment? No – FSMA does not apply. Yes – Go to Step 3.

171
Q

Give examples of specified activities given by the treasury.

A

Dealing in investments as principal, arranging investment deals, managing investments, advising on the merits of investments.

172
Q

For the purposes of FSMA, what does advising on the merits of investments mean?

A

Giving advice requiring an element of opinion + a recommendation as to a course of action.

173
Q

Would advising to invest in China rather than Europe amount to advising on the merits of investments?

A

No.

174
Q

Will a solicitor advising that their client should purchase ABC PLC shares amount to advising on the merits of investments?

A

Yes.

175
Q

What is Step 3 of the FSMA decision tree?

A

Is there an exclusion? Yes — FSMA does not apply. No – go to Step 4.

176
Q

What are the three most relevant exclusions to the work of a solicitor for FSMA?

A
  1. Regulated activities that are a necessary part of other services carried on in the course of a profession.
  2. Regulated activities in connection with the sale of a body corporate.
  3. Authorised persons.
177
Q

What is the FCA’s view on what constitutes a ‘necessary part’ for the FSMA necessary part exclusion?

A

Must not be possible for other services to be provided unless dealing/arranging/advising is also provided.

178
Q

What is the most commonly encountered ‘necessary part’ exclusion that solicitors might rely on?

A

Helping a client sell a leasehold flat, but the transaction also involves transferring a share to a management company or the company that owns the freehold of the block of flats.

179
Q

In what 3 circumstances could a solicitor rely on the sale of a body corporate exclusion for Step 3 of FSMA?

A
  1. Shares consist or include of 50%+ of the voting shares and the acquisition or disposal is between parties who are body corporate, partnership, single individual or a group of connected individuals.
  2. The shares, together with those already owned, are 50% or more of the voting shares and the acquisition or disposal is between parties who are body corporate, partnership, single individual or a group of connected individuals.
  3. The object of the transaction can reasonably be regarded as being the acquisition of day-to-day control of the affairs of the body corporate.
180
Q

What does the authorised person exclusion under step 3 of FSMA entail?

A

Solicitor will not be dealing in investments as an agent if: 1. the transaction is entered into on the advice of an authorised person or 2. it is clear that the client is not seeking/has not sought advice from the solicitor as to the merits of the transaction.

181
Q

Can the authorised person exclusion apply to an insurance contract?

A

No.

182
Q

Can the authorised person exclusion apply if a solicitor receives a commission?

A

No.

183
Q

What is Step 4 of FSMA?

A

Does the activity fulfil the basic conditions in s 327 of FSMA and the SRA Scope Rule 2? Yes – the activity is an exempt regulated activity. No – the firm must be authorised by PRA/FCA and must comply with their handbooks or refuse to act.

184
Q

What must a law firm do, if, via FSMA tree, they determine the activity is an exempt regulated activity?

A
  1. Ensure it complies with any restrictions imposed on the firm related to this activity under the SRA Scope Rules.
  2. Be authorised by the SRA in relation to this activity and comply with any relevant SRA Financial Services Rule.
185
Q

If the FSMA tree determines that FSMA will apply, in what 2 circumstances can the solicitor still act?

A
  1. They get direct authorisation from the FCA and comply with their handbook.
  2. They are supervised by a designated professional body (for lawyers, the Law Society) in compliance with the SRA rules in relation to such activities.
186
Q

What must a firm comply with under the SRA Scope Rules?

A

It complies with any restrictions imposed on the firm related to this activity under the SRA Scope Rules.

187
Q

What authorization is needed for solicitors to act under FSMA?

A

Be authorised by the SRA in relation to this activity and comply with any relevant SRA Financial Services Rule.

188
Q

In what 2 circumstances can a solicitor still act if FSMA applies?

A
  1. They get direct authorisation from the FCA and comply with their handbook.
  2. They are supervised by a designated professional body (for lawyers, the Law Society) in compliance with the SRA rules in relation to such activities.
189
Q

What is the effect of meeting the conditions under s 327 of FSMA for solicitors?

A

They will be exempt from the general prohibition, and be subject to rules prescribed by the SRA in relation to such exempt regulated activities.

190
Q

What are the 4 key conditions that must be met to qualify as exempt under s 327 FSMA?

A
  1. Person carrying out the regulated activities must be a member of a profession.
  2. Person must not receive a pecuniary reward in respect of regulated activities unless they account to their client for the commission.
  3. Specified activity must be provided in a way that is incidental to the provision of professional services.
  4. Person must only carry out regulated activities which they are permitted to carry out.
191
Q

What 3 factors will the FCA consider when deciding whether an activity is incidental?

A
  1. The scale of the activity in proportion to other services provided.
  2. Whether and to what extent activities that are regulated activities are held out as separate services.
  3. The impression given of how the firm provides regulated activities e.g., through marketing.
192
Q

What are the 4 basic conditions solicitors must satisfy when carrying out exempt regulated activities under SRA Scope Rule 2?

A
  1. You satisfy conditions in s 327 of FSMA.
  2. The activities arise out of and are complementary to the provision of a particular professional service to a particular client.
  3. There is not in force any order or direction of the FCA preventing you from carrying on the activities.
  4. The activities are not otherwise prohibited by these rules.
193
Q

What question should you ask yourself to determine if a regulated activity ‘arises’ out of non-regulated work?

A

What first happened to prompt the activity in question?

194
Q

What 2 restrictions should you be aware of if acting for a client selling shares?

A
  1. The restriction on financial promotions.
  2. The requirement for an approved prospectus where shares are to be offered up to the public.
195
Q

Is it a criminal offence for an unauthorised person to communicate a financial promotion without approval?

A

Yes.

196
Q

Do authorised firms need to apply for a ‘license’ to be an approver of unauthorised persons promotions?

A

Yes.

197
Q

Do authorised firms need to apply to approve their own promotions?

A

No.

198
Q

Can firms still apply to become authorised approvers of unauthorised promotions?

A

No, the ones that exist still currently stand, but now they have to ask the FCA for permission before every single approval.

199
Q

What are the 3 exemptions to the restriction on financial promotions?

A
  1. Sale of body corporate.
  2. Investment professionals.
  3. High net worth individuals.
200
Q

Is the sale of body corporate exemption criteria under FSMA the same as that for the restriction on financial promotions?

A

Yes.

201
Q

How much money does a company need to be considered high net worth?

A

Share capital of 5 million or 500k for a body corporate with 20+ members.

202
Q

Who counts as a high net worth individual?

A

Certified high net worth and certified sophisticated investors.

203
Q

Is it a criminal offence under FSMA to offer shares to the public without a prospectus?

A

Yes.

204
Q

Does a prospectus have to be approved by a regulatory authority?

A

Yes.

205
Q

What are the 2 exemptions to needing a prospectus?

A
  1. Offer directed at fewer than 150 people.
  2. An offer sent to qualified investors.
206
Q

What is a qualified investor?

A

Banks, investment institutions, national and regional governments.

207
Q

As part of the duty to act in best interests, is a solicitor required to draw a client to funding options?

A

Yes.

208
Q

To what extent are solicitors required to conduct a search for their clients’ funding options?

A

A reasonable and proportionate extent.

209
Q

What are the 4 different ways a solicitor can charge a client?

A
  1. Hourly.
  2. Fixed fee.
  3. Capped fees.
  4. Unbundled legal services.
210
Q

Is recording your time effectively the same as billing your client?

A

No.

211
Q

What happens after you record your time, before you can bill a client?

A

A partner has to sign off on your time, and may adjust (e.g., if you took disproportionately long).

212
Q

Do fixed fee earners still record their time?

A

Yes.

213
Q

What is meant by a capped fee?

A

The hourly rate applies, until you reach a maximum amount for the matter and then you will pay no more.

214
Q

What is a private retainer?

A

Somebody bearing the brunt of their own costs.

215
Q

What is professional funding?

A

By a trade union or professional organisation.

216
Q

What is BTE insurance?

A

Before the event – e.g., often is included as a part of other insurances like motor.

217
Q

Are BTE insurance premiums likely to be recoverable in costs if you win?

A

No.

218
Q

What is a CFA?

A

Conditional fee agreement – no win no fee.

If win - normal fee + success fee is paid.

219
Q

Are success fees likely to be recoverable in costs if you win?

A

No.

220
Q

What is the success fee cap for personal injury cases?

A

Must not exceed 25% of the damages, excluding damages for future care and loss.

221
Q

What are examples of things a CFA does not fund?

A

Expert fees, court fees, other disbursements.

222
Q

What is a success fee otherwise known as?

A

An uplift.

223
Q

If a personal injury claimant wins 300k, 240k for future losses, and the solicitor charged a CFA of 50%, what is the maximum amount the solicitor can actually take?

A

25% of the damages excluding those for future care and loss… so 25% of 60k = 15k.

224
Q

What is the maximum damages fee that can be charged for an employment tribunal case in a DBA?

A

35%.

225
Q

What is the general amount of damages fee that can be claimed for cases that aren’t personal injury or employment in a DBA?

A

50%.

226
Q

What is the difference between a CFA and a DBA?

A

CFA = charges + success fee; DBA = proportion of damages.

227
Q

What is the maximum a lawyer can claim under a DBA for a personal injury case?

A

25%.

228
Q

What is ATE?

A

After the event insurance.

229
Q

What does an ATE do?

A

It covers the cost of litigation after it has already begun.

230
Q

What is an ATE often used in conjunction with?

A

A DBA or CFA.

231
Q

Is BTE or ATE more expensive?

A

ATE.

232
Q

Is an ATE premium recoverable if you win?

A

No.

233
Q

What is third-party funding?

A

e.g., banks, private equity firms, hedge funds.

234
Q

What does a third-party funder get in return?

A

Fees + success fee.

235
Q

Can third-party funders control/be involved with the litigation?

A

No.

236
Q

What is CLS?

A

Community legal service – the new term for legal aid.

237
Q

Can CLS be available to a company?

A

Very rarely.

238
Q

What type of claim is eligible for CLS?

A

Mostly children/family, homelessness/domestic violence.

239
Q

Is CLS means-tested?

A

Yes.

240
Q

Does a CLS claim have to have good merits?

A

Yes.

241
Q

What 2 tests must a defendant in criminal proceedings pass to get free legal representation?

A

Means test and merits test.

242
Q

Which defendants are passported through the means test?

A

Under 18 and those on specific welfare benefits like UC.

243
Q

What is the means test in MAGS?

A
  1. Initial assessment works out the applicants weighted gross annual income.
    - If gross annual income is below 12,475 – applicant is eligible.
    - If gross annual income is over 22,325 – applicant is ineligible.
    - If between upper and lower – be required to take a full means test.
244
Q

What is a full means test in MAGS?

A

It will establish the applicants annual household disposable income; if below 3,398 – applicant will be eligible.

245
Q

What is the lower threshold for public funding in MAGS?

A

12,375 pounds.

246
Q

What is the upper threshold for public funding in MAGS?

A

22,325 pounds.

247
Q

What is the disposable income threshold in MAGS?

A

3,398 pounds.

248
Q

What is the combined capital and equity allowance for crown court funding?

A

30k.

249
Q

What happens if you exceed the threshold in crown court?

A

You can be required to make a contribution towards your defence.

250
Q

When are income contributions payable in crown court?

A

During proceedings.

251
Q

When are capital payouts payable in crown court?

A

At the end of proceedings.

252
Q

For crown court, what amount of disposable income makes you ineligible for public funding?

A

37,500K.

253
Q

For crown court, what amount of disposable income makes you eligible for public funding with no contribution?

A

3,398k.

254
Q

For crown court, what amount of disposable income makes you eligible for public funding with a contribution?

A

3,399k - 37,499.99k.

255
Q

What is the income-based contribution currently set at?

A

90% of disposable income for a maximum of 6mo in instalments subject to a maximum based on the type of offence.

256
Q

Which defendants will automatically pass the interest of justice test?

A
  • Charged with indictable only.
  • Either way offence is later sent to Crown.
257
Q

What are the 10 propositions for the interest of justice test?

A
  1. I will lose my liberty.
  2. I have been given a sentence that is suspended or non-custodial which if broken I can be dealt with for the OG offence.
  3. I will likely lose my livelihood.
  4. I will likely suffer serious reputational damage.
  5. A substantial question of law is involved.
  6. I may not be able to understand the court proceedings or present my own case.
  7. Witnesses may need to be traced or interviewed on my behalf.
  8. The proceedings could involve expert cross of a prosecution witness.
  9. It is in the interests of another person.
  10. Any other reasons.
258
Q

What does it mean to be likely to lose liberty?

A

Not just that it is a sentencable offence, but that you likely will be.

259
Q

What is meant by serious reputational damage?

A

It is specific and contextual e.g., sexual convictions can be damaging for theft offenders/prisoners or sexual allegations against somebody who works with children.

260
Q

What factors might mean a person cannot understand the court proceedings or present their own case?

A

Language, technical areas of law, youth, disability/mental health.

261
Q

What types of things make it in the interests of another person that somebody is represented?

A

E.G., it would be inappropriate for the defendant to cross-examine the complainant who is accusing him of rape.

262
Q

What are the defendants 3 options if they fail both tests?

A
  1. Consult with the duty solicitor, and get representation at the first hearing at least.
  2. Self-fund.
  3. Self-represent with the support of the court.

SQE 1 - FKL1 (12 decks)

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