LS

Question 1

LEGAL SERVICES BOARD

Answer 1

LEGAL SERVICES BOARD
* Solicitors Regulation Authority
(SRA)
Bar Standards Board
* CILEx
* Intellectual Property Regulation
Board
* Council of Licenced
* Conveyancers
* Cost Lawyer Standards Board
* Master of the Faculties

Answer 2

INDEMNITY INSURANCE
REQUIREMENTS
* SRA sets out minimum level
* Maintain adequate and appropriate coverage

Question 3

A firm may decide on any amount of insurance so long as they carefully consider whether the amount is adequate and appropriate.
O True
O False

Answer 3

False. The amount must be adequate and appropriate, but a firm needs at least £3 million coverage for any one claim.

Answer 4

SOLICITORS
; OUTSIDE
FIRMS
* If no reserved legal activity, no insurance requirement
* If reserved legal activity, adequate and appropriate coverage

Question 5

A freelance solicitor carrying on reserved legal activities may decide on any amount of insurance so long as they carefully consider whether the amount is adequate and appropriate.
* True
* False

Answer 5

True. Unlike a firm, a freelance solicitor need not carry a minimum amount of insurance, but a freelancer must let their clients know if their coverage is less than the £3 million minimum.

Question 6

What is the standard to assess whether a law firm is carrying proper insurance?

Answer 6

egal Requirements: Law firms are often required by their local bar associations or legal regulatory authorities to carry certain types and minimum levels of insurance coverage. These requirements can vary by jurisdiction and may include professional liability insurance (also known as legal malpractice insurance) as a mandatory minimum.
Type of Practice: The type of legal practice and the areas of law in which a firm specializes can influence the insurance requirements. For example, firms engaged in high-risk areas like personal injury or medical malpractice may require higher coverage limits than firms specializing in transactional law.
Client Contracts: Some clients may require law firms to maintain specific insurance coverage as a condition of engagement. These requirements are often outlined in engagement letters or contracts. Firms should carefully review client agreements to ensure compliance.
Risk Assessment: Law firms should conduct a risk assessment to identify potential liabilities and risks associated with their practice areas and specific cases. Based on this assessment, they can determine the appropriate types and levels of insurance coverage needed.
Coverage Limits: Law firms should consider the adequacy of their coverage limits. Coverage limits should be sufficient to cover potential claims or liabilities that may arise from their practice. It’s essential to periodically review and adjust coverage limits as needed.
Tail Coverage: Law firms should consider whether they need “tail coverage” or “extended reporting period” coverage when changing insurers or retiring. Tail coverage can provide protection for claims that arise after the policy’s expiration.
Exclusions and Deductibles: Firms should review policy exclusions and deductibles to understand the scope of coverage and any potential gaps in protection. They should also be aware of any obligations related to reporting claims to insurers.
Financial Stability of Insurer: It’s important to choose reputable and financially stable insurance providers to ensure that the insurer can meet its obligations in the event of a claim.
State Bar Guidelines: Law firms should consult their state bar association or equivalent regulatory body for guidelines and recommendations regarding insurance coverage for attorneys in their jurisdiction.
Regular Review: Law firms should regularly review and update their insurance coverage to reflect changes in their practice, client requirements, and regulations.

Question 7

What types of costs exist?

Answer 7

KEY TERMS
* Profit Costs
- Fee for solicitor’s time
* Disbursements
- Expenses incurred on client’s behalf

Question 8

Profit costs are the expenses a solicitor incurs on a client’s behalf.
O True
O False

Answer 8

False. Profit costs are the fees a solicitor charges for their time. Expenses a solicitor incurs on a client’s behalf are called disbursements.

Answer 9

FUNDING OPTIONS
* Private funding / private retainer
* Fixed fee

Answer 10

FUNDing OPTIONs
* Conditional Fee Agreement
- ‘No win no fee*
* Damages Based Agreement
- Contingency fee agreement
* Third party Funding
- Third party financing
* Legal Expenses Insurance
Before the event insurance
- After the event insurance
* Union Funding

Question 11

Enter the letter associated with the fee arrangement that corresponds with each scenario in the table below.
If more than one type of fee arrangement applies, enter the appropriate letters without a space (for example, AB).

A: conditional fee agreement
B: damages based agreement
C: third party funding
D: none of the arrangements
1. Client pays success fee if solicitor wins.
2. Client pays solicitor’s costs as a percentage of damages if solicitor wins.
3. Client pays disbursements if solicitor loses.
4. Client pays solicitor’s costs if solicitor loses.

Answer 11

1.B
2. B
3. A and B
4. D

Question 12

Enter the letter associated with the type of legal expenses insurance policy that corresponds with each scenario in the table below.
If both types of policies are applicable, enter the letters without a space (for example, AB).

A: before the event insurance
B: after the event insurance

1. Insurer pays solicitor’s costs if solicitor wins.
2. Insurer pays solicitor’s costs if solicitor loses.
3. Insurer pays solicitor’s disbursements if solicitor loses.
4. Insurer pays other side’s costs if solicitor loses

Answer 12

1. A
2. B.
3. A and B
   4 A and B

Answer 13

Civil Legal Aid
- Financial Eligibility
- Merits Test

Criminal Legal Aid
- Means Test
- Merits Test

Question 14

A client engages a solicitor in a breach of contract matter.

Select the funding arrangement the client has entered into in each of the following situations:

1. The client agrees with their solicitor to pay the solicitor’s hourly rate of £150 plus disbursements.
   These costs and disbursements will be billed to the client and payable on a monthly basis.

O conditional fee agreement
O privately funded
O damages based agreement

Answer 14

O privately funded

Question 15

The client agrees with their solicitor to pay the solicitor’s hourly rate of £100 plus a success fee of 30% if the client’s claim is successful.

O conditional fee agreement
O privately funded
O damages based agreement

Answer 15

O conditional fee agreement

Question 16

The client agrees with their solicitor to pay the solicitor 40% of the damages awarded if the client’s claim is successful.

Answer 16

damages based agreement

Question 17

The Equality Act 2010

Answer 17

PROTECTED
CHARACTERISTICS

Age
Disability
Gender reassignment
Marriage and civil partnership
Pregnancy and maternity
Race
Religion or Belief
Sex
Sexual Orientation

Answer 18

TYPES OF DISCRIMINATION
* Direct: Treating person less favourably than another because of protected characteristic
* Indirect: Putting people with protected characteristic at disadvantage

Answer 19

JUSTIFICATIONS FOR DISCRIMINATION
Proportionate means of achieving a legitimate aim

Question 20

A firm may directly discriminate on the basis of sexual orientation provided the discrimination is a proportionate means of achieving a legitimate aim.

TRUE
FALSE

Answer 20

False. Although the statement sets out the correct standard for determining whether direct discrimination is justifiable, the standard is applicable only with respect to direct discrimination on the basis of age or disability (that is, direct discrimination can be justified only with respect to age or disability).

Answer 21

REASONABLE
ADJUSTMENTS
Firms must put in place to ensure disabled clients and employees aren’t put at substantial disadvantage

Question 22

Write down a few key words relating to the Equality Act as it applies to solicitors.

Answer 22

Non-Discrimination: This is a core principle of the Equality Act, ensuring that solicitors do not discriminate against clients or employees on the basis of protected characteristics.
Protected Characteristics: These include race, gender, age, disability, sexual orientation, religion or belief, gender reassignment, marriage and civil partnership, and pregnancy and maternity.
Equality of Opportunity: Solicitors are expected to provide equal opportunities in employment and service provision, without bias towards any group or individual.
Reasonable Adjustments: This pertains to the requirement for solicitors to make necessary modifications or adjustments to accommodate individuals with disabilities.
Harassment and Victimisation: The Act covers provisions against harassment and victimisation of individuals based on their protected characteristics.
Diversity and Inclusion: Encouraging a diverse and inclusive work environment within law firms and in the provision of legal services.
Compliance and Enforcement: The obligations of solicitors to adhere to the Act and the consequences of non-compliance.
Training and Awareness: The importance of educating solicitors and staff about the Equality Act and its implications in legal practice.
Legal Obligations: The specific legal duties and responsibilities imposed on solicitors under the Act.
Ethical Practice: The ethical implications of the Equality Act for solicitors, emphasizing fairness and justice in legal practice.

Answer 23

MONEY LAUNDERING
STAGES
* Placement
- Money enters financial system
* Layering
- Money’s origin is concealed
* Integration
- Money appears legitimate

Answer 24

CONCEALInG
* Concealing, disguising, converting, transferring
* Criminal property from the UK
* Know or suspect

ARRANGEMENT
* Assist someone else
* To keep proceeds of crime
* Know or suspect
* Exception: ordinary litigation

Question 25

Solicitor’s Action Offence
1. A solicitor set up a private company for a client knowing the company will be used to funnel illegal drug proceeds.

2. A solicitor transferred a client’s money into multiple bank accounts suspecting but not knowing that the funds were derived from illegal gambling activity.
3. A solicitor assisted a client with a house purchase without knowing or suspecting the purchase funds came from the sale of stolen goods.

Offences: Concealing Arranging None

Answer 25

1. Arranging
2. Concealing
3. None

Answer 26

ACQUISITION, USE, OR POSSESSION
* Person uses, acquires, possesses
* Criminal property
Know or suspect

Answer 27

Placement: This is the initial stage where illicit funds are introduced into the financial system. This can be done through various methods like depositing cash into bank accounts, purchasing high-value items, or using the money for gambling.
Layering: In this stage, the money is moved and disguised to sever ties with its illegal source. This involves complex financial transactions, such as transferring money between different accounts, often in different countries, or investing in various financial instruments. The goal is to make tracing the origin of the funds as difficult as possible.
Integration: This final stage is where the laundered money is reintegrated into the economy as legitimate funds. This can be done through investments in legitimate businesses, real estate, or other assets. At this point, it becomes difficult to distinguish these funds from legal income.
Solicitors can potentially become involved at various stages of the money laundering process, often inadvertently. Their involvement typically occurs in the following scenarios:

Real Estate Transactions: Solicitors are often involved in property purchases, a common method for integrating laundered money.
Setting Up Companies or Trusts: Money launderers may use solicitors to set up legal entities which can then be used in the layering stage.
Managing Client Accounts: Handling client funds or transactions can inadvertently involve solicitors in the placement or layering stages.
Providing Legal Advice: Sometimes, legal advice might be sought to navigate or exploit loopholes in financial regulations.

Answer 29

FAILURE TO REPORT
* Failing to report
* Know, suspect, OR
* Reasonable grounds to suspect
* Suspicious Activity Report
(SAR)
* Defences
- Privileged circumstances
- Lack of training

Answer 30

TIPPING OFF
* Disclosing investigation or
SAR
To offender or third person

Question 31

A woman meets with a solicitor and asks if the solicitor could help her purchase a dry cleaning business. The woman says that she recently came into £150,000 in cash but is reluctant to provide further details about the money. To ensure the woman has the funds she claims, the solicitor asks where the money came from. The woman storms out of the office.

If the woman actually has £150,000 in cash and it is the proceeds of crime, is it likely that the solicitor has committed the offence of tipping off?

Yes
No

Answer 31

No. The solicitor would not likely be found to have committed the offence of tipping off because the solicitor is allowed to make normal enquiries about instructions and the retainer. Enquiries as to whether the client has the funds claimed can help the solicitor determine whether they have any concerns about the matter and whether to take on the work.

Answer 33

POLICIES AND PROCEDURES
* Money Laundering Reporting
Officer (MLRO)
* Customer due diligence
* Controls and systems
Training

Question 34

A solicitor is being instructed by a new client who intends to buy and sell a number of commercial properties over the next few months. To cover costs and disbursements, the client hands the solicitor a briefcase full of cash to be deposited in a client account. The solicitor accepts the cash.

Subsequently, the solicitor tries to research the client’s business but can find no information. The solicitor now suspects the client might be trying to launder money. The firm’s MLRO is on vacation and won’t return for three weeks. The firm does not have a deputy MLRO. To whom does the solicitor report their concerns?

O A. Their supervisor
O B. The MLRO, upon their return.
O C. The local police
O D. The National Crime Agency
O E. Interpol

Answer 34

The correct answer is D, the National Crime Agency. If a firm’s MLRO is not available and there is no deputy MLRO, the solicitor must report their suspicion to the NCA.

Answer 35

SPECIFIED ACTIVITIES
Advising
* Arranging
* Dealing as agent
* Managing
* Safeguarding

Answer 36

SPECIFIED INVESTMENTS
* Insurance contracts
* Shares in a company
* Debentures or bonds
* Mortgage contract
* Pension schemes
* Funeral Plans

• NOT included:
• Land
• National Savings Products

Question 37

Why must a solicitor be careful to not advise a client on the merits of buying stock in Company A vs stock in Company B?

Answer 37

It would be advising (a specified activity) on company shares (a specified investment), which is a regulated activity. The solicitor would be committing a criminal offence if they are not authorised by the Financial Conduct Authority.

A solicitor must be careful when advising a client on the merits of buying stock in Company A vs. stock in Company B because of several important reasons:

1. Conflict of Interest: Solicitors have a fiduciary duty to act in their clients’ best interests. Advising on the merits of specific stock investments can create a conflict of interest, as the solicitor may have a personal or financial interest in one of the companies, potentially clouding their judgment. This can undermine the client’s trust and confidence in their solicitor’s advice.
2. Lack of Expertise: Providing investment advice requires specialized knowledge and expertise in financial markets, securities regulations, and economic trends. Solicitors typically do not have the training or qualifications to offer sound investment advice. Giving inaccurate or uninformed advice can lead to financial losses for the client and legal liability for the solicitor.
3. Regulatory Compliance: Offering investment advice without the appropriate licenses and regulatory compliance can result in legal violations. Financial regulators often require individuals providing investment advice to be registered and adhere to strict regulations. Solicitors may not be licensed or authorized to provide such advice.
4. Complexity and Risk: Stock investments involve significant financial risks, and the choice between Company A and Company B can depend on a wide range of factors, including financial performance, market conditions, and long-term prospects. Solicitors may not have the capacity to assess these complex matters accurately.
5. Professional Scope: Solicitors have a specific professional scope related to legal matters. While they can provide legal advice related to investment transactions or assist with legal aspects of stock purchases, they should refrain from offering investment recommendations beyond their legal expertise.
6. Liability Concerns: If a client follows the solicitor’s advice and incurs financial losses, the solicitor could potentially face legal liability for providing unsound investment advice, even if it was unintentional. This can result in legal disputes and damage to the solicitor’s reputation.

To avoid these potential issues, solicitors should recommend that clients seek advice from qualified financial professionals or investment advisors when making decisions about buying stocks. It is essential for solicitors to maintain their focus on legal matters and refrain from straying into areas where they lack the necessary expertise and qualifications.

Question 38

A solicitor just obtained a large settlement for a client who was injured in a car accident. The client asks the solicitor about the advantages and disadvantages of investing in company stock. Would giving such advice be a regulated activity?

Yes
No

Answer 38

No, this would be considered generic advice which is not a specified activity. Therefore, the solicitor is not engaging in a regulated activity.

Answer 39

EXCLUSIONs
* Takeover
* Acting as trustee, nominee, personal representative
* Acting through authorised persons
* Introducing authorized persons
* Providing incidental activities

EXEMPTION
* Members of Designated Professional Body
* Incidental part of legal advice

Answer 40

Fill in the letter that corresponds to the missing word or words.

Under the Financial Services and Markets Act 2000, what is required for the Designated Professional Body exemption to apply to a solicitor’s conduct?

The solicitor must be a member of the SRA and the financial service must be incidental to providing legal advice.