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SQE 1 > Legal Services > Flashcards

Legal Services Flashcards

1
Q

What primary function does the Solicitors Regulation Authority (SRA) perform?

A

The SRA has authority to regulate solicitors and ensure they follow professional standards.

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2
Q

Name three activities that qualify as ‘reserved legal activities’ that only authorised persons may perform.

A

1) Conduct of litigation (issuing or defending proceedings),
2) Preparing court documents relating to probate or land transactions,
3) Administering an oath.

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3
Q

Under what circumstances can someone who is not authorised still carry out a reserved legal activity?

A

When acting on their own behalf, a person may carry out a reserved legal activity even if they are not authorised.

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4
Q

How should a firm determine the appropriate level of professional indemnity insurance (Berufshaftpflichtversicherung) beyond the SRA minimum?

A

A firm should consider:
1) their historic claims experience, and
2) the value of matters the firm takes on each year.

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5
Q

Why would a high-value workload suggest a firm needs more than minimum insurance coverage?

A

Higher-value work carries greater risk of substantial claims, so the firm should have insurance coverage proportionate to potential liability.

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6
Q

In what case does a freelance solicitor need to hold professional indemnity insurance?

A

A freelance solicitor only needs professional indemnity insurance if they are carrying out reserved legal activity.

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7
Q

When should a solicitor discuss fees and costs with a client?

A

A solicitor should discuss fees and costs at the beginning of the engagement and throughout if there will be significant variance from originally discussed amounts.

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8
Q

What specific obligation does a solicitor have regarding cost transparency?

A

The solicitor must provide clear and transparent advice on costs throughout the relationship.

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9
Q

How are non-litigation legal services typically funded?

A

Non-litigation legal services are usually self-funded by the client, with fees typically hourly or at a fixed fee.

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10
Q

Explain how private funding works in litigation.

A

Private funding means the litigation is funded by the litigant themselves.

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11
Q

How does a conditional fee agreement work in legal services?

A

The solicitor and client agree that if the client succeeds, the solicitor is entitled to standard time costs (recoverable from losing party) plus a success fee expressed as percentage of standard costs, payable by client from recovery.

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12
Q

What happens if a client loses under a conditional fee agreement?

A

If nothing is recovered, the client typically pays no costs to their solicitor but may have to pay opponent’s costs and disbursements, and pay for disbursements (Auslagen) incurred by the solicitor.

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13
Q

What limitation exists on success fees in conditional fee agreements?

A

The success fee cannot exceed 100% of the normal fee charged.

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14
Q

How does a damages-based agreement differ from a conditional fee agreement?

A

In a damages-based agreement, the solicitor is entitled to a percentage of the client’s recovery regardless of time spent, while a conditional fee agreement is based on standard time costs plus a success fee.

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15
Q

What are the maximum percentages a solicitor can claim in damages-based agreements?

A

25% in a personal injury case, 50% in commercial cases, and 35% in employment claims.

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16
Q

What happens to the solicitor’s payment if the client loses in a damages-based agreement?

A

If the client does not achieve their goal, the solicitor gets nothing.

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17
Q

How does third-party funding work in litigation?

A

A third party pays the solicitor’s costs and disbursements, but not the other side’s costs if the case is lost.

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18
Q

What protection does a third-party funder have if the client loses the case?

A

If nothing is recovered, typically the third-party funder is not entitled to recover anything from the client.

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19
Q

What happens if a client wins with third-party funding?

A

If the client wins, typically the third-party funder will recover an agreed fee which will be paid out of the recovery.

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20
Q

What is before-the-event insurance and when is it typically purchased?

A

This is insurance purchased before the event being litigated occurred, such as car insurance that includes an agreement to pay solicitors’ costs if the purchaser has a road accident.

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21
Q

What must a solicitor do if insurance requires a designated solicitor?

A

If insurance requires a designated solicitor other than the client’s preferred one, the solicitor must inform the client of this limitation and not accept instruction without such disclosure.

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22
Q

What is after-the-event insurance and when is it typically purchased?

A

Insurance taken out after the event giving rise to the claim, often purchased when the client has agreed to a conditional fee arrangement.

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23
Q

What does the insurer agree to pay in after-the-event insurance?

A

The insurer agrees to pay the disbursements made on the client’s behalf and the other party’s costs if the client loses.

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24
Q

How do some unions support their members with legal issues?

A

Some unions have a plan that pays legal fees for members.

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25
What two tests must be passed to qualify for civil legal aid?
A financial need test and a merits test (good prospects of success), and it's only available for housing disputes and a small range of other cases.
26
What additional qualification applies for criminal legal aid?
Criminal legal aid is subject to a means test, though defendants under age 18 and people receiving Job Seekers Allowance or Universal Credit are automatically qualified.
27
What does the interests of justice test consider?
The interests of justice test considers whether the defendant is likely to lose their job if found guilty and whether they'd be able to present their own case.
28
What factors does the means test consider for legal aid?
The means test considers household income, outgoings, savings, and other available capital.
29
Is there anything preventing solicitors from asking for payment upfront?
No, nothing prevents a solicitor from asking for their fee up front.
30
What does the Equality Act 2010 prohibit solicitors from doing?
The Equality Act 2010 prohibits solicitors from both directly and indirectly discriminating in their practice as well as victimising and harassing people in the workplace.
31
How does indirect discrimination differ from direct discrimination?
Indirect discrimination is conduct that appears neutral but which negatively impacts those with a protected characteristic.
32
List at least five protected characteristics under the Equality Act 2010.
Protected characteristics include: age, disability, sex, sexual orientation, gender re-assignment, marital status, pregnancy, race, and religion.
33
Can direct discrimination occur even when a person doesn't have the protected characteristic?
Yes, direct discrimination can occur even when a person does not actually have the protected characteristic.
34
To whom do a solicitor's duties under the Equality Act 2010 extend?
A solicitor's duties under the Equality Act 2010 extend to clients as well as to employees.
35
When must solicitors make reasonable adjustments under the Equality Act 2010?
Under the Equality Act 2010, solicitors must make reasonable adjustments if a disabled employee or client is at a substantial disadvantage compared to a non-disabled employee or client.
36
Can a disabled client be asked to pay for reasonable adjustments?
No, the employee or client cannot be asked to incur the expense of reasonable adjustments.
37
When is an adjustment not considered 'reasonable' under the Equality Act?
If the cost outweighs the benefit, then it is not a 'reasonable' adjustment.
38
Under what conditions is a defence available for direct discrimination?
No defence is available for direct discrimination unless it is based on age or disability and the action is a proportionate, appropriate, and necessary means of achieving a legitimate aim.
39
What constitutes a legitimate aim in discrimination cases?
A legitimate aim is a real business need (which is also a defence in indirect discrimination cases).
40
Give an example of a legitimate business aim that might justify apparent discrimination.
For example, it is a legitimate aim for a business to offer higher pay to people who work night shifts because it is difficult to attract employees during unsociable hours.
41
What is victimisation in the context of the Equality Act?
Victimisation is when someone is treated less favourably as a result of being involved with a discrimination or harassment complaint.
42
How is harassment defined under the Equality Act?
Harassment is unwanted conduct related to a relevant protected characteristic which violates a person's dignity or creates an intimidating, hostile, degrading, humiliating, or offensive environment.
43
What is money laundering and why is it problematic?
Money laundering is the process of making large amounts of money generated by criminal activity appear to have come from a legitimate source.
44
Which agency primarily handles enforcement of money laundering in the UK?
Enforcement of money laundering in the UK is primarily handled by the National Crime Agency (NCA).
45
What constitutes the offence of concealing under the Proceeds of Crime Act?
A solicitor commits the offence of concealing under POCA if they subjectively know or suspect they are concealing, converting, or transferring criminal property, or removing it from the UK.
46
What can be considered criminal property under POCA?
Criminal property can include money, real property, personal property, and/or intangible property.
47
What does 'concealing' include under money laundering legislation?
Concealing extends to concealing the source or location of property as well as concealing the nature or owner of property.
48
Name two defences to the direct offence of concealing under POCA.
Defences include: 1) Authorised disclosure was made to a nominated officer of the firm or NCA before the transaction, 2) Authorised disclosure after the transaction if there is good reason for the delay.
49
Does making a disclosure about money laundering violate a solicitor's duty of confidentiality?
No, disclosure does not violate a solicitor's duty of confidentiality, and legal privilege does not apply if the solicitor knows or correctly suspects the transaction involves money laundering.
50
What constitutes the offence of arranging under POCA?
A solicitor commits the offence of arranging if they know or suspect they are facilitating the acquisition, retention, use, or control of criminal property by or on behalf of another person.
51
Give an example of how a solicitor might commit the offence of arranging.
A solicitor sets up a private company for a client knowing the company will be used to funnel proceeds of illegal drug activity.
52
What should make solicitors especially vigilant about potential money laundering?
Solicitors should be especially vigilant when questions involve: misuse of client accounts, sale/purchase of real property, use of cash for major transactions, creation of trusts/companies/charities, or management of trusts and companies.
53
What is the key point about the offence of arrangement regarding knowledge?
A person can commit the offence of arranging if they merely suspect (not know) that a transaction will facilitate criminal property, making this an offence solicitors must be vigilant about.
54
What constitutes the offence of acquisition, use, or possession under POCA?
A solicitor commits this offence if they acquire, possess, or use criminal property knowing or suspecting it is criminal property.
55
What defence might be available if a solicitor takes property that might be criminal?
That the solicitor took the property in good faith as adequate consideration is a defence.
56
In what scenario might the defence of adequate consideration most likely arise?
The defence of adequate consideration is most likely in situations where a solicitor provides legal services as part of a legitimate arm's length transaction but unknown to them is paid from a bank account containing proceeds of crime.
57
What reporting obligations do solicitors have regarding money laundering?
Solicitors have a duty to make suspicious activity reports (SARs) under POCA and the Terrorism Act 2000 when they have suspicions of money laundering.
58
To whom can solicitors report suspicious activities?
Solicitors can report to their firm's nominated officer (sometimes known as Money Laundering Reporting Officer [MLRO]) or directly to the NCA if there is no nominated officer or they are unavailable.
59
What test applies when determining whether activity is suspicious enough to report?
The test for suspicion is objective—whether a reasonable person would think the activity is suspicious.
60
Can lack of training be a defence for a solicitor under POCA?
Yes, lack of training from the solicitor's firm can be a defence for a solicitor under POCA (but not under the Terrorism Act), but partners can be criminally liable for failure to provide training.
61
What constitutes the offence of tipping off under POCA?
A solicitor commits the offence of tipping off if they indicate to a client that a SAR has been submitted or disclose that an investigation is underway.
62
Is it an offence to disclose suspicions to a colleague working on the same matter?
No, it is not an offence to disclose to a colleague working on the same undertaking.
63
Is it an offence to disclose suspicions to another legal professional?
No, it is not an offence to disclose to another legal professional to prevent money laundering.
64
What regulatory framework governs disclosures related to money laundering?
The Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payor) Regulations 2017 require firms to have a nominated officer/MLRO to receive and make disclosures to the NCA.
65
What due diligence is required under terrorism financing regulations?
Under Terrorist Financing Regulations 2017, firms must exercise due diligence in verifying the client's identity.
66
In what transactions must a solicitor exercise due diligence?
When establishing a business relationship, for transactions over €15,000, when money laundering or terrorist financing is suspected, or when doubting document veracity.
67
How long must client due diligence records be kept?
A firm must keep client due diligence records for at least five years after the end of the relationship with the client.
68
What general prohibition exists under the Financial Services and Markets Act 2000?
No person (including solicitors) may carry on an activity regulated under the Act unless they are authorised by the Financial Conduct Authority or exempt from authorisation.
69
What constitutes a regulated activity under financial services legislation?
A regulated activity is specified under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 that relates to an investment specified under the Order carried on in the course of business.
70
Name three activities that would qualify as regulated financial activities.
1) Giving investor advice on investment merits, 2) Arranging purchase/sale of investments, 3) Managing assets with discretionary authority.
71
What types of investments are specified under the Regulated Activities Order?
Specified investments include: shares in a company, pension schemes, insurance contracts, funeral plans, mortgage contracts, and debentures.
72
Give an example of prohibited financial advice a solicitor cannot give without authorisation.
Unless authorised or exempt, a solicitor acting in business would be prohibited from telling a client that a particular mortgage is better than others, or from buying and selling company shares for a client who has entrusted investments to them.
73
When is advice considered outside the scope of financial services regulation?
Advice casually given at dinner parties is outside the scope of the general prohibition (because it is not given in the course of business).
74
Are land and Premium Bonds considered specified investments?
No, land and Premium Bonds (amongst some other national savings products) are not specified investments, so the general prohibition does not apply to advice about either.
75
When is safeguarding a client's investments excluded from regulated activities?
Safeguarding a client's investments is excluded when acting as a trustee or personal representative.
76
When is advising on company control excluded from regulated activities?
Advising a client, acting as their agent, or arranging for the purchase or sale of control of a company is excluded.
77
What client introduction activity is excluded from regulated activities?
Introducing a client to a person authorised by the Financial Conduct Authority to give financial advice is excluded.
78
When is advising on company shares excluded from regulated activities?
Advising an estate on the merits of holding or selling specific company shares to pay beneficiaries with no additional compensation is excluded.
79
What general exemption exists for activities that are part of legal services?
An activity is excluded if it is a reasonably necessary part of legal services being provided and the solicitor doesn't bill for the activity separate from legal services.
80
What is the Designated Professional Bodies Exemption?
Under this exemption, a solicitor's activities will be exempt if regulated by the SRA and the activity is incidental to legal advice and the firm's work as a whole.

SQE 1 (6 decks)

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