PC Flashcards
Which ONE of the following statements is CORRECT?
Every lawyer, whether they work in a law firm or in-house, is at risk of exposure to money laundering.
The money laundering regulations apply to law firms but not to in-house lawyers or other industries.
The money laundering regulations apply to corporate solicitors in law firms but not to other areas of practice or to in-house lawyers or other industries.
Every lawyer, whether they work in a law firm or in-house, is at risk of exposure to money laundering.
Correct. The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLR 2017’) apply to a wide range of people and businesses, not just law firms.
Which ONE of the following statements is CORRECT?
There is a risk of a firm being involved in money laundering only when it receives proceeds of crimes in excess of £10,000 into its bank account.
There is a risk of a firm being involved in money laundering only when it receives proceeds of crimes in excess of £100,000 into its bank account.
Money laundering can include receiving small proceeds of minor crimes into your employer’s bank account.
Money laundering can include receiving small proceeds of minor crimes into your employer’s bank account.
Correct
Correct. Receiving the proceeds of crime, however small into your bank account can constitute possessing criminal property and could be a criminal offence.
Which option correctly identifies the key pieces of legislation relating to money laundering in the UK?
The Proceeds of Crimes Act 2002 (‘PoCA’) and the Money Laundering Regulations 2007 (‘MLR’)
The Proceeds of Crime Act 2002 (‘PoCA’), and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLR’)
The Financial Services and Markets Act 2000 (‘FSMA’) and the Money Laundering Regulations 2007 (‘MLR’)
The Proceeds of Crime Act 2002 (‘PoCA’), and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLR’)
Correct
Correct, these are the two key pieces of legislation relating to money laundering in the UK.
Identify whether the following scenario indicates a high or low risk of money laundering:
Your client, a British national, is purchasing a flat for his daughter. He deposits £500,000 in your firm’s client account for the purchase from a bank account in Bermuda. The next day he rings you to inform you that the purchase is not going ahead. He asks you to transfer the £500,000 to his wife’s bank account in the Cayman Islands
High risk, because the client’s deposit came from an offshore bank account in a tax haven, the transaction has been cancelled at short notice and the client is asking you to transfer the money to a different account, also offshore in a different tax haven
Low risk. Neither Bermuda nor the Cayman Islands are on the FATF list of countries with a high risk of money laundering.
High risk because Bermuda and the Cayman Islands are on the European Commission’s list of high risk jurisdictions.
High risk, because the client’s deposit came from an offshore bank account in a tax haven, the transaction has been cancelled at short notice and the client is asking you to transfer the money to a different account, also offshore in a different tax haven
Correct
Correct. There are a number of risk factors here which should alert you to the high risk of money laundering. The client has deposited a large sum of money in cash in your firm’s account. The money came from an offshore bank account in a tax haven. The transaction has been cancelled at short notice and the client is asking you to transfer the money to a different account, also offshore in a different tax haven.
Identify whether the following scenario indicates a high or low risk of money laundering:
Your client, a French national, living in the UK is setting up a trust for her grandchildren. She plans to invest £50,000 in the trust over the course of two years.
High risk because the client is investing a large sum of money in a trust which is a suspicious area of activity because it could be a vehicle for money laundering.
Low risk because France is not a high risk country and there appears to be a legitimate reason for the client to set up the trust.
High risk because although the client is a French national, she is setting up a trust in the UK
Low risk because France is not a high risk country and there appears to be a legitimate reason for the client to set up the trust.
Correct. A client setting up a trust, does have the potential to be a vehicle for money laundering and you will need to carry out customer due diligence on the client, as you will see later in this topic. However there is nothing to suggest a high risk of money laundering here, France is not a high risk country and there appears to be a legitimate reason for the client to set up the trust.
Identify whether the following scenario indicates a high or low risk of money laundering:
Your client, a South African national, has instructed you on a litigation claim and asked you to commence proceedings against her neighbour. The neighbour contacts you and wants to pay £100,000 into your firm’s client account to settle the matter.
Low risk because litigation is not a high risk activity from a money laundering perspective.
High risk because the dispute being settled early is an indicator that the litigation might be a sham. Also the other party is seeking to pay a large sum of money into your firm’s bank account.
High risk because South Africa is on the European Commission’s list of high risk jurisdictions.
High risk because the dispute being settled early is an indicator that the litigation might be a sham. Also the other party is seeking to pay a large sum of money into your firm’s bank account.
Correct. There are a number of risk factors here which should alert you to the high risk of money laundering. A dispute being settled early and easily should alert you to the risk of this being a sham litigation, and the other party seeking to pay a large sum of money into your firm’s account is another warning sign. South Africa is not on the list of high risk countries, but there are enough other factors here to indicate a high risk of money laundering.
Which ONE of the following options completes the following sentence CORRECTLY:
It is a defence to the offence of concealing, disguising, converting or transferring criminal property to:
“report your suspicion to a nominated officer”
“report your suspicion to the SRA”
“report your suspicion to your manager”
“report your suspicion to a nominated officer”
Correct
Correct. You have a defence to the offence of concealing, disguising, converting or transferring criminal property under s. 327 PoCA if you made an authorised disclosure. Under s. 338 the disclosure should be made to a constable, customs office or a nominated officer. In practice the most practical thing to do is therefore to report your suspicion to your employer’s nominated officer.
Which ONE of the following activities does NOT fall within the definition of ‘regulated sector’ in Schedule 9 of PoCA?
Advising a client on an employment dispute.
Advising a client on the purchase of a property.
Advising a client on setting up a trust for their grandchildren.
Advising a client on an employment dispute.
Correct. ‘Regulated sector’ as defined in Schedule 9 PoCA includes “participating in financial and real property transactions concerning:
the buying and selling of real property or business entities
the managing of client money, securities or other assets,
the opening or management of bank, savings or securities accounts;
the organisation of contributions necessary for the creation, operation and management of companies;
the creation, operation or management of trusts, companies or similar structures
Advising a client on the purchase of a property and on setting up a trust would fall within participating in financial and real property transactions. However advising on litigation matters (including an employment dispute) does not fall within the definition of regulated sector, as set out in Schedule 9.
You are an apprentice in the property department of a law firm and you are contacted by a new client (‘Client’) who has never instructed the firm before. The Client contacts you directly asking for details of the firm’s client account. He wants to send the sum of £6,000,000 from an account in Bermuda to the firm’s client account in readiness for a quick completion of his purchase of a property in London, on which he is just about to instruct the firm (the ‘Purchase’). He insists that he wants you to act personally on the Purchase.
You explain to the Client that you are not able to give the Client the firm’s client account details. The Client tells you he will call in at the office tomorrow and he wants you to give him the firm’s client account details then.
Which ONE of the following statements is CORRECT?
You should meet the Client and give him the account details. There are no grounds for suspicion here as it is not unusual for a property in London to cost £6,000,000
You should meet the Client and give him the client account details – so as not to arouse suspicion.
When the Client arrives at the office, you should not give him the client account details, but tell him that you have reported the matter to the MLRO (money laundering reporting officer) because you suspect money laundering.
You should immediately make a disclosure to the firm’s MLRO (money laundering reporting officer) under the Proceeds of Crime Act 2002 (‘PoCA’) that you suspect the money is criminal property. You must wait to receive appropriate consent from the MLRO before carrying out the Client’s instructions.
You should immediately make a disclosure to the firm’s MLRO (money laundering reporting officer) under the Proceeds of Crime Act 2002 (‘PoCA’) that you suspect the money is criminal property. You must wait to receive appropriate consent from the MLRO before carrying out the Client’s instructions.
Correct
Correct. There are a number of risk factors here which should alert you to the risk of the Client attempting to launder money, notably: the client is new to your firm and has sent a large amount of money (£6 million) in cash to your firm’s client account, the client wants the transaction to complete quickly and he wants you (an inexperienced apprentice) to act personally on the transaction.
If you carry out the Client’s instruction you are at risk of committing an offence under s. 327 (transferring criminal property), s. 328 (becoming concerned in an arrangement which facilitates the acquisition…use or control of criminal property) and/or s. 329 PoCA (acquires, uses or has possession of criminal property).
You will also commit an offence under s. 330 PoCA if you fail to disclose your suspicion to the firm’s nominated officer. You should not take further action until you receive appropriate consent from the MLRO, s. 327(2)(a), s. 328(2)(a) PoCA.
You should be careful that you do not commit the offence of tipping off the client under s. 333A PoCA.
Xavier Gaston is a French national. He has never instructed Price Prior before, where you are currently an apprentice in the corporate department. Xavier has sent the sum of £2,000,000 from an account in Jersey to Price Prior’s client account in readiness for a quick completion of his acquisition of all the shares in FWL (Retail) Ltd, which he is just about to instruct you on (the ‘Acquisition’). Xavier insists that he wants you to act personally on the deal.
If you proceed with Xavier’s instructions and complete the Acquisition WITHOUT making an authorised disclosure to Price Prior’s MLRO, which ONE of the following statements is CORRECT in relation to offences that you have committed under the Proceeds of Crime Act 2002 (‘PoCA’)?
You are likely to have committed an offence under section 333A PoCA.
You are likely to have committed an offence under sections 329 and 330 PoCA
You are likely to have committed a direct involvement offence under section 329 PoCA, but not a non-direct involvement offence because you are not working in the regulated sector.
You are not likely to have committed an offence under PoCA.
You are likely to have committed an offence under sections 329 and 330 PoCA
Correct
Correct. There are a number of risk factors here which should alert you to the risk of Xavier attempting to launder money, notably: the client is new to your firm and has sent a large amount of money (£2 million) in cash to your firm’s client account, the client wants the transaction to complete quickly and he wants you (an inexperienced apprentice) to act personally on the transaction.
If it is later discovered that the Acquisition was part of a money laundering operation, you will have had possession of criminal property (the proceeds of crime) so you are likely to have committed an offence under s. 329 PoCA 2002.
In addition, you will have committed an offence under s. 330 PoCA 2002 because there is sufficient grounds for you to suspect that Xavier is engaged in money laundering, for the reasons set out above. Under s. 330 PoCA 2002 it is an offence for someone practising in the regulated sector (which you are, as you are involved in buying a business entity) not to make a disclosure to your firm’s MLRO. You are practising in the regulated sector because you are buying a business entity which falls within the definition of “participating in financial and real property transactions concerning: the buying and selling of real property or business entities”.
You will not have committed an offence under s. 333A PoCA 2002 because you have not done anything to tip Xavier off to the fact that you suspect he may be attempting to launder money.
Identify whether the following scenario requires standard CDD, enhanced CDD or ongoing monitoring:
Your client, a British national, is purchasing a flat for her daughter for a price of £750,000. She is funding 50% of the purchase in cash from the sale of some shares, and 50% by a mortgage with a high street bank. You have not acted for the client before and you expect that this will be a one-off transaction for the client.
Ongoing monitoring
Standard CDD
Enhanced CDD
Standard CDD
Correct
Correct. There is nothing on these facts to suggest that this client present a high risk of money laundering. The is not from a high risk country and is funding 50% of the purchase through a mortgage. As this is a one-off transaction, it will be an occasional transaction and you should obtain standard CDD on the client before you start working for her.
Identify whether the following scenario requires standard CDD, enhanced CDD or ongoing monitoring:
You have been instructed by a company Autolext Corporation (‘Autolext’) on the purchase of 60% of the shares in a data analytics company, Data Inc for £2 million. Data Inc is registered in the Cayman Islands. Autolext is registered in Bermuda and has a majority shareholder who is Iranian. Autolext has asked to you set up a wholly owned subsidiary, Autolext Data Limited which will be the vehicle that purchases the shares in the Data Inc. Autotext will pay cash for the shares.
Enhanced CDD
Ongoing monitoring
Standard CDD
Enhanced CDD
Correct
Correct. There are a number of factors that suggest that there is a high risk of money laundering in this scenario. The client is registered in Bermuda, an off-shore tax haven, and its majority shareholder is from a high risk country, Iran. The value of the transaction is high and is being funded in cash. The client is also asking you to establish a subsidiary for the sole purpose of purchasing the shares, which could indicate a transaction that is unusually complex with no apparent purpose. The target is also registered in an off-shore tax haven, the Cayman Islands. You would need to make further enquiries to satisfy yourself as to the source of the £2 million, the identity of the majority shareholder and that the transaction is genuine.
Identify whether the following scenario requires standard CDD, enhanced CDD or ongoing monitoring:
Plaza Properties Limited is a private limited company and an existing client of your firm and regularly instructs you on the acquisition and sale of properties in its portfolio. You have received a new instruction to act for it on the acquisition of the freehold of an office building near Maidenhead for £10 million. Part of the acquisition is funded by a loan.
Ongoing monitoring
Standard CDD
Enhanced CDD
Ongoing monitoring
Correct
Correct. This is an existing client whom the firm acts for on a regular basis. The firm will already have carried out CDD on the client. The firm will need to carry out ongoing monitoring, by checking that the transaction is consistent with the firm’s knowledge of the client and checking at regular intervals that the identification documents it holds for the client are up to date. There is nothing on these facts to suggest that this client present a high risk of money laundering.
BLP
You recently acted for a client in connection with the sale of his personal training business and that sale has now concluded.
The client tells you that following the sale, he now has £50,000 cash and he would like some advice about how to invest this money, specifically whether he should buy shares in XYZ Plc. He wants to know whether shares are generally a good investment at the moment and, in particular, whether or not he should buy the shares in XYZ.
Which one of the following statements is correct in relation to the above scenario?
You would be able to give the client generic advice on the rights attaching to shares because this advice does not fall within Article 53(1) RAO.
It is likely that Article 67 of the Financial Services and Markets Act (Regulated Activities) Order 2001 (‘RAO’) would apply to your advice.
You would be free to advise about the merits of the shares in XYZ Ltd because you could rely on the exclusion under Art 70 RAO.
The advice is likely to be complementary under Scope Rule 2.
The advice is not likely to be incidental under s 327 FSMA.
You would be able to give the client generic advice on the rights attaching to shares because this advice does not fall within Article 53(1) RAO.
Correct
BLP
Which one of the following would not be classified as financial services and therefore not be regulated under FSMA?
Advising on the acquisition of a business.
Dealing in investment products on behalf of clients.
Advising on investment products on behalf of clients.
Arranging investment products on behalf of clients.
Advising on the acquisition of a business.
BLP
You are a solicitor in the corporate department of Price Prior. Your client wishes to buy 50% of the shares in a company as an investment. Your client has instructed you to advise her on the acquisition (including on the merits).
Which one of the following statements is correct regarding authorisation under FSMA?
You will not need to be authorised by the FCA to act for the client because your advice will be excluded from FSMA under Article 70 RAO.
You will not need to be authorised by the FCA to act for the client because acting for a client who is acquiring shares in a company is not a specified activity under Article 53(1) RAO.
FSMA does apply and you will need to be authorised by the FCA to act for the client on the acquisition.
Shares are not a specified investment, therefore FSMA does not apply.
There is a specific exclusion relating to advising on the merits that will allow you to act.
You will not need to be authorised by the FCA to act for the client because your advice will be excluded from FSMA under Article 70 RAO.
Which one of the following best describes who the SRA Accounts Rules apply to?
All law firms (including sole practices) worldwide, including all who manage or work within them.
Authorised bodies only.
Managers and employees of a law firm’s accounts department only.
All firms (including sole practices) the SRA regulates, including all who manage or work within them.
All firms (including sole practices) the SRA regulates, including all who manage or work within them.
Correct. The SRA make this clear in their introduction to the SRA Accounts rules and in Rule 1.
Which topic do the majority of the SRA Accounts Rules relate to?
Dealings with other money (not client money) belonging to clients or third parties.
Client money and client accounts.
Application of the SRA Accounts Rules
Accountants’ reports and storage and retention of accounting records.
Client money and client accounts.
Correct. Rules 2-8 (of 13) are on this topic and are the largest section of the SRA Accounts Rules.
Who is responsible for compliance with the SRA Accounts Rules?
All managers and employees of an authorised body are jointly and severally responsible.
The managers of an authorised body are severally responsible.
The managers of an authorised body are jointly and severally responsible.
Only the authorised body’s compliance manager is responsible.
The managers of an authorised body are jointly and severally responsible.
Correct. Rule 1.2 states that: ‘The authorised body’s managers are jointly and severally responsible for compliance by the authorised body, its managers and employees with these rules.
A client is selling a property. You receive the deposit money for the property from the buyer’s solicitor before exchange and hold it to their order, as requested.
Which one of the following best explains whether the money is client money or not?
The money is not client money because you do not provide regulated services to the sender of the money (the buyer’s solicitor).
The money is not client money because it does not belong to a client of yours.
The money is client money because it is held by you on behalf of a third party in relation to regulated services delivered by you.
The money is client money because it is held by you on behalf of a third party in relation to regulated services delivered by you.
Correct. This situation falls within Rule 2.1(b).
Your client is buying a property and prior to completion of the purchase sends you a cheque in respect of the stamp duty land tax which will be paid on the purchase after completion.
Which one of the following best explains what kind of money this cheque represents and why?
It is non-client money as a bill has not yet been delivered to the client for the stamp duty land tax.
It is client money because it has been received in respect of an unpaid cost or expense.
It is non-client money as the stamp duty land tax is a paid disbursement.
It is client money because it has been received in respect of an unpaid cost or expense.
Correct. It is client money under Rule 2.1(d).
Which one of the following is correct in respect of non-client money?
If you receive money generally on account of costs in a transaction from a client, it will be non-client money as it is not for a specific cost.
If you receive money from a client in respect of a paid disbursement, it is non-client money.
If you receive money from a client in respect of an unpaid disbursement, it is non-client money.
If you receive money from a client in respect of a paid disbursement, it is non-client money.
Correct. It will fall outside Rule 2.1(d) and the definition set out there of client money and so it will be non-client money.
Which one of the following is NOT a requirement under Rule 8 of the SRA Accounts Rules?
To, at least every five weeks, for all client accounts, reconcile the bank statement with the cash book balance and the client ledger total.
To keep accurate, contemporaneous and chronological records in respect of client ledgers (including the business side of the client ledger account) and a cash book for client accounts.
To keep a record of all bills or other notifications of costs given by you.
To obtain, at least every week, bank statements for all client accounts and business accounts which you hold or operate.
To obtain, at least every week, bank statements for all client accounts and business accounts which you hold or operate.
Correct. Whilst this looks like the requirement under Rule 8.2, the correct frequency in Rule 8.2 is at least every five weeks not at least every week. The time period (at least every five weeks) matches that of the reconciliation required in Rule 8.3.
Which of the following correctly sets out the accounts where a receipt of client money from Dr Jones (a client) on account of costs for her property purchase would be recorded by the authorised body?
Business side of the client ledger for Dr Jones’ property purchase and the client cash book.
Client side of the client ledger for Dr Jones’ property purchase and the client cash book.
Business side of the client ledger for Dr Jones’ company incorporation and the client cash book.
Client side of the client ledger for Dr Jones’ property purchase and the business account cash book.
Client side of the client ledger for Dr Jones’ property purchase and the client cash book.
Correct. See Rules 8.1(a)(i) and 8.1(c) as well as Rule 8.1(a) and SRA guidance ‘Helping you keep accurate accounting records’.
Which one of the following statements about the client ledger balance is correct?
The balance on the client side of a client’s client ledger account shows how much money in the client account belongs to that client.
The balance on the client side of a client’s client ledger account shows how much money that client owes to the authorised body.
The balance on the client side of a client’s client ledger account shows how much money there is in total in the client account.
The balance on the client side of a client’s client ledger account shows how much money in the client account belongs to that client.
Which one of the following is not an SRA Principle?
Act in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons.
Act in a way that encourages equality, diversity and inclusion.
Act in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice.
Act in the best interests of your employer.
Act with independence.
Act in the best interests of your employer.
Correct
Correct. Acting in the best interests of your employer is not an SRA Principle. Whether you work for a law firm or in-house, you are subject to the Principles to act with independence, with honesty, with integrity, and in a way that upholds public trust and confidence in the profession. If these Principles came into conflict with a desire to act in the best interests of your employer, the Principles would take priority.
CCS 2.3 relates to proceedings before the courts. It states:
‘You do not provide or offer to provide any benefit to witnesses dependent upon the nature of their evidence or the outcome of the case.’
If you breached this provision of CCS, which one of the following Principles would you also be in breach of?
Principle 6: act in a way that encourages equality, diversity and inclusion.
Principle 7: act in the best interests of each client.
Principle 1: act in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice.
Principle 1: act in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice.
Correct. If you provided a benefit to witness for providing evidence of a particular nature you would be jeopardising the proper administration of justice.
Which ONE of the following statements about the Principles is FALSE?
Your duty to act with integrity (under Principle 5) extends not only to your relationship with your client but also to your dealings with the court, other lawyers and members of the public.
If you behave in an untrustworthy way but that behaviour is outside of your usual professional practice, you cannot be found liable to have breached Principles 4 or 5.
Should the Principles come into conflict, those which safeguard the wider public interest take precedence over an individual client’s interests.
The Principles apply to all individuals authorised by the SRA to provide legal services, as well as authorised firms and their managers and employees.
If you behave in an untrustworthy way but that behaviour is outside of your usual professional practice, you cannot be found liable to have breached Principles 4 or 5.
Correct. Principles 4 and 5 apply to legal professionals in their personal as well as their professional lives. Therefore, the statement that you cannot be found liable to have breached Principles 4 and 5 if you behave in an untrustworthy way outside of your usual professional practice is FALSE.
Which ONE of the following is NOT a protected characteristic under the Equality Act 2010?
Race
Measles
Religion or belief
Sex
Measles
Correct. Measles is not one of the protected characteristics listed in your materials under the Equality Act 2010.
Which one of the following is NOT an example of direct discrimination?
A nightclub charges a higher price for entry to a man because of their sex where the service provided to a woman is exactly the same.
A bowls club will not admit someone with a hearing impairment as a member.
A shop will not serve someone because of their ethnic origin.
A large department store provides a private resting area for women who are pregnant or breastfeeding. A man feeling tired complains that he does not have access to a similar facility.
A large department store provides a private resting area for women who are pregnant or breastfeeding. A man feeling tired complains that he does not have access to a similar facility.
Correct.
Under section 13(1) Equality Act, direct discrimination occurs where “because of a protected characteristic, A treats B less favourably than A treats or would treat others”.
Note however that, under section 13(6)(b) of the Act, in considering discrimination against a man, it is not relevant to take into account any special treatment given to a woman in connection with pregnancy or childbirth. This example is not discrimination because a man cannot compare himself to a woman in connection with pregnancy, childbirth, or it would follow, breast feeding.
The other examples would amount to direct discrimination:
A shop will not serve someone because of their ethnic origin: in this example the protected characteristic is race and the shop is treating the customer less favourably than they would treat others.
A nightclub charges a higher price for entry to a man because of their sex where the service provided to a woman is exactly the same: in this example the protected characteristic is sex. The night club owner is treating men less favourably than they treat others (i.e women).
A bowls club will not admit someone with a hearing impairment as a member: in this example the protected characteristic is disability. The bowls club is treating the person with a hearing impairment less favourably than they treat others (people without a hearing impairment)
Which ONE of the following statements about the duty to make reasonable adjustments is CORRECT?
The duty to make reasonable adjustments aims to make sure that a disabled person can use a service as close as it is reasonably possible to get to the standard usually offered to non-disabled people.
The duty is ‘anticipatory’. This means a service provider cannot wait until a disabled person wants to use the service. They must think in advance (and on an ongoing basis) about what disabled people with a range of impairments (such as people who have a visual or hearing impairment, a mobility impairment or a learning disability) might reasonably need.
Many adjustments will not be particularly expensive and a service-provider is not required to do more than is reasonable.
The duty to make reasonable adjustments aims to make sure that a disabled person can use a service as close as it is reasonably possible to get to the standard usually offered to non-disabled people.
If a disabled person wants to use the service, the service provider must ensure that it makes reasonable adjustments to the service within a reasonable time of the disabled person’s request.
Many adjustments will not be particularly expensive and a service-provider is not required to do more than is reasonable.
The duty to make reasonable adjustments aims to make sure that a disabled person can use a service as close as possible to get to the standard usually offered to non-disabled people.
The duty is ‘anticipatory’. This means a service provider cannot wait until a disabled person wants to use the service. They must think in advance (and on an ongoing basis) about what disabled people with a range of impairments (such as people who have a visual or hearing impairment, a mobility impairment or a learning disability) might reasonably need.
The service-provider must use its best endeavours to provide the same service to a disabled person as to a non-disabled person, and bear the cost of all necessary expenditure.
The duty to make reasonable adjustments aims to make sure that a disabled person can use a service as close as it is reasonably possible to get to the standard usually offered to non-disabled people.
The duty is ‘anticipatory’. This means a service provider cannot wait until a disabled person wants to use the service. They must think in advance (and on an ongoing basis) about what disabled people with a range of impairments (such as people who have a visual or hearing impairment, a mobility impairment or a learning disability) might reasonably need.
Many adjustments will not be particularly expensive and a service-provider is not required to do more than is reasonable.
Correct
Which provision of the Code of Conduct for Solicitors, RELs and RFLs (‘CCS’) contains the duty of confidentiality:
“You keep the affairs of current and former clients confidential unless disclosure is required or permitted by law or the client consents”
CCS 6.3
CCS 6.2
CCS 6.4
CCS 6.3
Correct.
CCS 6.2 contains the principle that you do not act if you have a conflict of interest or a significant risk of a conflict of interest.
CCS 6.4 contains the principle that where you are acting for a client on a matter, you make the client aware of all information material to the matter of which you have knowledge (the duty of disclosure).
Which ONE of the following statements is CORRECT
The duty of disclosure under CCS 6.4 does not apply where you have reason to believe that serious physical or mental injury will be caused to your client or another if the information is disclosed.
The duty of disclosure under CCS 6.4 does not apply where you are satisfied it is reasonable in all the circumstances for you not to disclose information to the client.
The duty of disclosure under CCS 6.4 does not apply where the Compliance Officer for Legal Practice consents to you not disclosing the information to the client.
The duty of disclosure under CCS 6.4 does not apply where you have reason to believe that serious physical or mental injury will be caused to your client or another if the information is disclosed.
Correct. This is an exception to the rule in CCS 6.4, as set out in CCS 6.4(c ).
Under CCS and CCF, the decision as to whether or not you should disclose information that is material to your client’s matter does not rest with your Compliance Officer for Legal Practice or with what you consider to be reasonable.
In which ONE of the following circumstances will there not have been a breach of the duty of confidentiality?
Providing information to the court in compliance with a court order.
Disclosing information about your deceased client’s estate to a beneficiary without the consent of the deceased’s personal representatives.
Disclosing information about your client (A) from the firm you used to work for, which is material to the litigation matter on which you are advising your client (B) at your new firm.
Providing information to the court in compliance with a court order.
Correct. Complying with a court order falls within the exception “unless disclosure is required…by law” under CCS 6.3.
Which ONE of the following statements is correct?
The 3 Cs are customer due diligence, conflict check and client care letter
The 3 Cs are customer due diligence, confidentiality and client care letter.
The 3 Cs are conflict check, confidentiality and competence.
The 3 Cs are customer due diligence, conflict check and client care letter
Correct
Which ONE of the following statements is correct?
CDD is verifying the identity of your client on the basis of information from a government source.
CDD is identifying your client and verifying their identity on the basis of documents, data or information from a reliable source
CDD is identifying your client by taking a copy of their passport.
CDD is identifying your client and verifying their identity on the basis of documents, data or information from a reliable source
Correct
Which provision of CCS contains the principle that you do not act in relation to a matter if you have a conflict of interest?
CCS 6.1
CCS 6.2
CCS 6.3
CCS 6.2
Correct
Outdoor Pursuits Limited (‘Outdoor’) is an online retailer of outdoor leisure clothes and an existing client of your firm. Outdoor wishes to acquire Gorspex Limited (‘Gorspex’), an online climbing equipment retailer, (the ‘Acquisition’). Your firm has been instructed to advise Outdoor in connection with the Acquisition.
Which ONE of the following statements is correct?
Your firm might be able to act for Outdoor and Gorspex on the Acquisition as they will be competing for the same objective.
If anyone working at your firm owned shares in Gorspex, your firm would not be able to act on the Acquisition because there would be an ‘own interest conflict’.
You should check that your firm is not acting for Gorspex in relation to the Acquisition.
You should check that your firm is not acting for Gorspex in relation to the Acquisition.
Correct. If your firm was acting for Gorspex, there would be a conflict of interest and your firm would not be able to act for Outdoor.
Outdoor and Gorspex are not competing for the same objective here. The ‘objective’ Outdoor is ‘competing for’ is Gorspex, the target, so Gorspex cannot be competing for itself. Remember that the competing for the same objective exception applies mostly to tenders or auctions, not direct arm’s length sales.
‘Own interest conflict’ is defined in the SRA Glossary as ‘any situation where your duty to act in the best interests of any client in relation to a matter conflicts or there is a significant risk that it may conflict with your own interests in relation to that or a related matter.’ If an individual solicitor owned shares in Gorspex, that solicitor would not be able to act on the acquisition due to their own interest conflict. But one solicitor in the firm owning shares in Gorspex would not prevent another solicitor in that firm from acting for Outdoor on the acquisition.
Which provision of the SRA Codes requires law firms to carry out client conflict checks?
SRA Code of Conduct for Firms (‘CCF’) 2.1
SRA Code of Conduct for Solicitors, Registered European Lawyers (RELs) and Registered Foreign Lawyers (RFLs) 6.2
SRA Code of Conduct for Solicitors, Registered European Lawyers (RELs) and Registered Foreign Lawyers (RFLs) 6.1
SRA Code of Conduct for Firms (‘CCF’) 2.1
Correct. CCF 2.1 states that you must ‘have effective governance structures, arrangements, systems and controls in place to ensure:
You comply with all the SRA’s regulatory arrangements, as well as with other regulatory and legislative requirements which apply to you’.
CCF 2.1 means that law firms need to have systems in place to ensure that there are no conflicts in place at the outset of the instruction.
John Smith has approached your firm to act for him on the sale of all his shares in John Smith Films Ltd (‘John Smith Films’) to Galaxy Inc (‘Galaxy’), a well-known film studio. Mars Inc (‘Mars’) has also been reported in the press as making an offer to John Smith for his shares in John Smith Films.
Which ONE of the following options correctly states the names against which you should carry out a conflict check?
John Smith and John Smith Films
John Smith, John Smith Films, Galaxy and Mars.
John Smith, John Smith Films, and Galaxy.
John Smith and Galaxy
John Smith, John Smith Films, and Galaxy.
Correct. You should carry out a conflict check against your client, John Smith, the target, John Smith Films and the counter party, Galaxy. There is no need to carry out a search against Mars because at this stage it is not involved in the transaction, there have just been reports in the press.
Which option below completes the following sentence correctly?
‘CCS 3.2 requires you to…’
send your client a client care letter within one week of receiving new instructions from them.
ensure that the service you provide to clients is competent and delivered in a timely manner.
consider and take account of your client’s attributes, needs and circumstances.
charge your client a fair and reasonable price for the service.
ensure that the service you provide to clients is competent and delivered in a timely manner.
Correct. This is an important standard from a client care perspective. You must be competent to give the advice your client requests and you must give it in a timely fashion. Many complaints arise from lawyers being too busy to give the client the level of service they are paying for.
‘Sending a client care letter is an SRA requirement under CCS 3.1.’
Which ONE of the following statements is CORRECT?
The statement is false because the requirement is under CCS 3.3
The statement is true.
The statement is false because there is no SRA requirement to send a client care letter.
The statement is false because there is no SRA requirement to send a client care letter.
Correct. Sending a client care letter is not a mandatory requirement under CCS. However, as the SRA requires that certain information is provided to clients in writing, most firms choose to send client care letters to their clients as a way of demonstrating that they have met the SRA’s requirements.
Which ONE of the following would NOT be a permitted reason to terminate your retainer with a client?
You are acting for a client on the sale of a company (‘Target’) and you discover that the client is selling the Target to a company in which your brother is a majority shareholder.
The client you are defending in a criminal trial has admitted that they lied on oath in their evidence and they are not willing to change their evidence.
Terminating your retainer to act on the divorce of a current client to give you time to concentrate on the divorce of a celebrity client who has just instructed you.
A two-partner accountancy firm has instructed you to act on the sale of their practice. However, you have not been able to obtain clear instructions from the partners because they disagree on the terms of the sale.
Terminating your retainer to act on the divorce of a current client to give you time to concentrate on the divorce of a celebrity client who has just instructed you.
Correct. You would be in breach of Principle 7 (act in the best interests of each client) and Principle 2 (act in a way that upholds public trust and confidence in the solicitors’ profession) amongst others if you did this. You would also be in breach of CCS 1.1.
Which ONE of the following statements is INCORRECT?
Law firms must ensure that clients are informed in writing at the time of engagement about any right they have to make a complaint to the Legal Ombudsman and when such a complaint can be made.
Law firms must ensure that clients are informed in writing at the time of engagement about how a complaint can be made and to whom.
Law firms must ensure that clients are informed in writing at the time of engagement about their right to complain about the firm’s service and their charges.
Clients do not need to be informed of a law firm’s complaints procedure until you become aware that an issue has arisen which you reasonably believe may lead to the client wanting to make a complaint.
Clients do not need to be informed of a law firm’s complaints procedure until you become aware that an issue has arisen which you reasonably believe may lead to the client wanting to make a complaint.
Correct answer. This statement is false. CCS 8.3 requires legal professionals (and this requirement applies to firms under CCF 7.1) to inform their clients in writing at the time of engagement about their right to complain, how a complaint can be made and their right, if any, to make a complaint to the Legal Ombudsman.
Which ONE of the following statements is CORRECT?
If a law firm does not resolve a complaint from a client within 8 weeks following the event giving rise to the complaint, solicitors must ensure that the client is informed, in writing, of any right they have to complain to the Legal Ombudsman and the time frame for doing so
If a law firm does not resolve a complaint from a client within 6 weeks following the making of the complaint, solicitors must ensure that the client is informed, in writing, of any right they have to complain to the Legal Ombudsman and the time frame for doing so.
If a law firm does not resolve a complaint from a client within 8 weeks following the event giving rise to the complaint, solicitors must ensure that the client is informed, in writing, of any right they have to complain to the SRA and the time frame for doing so.
If a law firm does not resolve a complaint from a client within 8 weeks following the making of the complaint, solicitors must ensure that the client is informed, in writing, of any right they have to complain to the Legal Ombudsman and the time frame for doing so.
If a law firm does not resolve a complaint from a client within 8 weeks following the making of the complaint, solicitors must ensure that the client is informed, in writing, of any right they have to complain to the Legal Ombudsman and the time frame for doing so.
Correct. See CCS 8.4 (which applies to firms by virtue of CCF 7.1).
Which ONE of the following statements is CORRECT?
CCS requires legal professionals to ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred.
CCS requires legal professionals to inform their clients in writing of who will be carrying out the work for the client, and how the firm will charge for the work.
CCS requires legal professionals to inform their clients in writing at the time of engagement about how their matter will be priced and the likely overall cost of the matter.
Law firms may charge clients for the reasonable costs incurred by a firm in dealing with a complaint if the complaint is resolved in favour of the firm.
CCS requires legal professionals to ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred.
Correct. See CCS 8.7. Note that CCS does not require this information to be provided in writing, but it is good practice to put this in writing.
Which ONE of the following correctly states two of the largest liabilities of a law firm?
Training events for staff and client entertainment
Rent and salaries
Fees paid by clients and marketing
Rent and salaries
Correct. Two of the main liabilities of a law firm are rent and salaries. Many firms are based in central city locations to be close to the businesses which they represent. The downside to this is, of course, the higher rent. Equally, while more staff mean that more work can be taken on, the salaries of those staff are considerable.
Fees paid by clients are the main source of income for a law firm, not outgoings. Marketing expenses is an outgoing but should not be one of the largest two liabilities of a law firm. Training events for staff should not be one of the largest liabilities of a law firm although it is an outgoing. Expenditure on client entertainment is also an outgoing, but again should not be one of the largest outgoings of a law firm.
Which ONE of the following statements is CORRECT?
Hourly charging is the traditional method of billing a client. However, it is coming under increasing pressure as clients seek to control the extent of their legal costs, and other methods of billing are therefore becoming more common.
Hourly charging is the method of billing most favoured by clients as it enables clients to see how much time has been spent on a matter by all the lawyers working on it.
Hourly charging is the most common method of billing clients used by law firms.
Hourly charging is the traditional method of billing a client. However, it is coming under increasing pressure as clients seek to control the extent of their legal costs, and other methods of billing are therefore becoming more common.
Correct. The problem with hourly charging from the client’s perspective is that there is no limit on the amount the firm charges the client for the work. If the lawyers take 100 hours to complete the project, the firm could charge for the full amount, assuming the partner responsible for the matter considers that to be a reasonable amount for the work. Clients are therefore increasingly looking to agree other billing methods, such as fixed fees or a cap on legal fees to help them manage the amount they spend on external lawyers.
Which ONE of the following statements CORRECTLY defines a fixed fee agreement?
In a fixed fee agreement, the law firm will record (and bill) their fees in the normal way, but the fees will not exceed a pre-agreed amount for the particular transaction.
If the recorded time on a file reaches the fixed amount, the legal team may be asked to stop work on the file while the partner attempts to renegotiate the fixed amount.
Otherwise, work will continue as normal past the fixed amount, and any fees incurred above the amount will have to be written off.
In a fixed fee agreement, the law firm will invoice a client for a fixed amount, regardless of the amount of time spent by fee earners on the transaction. The fixed amount will be fixed at the agreed amount whether the hours worked by the lawyers on an hourly charging basis work out as more or less than the fixed fee. Fixed fee agreements are common for conveyancing or wills eg drafting a will for a set fee of £95 plus VAT
Fixed fee agreements are common in litigation and mediation cases. Under fixed fee agreements, the lawyers do not recover any fees if they lose the case. If they win, they may recover their fees out of the damages awarded to the client. The maximum amount the lawyer can recover is capped, eg at 25% for personal injury cases. There are rules in place as to when and how fixed fee agreements can be used and enforced.
In a fixed fee agreement, the law firm will invoice a client for a fixed amount, regardless of the amount of time spent by fee earners on the transaction. The fixed amount will be fixed at the agreed amount whether the hours worked by the lawyers on an hourly charging basis work out as more or less than the fixed fee. Fixed fee agreements are common for conveyancing or wills eg drafting a will for a set fee of £95 plus VAT
Correct. In a fixed fee agreement the law firm will charge the client the fixed fee whether the hours worked by the lawyers on the task work out as more or less than the fixed fee. If the hours worked by the lawyers work out as more than the fixed fee the firm will make a loss, if the hours work out as less than the fixed fee, the firm will be able to charge the full amount of the fixed fee. Fixed fees tend to be used for projects the firm carries out regularly where they can confidently predict the number of hours it will take to complete the work.
A capped fee agreement is where the law firm will record (and bill) their fees in the normal way, but the fees will not exceed a pre-agreed amount for the particular transaction. If the recorded time on a file reaches the cap, the legal team may be asked to stop work on the file while the partner attempts to renegotiate the cap. Otherwise, work will continue as normal past the cap, and any fees incurred above the amount will have to be written off.
A conditional fee agreement is common in litigation and mediation cases. The lawyers do not recover any fees if they lose the case. If they win, they may recover their fees out of the damages awarded to the client. The maximum amount the lawyer can recover is capped, eg at 25% for personal injury cases. There are rules in place as to when and how conditional fee agreements can be used and enforced.
You have acted for a client whose transaction has now finished. You are not currently acting on any other matters for them although they are a long-standing client. There is some client money belonging to them in the client account. Which one of the following best sets out what you should do with this?
You must send the money to the client and the relevant accounting entries are as follows:
Credit client ledger business side
Debit cash sheet business account.
There is no need to send the money to the client. It can remain in your client account until you are next instructed by the client.
You must send the money to the client and the relevant accounting entries are as follows:
Credit client ledger
Debit cash sheet client account.
You must send the money to the client and the relevant accounting entries are as follows:
Debit client ledger
Credit cash sheet client account.
You must send the money to the client and the relevant accounting entries are as follows:
Debit client ledger
Credit cash sheet client account.
Correct. Rule 2.5 states that you must ensure that client money is returned promptly to the client for whom it’s held, as soon as there is no longer any proper reason to hold those funds. These are the correct accounting entries for withdrawing money from the client account to send it (in a cheque or by electronic transfer) to the client.
A client has no money in the client account. Their solicitor pays a Land Registry fee on their behalf. Which one of the following correctly sets out the accounting entries to record this?
Debit client ledger client account
Credit cash sheet client account.
Credit client ledger client account
Debit cash sheet client account.
Debit client ledger business account
Credit cash sheet business account.
Credit client ledger business account
Debit cash sheet business account.
Debit client ledger business account
Credit cash sheet business account.
Correct. These are the correct entries to record the payment out of non-client money. Non-client money will be used to make the payment because the client does not have any client money in the client account and Rule 5.3 states that you only withdraw client money from a client account if sufficient funds are held on behalf of that client to make the payment.
A client has no money in the client account. Their solicitor pays a Land Registry fee on their behalf. Which one of the following correctly sets out the accounting entries to record this?
Credit client ledger client account
Debit cash sheet client account.
Credit client ledger business account
Debit cash sheet business account.
Debit client ledger business account
Credit cash sheet business account.
Debit client ledger client account
Credit cash sheet client account.
Credit client ledger business account
Debit cash sheet business account.
Correct. When the cheque reimbursing you is received, the entries needed are these ones to record the receipt of non-client money into the business account (because the cheque cannot be paid into petty cash as it is not an actual bank account).
You act for a client who has no money in the client account. You use cash from petty cash to pay a taxi fare to attend a meeting with your client. Your client later sends you a cheque to reimburse you for the taxi fare. Which one of the following correctly sets out the accounting entries to record the receipt of the cheque?
Credit client ledger business account
Debit cash sheet business account.
Credit client ledger client account
Debit cash sheet client account.
Debit client ledger business account
Credit cash sheet petty cash account
Credit client ledger business account
Debit cash sheet business account.
Credit client ledger business account
Debit cash sheet business account.
Correct. When the cheque reimbursing you is received, the entries needed are these ones to record the receipt of non-client money into the business account (because the cheque cannot be paid into petty cash as it is not an actual bank account).
A solicitor is dealing with the administration of a deceased’s estate for a client. At the outset the solicitor gave a written estimate of the likely total costs of £10,000 including disbursements. A few weeks later the client instructs the solicitor to arrange for some shares in an overseas company to be sold. The solicitor decides the best way to do this is to instruct an agent to sell the shares. The agent’s fees will be an additional £1000.
Which of the following best explains what the solicitor should do next?
A The solicitor does not need to do anything because the client was informed that it was only an estimate at the outset.
B The solicitor does not need to do anything because the agent’s fees will be incurred outside England and Wales.
C The solicitor does not need to do anything because the agent will invoice the client directly.
D The solicitor should write to the client to inform him about the agent’s fees and ask for his instructions because a solicitor must get prior approval for every item of expenditure.
E The solicitor should write to the client to inform him about the agent’s fees and ask for his instructions because the original estimate is no longer accurate.
E The solicitor should write to the client to inform him about the agent’s fees and ask for his instructions because the original estimate is no longer accurate.
A client telephones a solicitor to instruct her to draft wills for himself and his brother. They both wish to leave their estates to each other.
Which of the following best explains what the solicitor should do?
A The solicitor must draft wills for the client and the brother if the brother has given written authorisation in advance of the client’s authority to give instructions on his behalf and provided the solicitor has as no reason to doubt the instructions reflect the brother’s
wishes.
B The solicitor may draft wills for the client and the brother if the brother has given written authorisation in advance of the client’s authority to give instructions on his behalf.
C The solicitor cannot draft the wills for the client and the brother unless the brother provides instructions to her directly.
D The solicitor cannot draft the wills for the client and the brother because there is a conflict of interests between them.
E The solicitor can draft the wills for the client and the brother because they are related to each other and there is a low risk that the instructions do not represent the
brother’s wishes.
B The solicitor may draft wills for the client and the brother if the brother has given written authorisation in advance of the client’s authority to give instructions on his behalf.
- authorisation does not need to be direct (just proper)
- not a conflict of interest at this stage
- no such thing as a low risk instruction
- real debate between A and B: question of wording (“must” vs “may”)
A disabled employee at a firm of solicitors has requested that the firm buy some computer software for him to use at work. This software enables a person with the employee’s disability to use a computer more effectively. The partners in the firm want
advice on their obligations under the Equality Act 2010 (‘the Act’).
What must the partners in the firm do to meet their obligations under the Act?
A They must make substantial adjustments to ensure that the disabled employee is not placed at a disadvantage compared to those who are not disabled.
B They must make reasonable adjustments to ensure that the disabled employee is not placed at a substantial disadvantage compared to those who are not disabled.
C They must make adjustments to ensure that the disabled employee is not placed at a significant disadvantage compared to those who are not disabled.
D They must make significant adjustments to ensure that the disabled employee is not placed at a disadvantage compared to those who are not disabled.
E They must make adjustments to ensure that the disabled employee is not placed at an unreasonable disadvantage compared to those who are not disabled.
B They must make reasonable adjustments to ensure that the disabled employee is not placed at a substantial disadvantage compared to those who are not disabled.
- “reasonable” is the wording from the legislation
A solicitor is advising a client who wants to leave a considerable sum of money to a charity in his will. The following day the solicitor sits next to a new acquaintance at a golf club dinner. The new acquaintance tells the solicitor that he is concerned that the charity he works for is bound for financial failure because the directors are being sued for misappropriation of the charity’s funds. The new acquaintance then tells the solicitor the name of the charity he works for. Much to the solicitor’s surprise, it is, by coincidence, the charity the client is proposing to bequeath to.
Is the solicitor obliged to inform the client of the reported concerns about the prospects of the charity?
A No, because the information was obtained in the course of the solicitor’s
personal life and therefore does not impact on his professional obligations.
B No, because the duty of confidentiality overrides the duty of disclosure.
C No, because information obtained from clients must be kept confidential unless disclosure is required or permitted by law or the client consents.
D Yes, because the information is material to the client’s matter.
E Yes, because the duty of disclosure overrides the duty of confidentiality.
D Yes, because the information is material to the client’s matter.
- no duty owed to the acquaintance
- need to act in the best interest of the client
- personal duty of solicitor: does not matter that it is outside the office
-
Arjun Patel sends a cheque to the law firm acting for him on the drafting of his will. He sends the cheque at the start of the transaction and it is generally on account of costs to be incurred in connection with the matter.
Which pair of double entries shows how the receipt of the cheque from Mr
Patel should be recorded in your firm’s accounts?
A Credit client ledger client account: Arjun Patel
Debit cash sheet client account
B Debit client ledger client account: Arjun Patel
Credit cash sheet client account
C Debit client ledger business account: Arjun Patel
Credit cash sheet business account
D Credit client ledger client account: Arjun Patel
Debit client ledger business account: Arjun Patel
E Credit client ledger business account: Arjun Patel
Debit cash sheet business account
A Credit client ledger client account: Arjun Patel
Debit cash sheet client account
- get rid of those that only mention business account
- D is wrong since the double entry does not match
- client money credit since no bill has been sent
- B is the wrong way around: looking for a credit in the client ledger!
A solicitor in a law firm has received a phone call from the managing director of a private limited company incorporated in the UK, which is a new client. The managing director wants to know why the solicitor’s firm is asking for documents to verify the identity of the company’s shareholder. The company’s shareholder lives in Russia and owns and holds the entire shareholding of the company.
Which of the following responses best explains the advice the solicitor should give
to the managing director?
A. The solicitor is under an obligation to identify and verify the identity of the company’s shareholder because the shareholder lives outside the UK.
B. The solicitor is under an obligation to identify and verify the identity of the company’s shareholder because the shareholder lives in Russia.
C. The solicitor is under an obligation to identify and verify the identity of the company’s shareholder because the shareholder owns more than 25% of the shares.
D. The structure of the company and the way the shares are held by the shareholder
may raise issues about tax evasion.
E. The solicitor is considering making a suspicious activity report to the firm’s nominated
officer
C. The solicitor is under an obligation to identify and verify the identity of the company’s shareholder because the shareholder owns more than 25% of the shares.
- the focus is on the beneficial owner as they earn more than 25%
Your client, a British national, is purchasing a flat for her daughter for a price of £750,000. She is funding 50% of the purchase in cash from the sale of some shares, and 50% by a mortgage with a high street bank. You have not acted for the client before and you expect that this will be a one-off transaction for her.
Which of the following best explains the action you should take with regard to
customer due diligence?
A. You should carry out simplified CDD on the client because there is nothing to suggest that this client presents a high risk of money laundering.
B. You should carry out standard CDD on the client because there is nothing to suggest that this client presents a high risk of money laundering.
C. You should carry out enhanced CDD on the client because she presents a high risk of money laundering.
D. You should carry out ongoing monitoring on the client because you have not acted for
her before.
E. You should carry out standard CDD on the client and identify and verify the beneficial owner of the high street bank.
B. You should carry out standard CDD on the client because there is nothing to suggest that this client presents a high risk of money laundering.
not A – the type of investment is not low risk and implied that there are only two types (simplified or high risk) but there is a third type: standard!
not C – not high risk
not D – first time and one off
not E – beneficial ownership irrelevant
For each of the following scenarios, is there:
* a conflict of interest
* an own interest conflict
* neither?
Scenario 1: A developer client asks you to advise on a large development. You realise that it is sited next to your brother’s house and will likely affect its value.
Scenario 2: A client asks you to act on the purchase of a house. You have already been instructed to act for the seller of the property.
Scenario 3: You act for the landlord of a leasehold flat. The tenant is a friend from school. The tenant is in arrears on payment of the rent, and the landlord instructs you to commence proceedings for the rent arrears.
Scenario 4: You are a partner acting for the tenant of an office on a claim against the freeholder for disrepair. The freeholder rings a different partner in the team to instruct them to defend the claim.
scenario 1 – own conflict
scenario 2 – conflict of interest
scenario 3 – own conflict
scenario 4 – conflict of interest
Conflicts of interest exceptions
For each of the following scenarios, which of the exceptions applies?
* a substantially common interest
* competing for the same objective
* neither
Scenario 1: acting for the purchaser of a residential property and the mortgage company lending the purchase price to the purchaser. The purchaser and the mortgage company will be using a loan agreement, security documentation and a standard form certificate of title approved by the Law Society and UK Finance.
Scenario 2: acting for company X and bank Y on bank Y’s loan of £500,000 to buy land for the development of a shopping centre. The terms of the loan will be negotiated at arm’s length.
Scenario 3: acting for company A and company B who are both bidding against each other in an auction to buy the shares in company C.
scenario 1 – substantially common interest
scenario 2 – neither
scenario 3 – competing for same objective
Were the solicitor’s actions in accordance with the SRA Standards and Regulations?
A. Yes, because a solicitor can act where there is an own interest conflict if he has received written consent from the client.
B. Yes, because a solicitor can act where there is an own interest conflict if he is satisfied it is in his client’s best interests.
C. Yes, because a solicitor can act where there is an own interest conflict if the solicitor and the client have a substantially common interest.
D. No, because a solicitor cannot act if there is an own interest conflict unless the solicitor and the client are competing for the same objective.
E. No, because a solicitor cannot act if there is an own interest conflict or a significant risk of an own interest conflict.
E. No, because a solicitor cannot act if there is an own interest conflict or a significant risk of an own interest conflict.
Client money?
For each of the scenarios, decide whether the money described is client money or not.
Scenario 1: money received by a law firm from a client on account of costs generally.
Scenario 2: money received by a law firm from a client in respect of a company search fee that has already been paid by the
solicitor on the client’s behalf.
Scenario 3: money received by a law firm from a client in respect of a company search fee. The solicitor has incurred the search fee, and the solicitor’s firm has received the invoice, but the invoice has not yet been paid by the solicitor’s firm
scenario 1 – client money
scenario 2 – not client money
scenario 3 – client money
Client money MCQ 1
A firm of solicitors is acting on behalf of a client who is selling their property and purchasing a new property. A deposit of £35,000 has been received from the buyer’s solicitor in respect of the sale and is held as stakeholder. The firm of solicitors has not sent a bill of costs to the client yet.
Which one of the following best explains whether the £35,000 is client money?
A. Yes, it is client money.
B. No, it is not client money because it has been received from a third party and not from the client.
C. No, it is not client money because it is held as stakeholder and has not been released to the client.
D. No, it is not client money because a bill of costs has not yet been sent to the client.
E. No, it is not client money because it has been received by the firm of solicitors and not by the client.
A. Yes, it is client money.
Client money MCQ 2
You work in a firm of solicitors which receives a cheque for £4,500. The cheque is made payable to the firm and is drawn on the client account of Elford & Partners (another firm of solicitors). The cheque arrives with a covering letter from Elford & Partners, stating that it represents payment of damages owed by one of their clients to one of your clients, Sonia Jones, who you represented in her claim for damages. The partner in your firm who has been dealing with the matter is away from the office for one week on holiday and cannot be contacted. Sonia Jones is out of the country on a business trip.
Which one of the following sets out the best course of action your firm should take?
A. Send the cheque immediately to Sonia Jones by first class post.
B. Bank the cheque immediately in the firm’s client account and notify Sonia Jones that the money has been received.
C. Hold the cheque and try to contact Sonia Jones to find out what she would like your firm to do with the cheque.
D. Bank the cheque immediately in the firm’s business account until the partner dealing with the matter returns from holiday.
E. Hold the cheque until the partner dealing with the matter returns from holiday.
B. Bank the cheque immediately in the firm’s client account and notify Sonia Jones that the money has been received.
A firm of solicitors is acting on behalf of a client who is selling his property and purchasing a new property. A deposit of £25,000 has been received in respect of the sale and is held as stakeholder.
Which pair of double entries shows how the receipt of the deposit should be recorded?
A. Credit cash sheet client account
Debit stakeholder ledger
B. Credit cash sheet business account
Debit stakeholder ledger
C. Credit client ledger client account
Debit stakeholder ledger
D. Credit stakeholder ledger
Debit cash sheet client account
E. Credit cash sheet client account
Debit client ledger client account
D. Credit stakeholder ledger
Debit cash sheet client account
A solicitor acts for a client in relation to the acquisition of a private limited
company. Two days before the transaction is due to complete the solicitor
suspects that his client will be using the transaction to launder money. The
solicitor reports this to the nominated officer who makes a suspicious activity
report to the relevant authority.
What action should the solicitor now take?
A. Proceed with the transaction as the solicitor has made the disclosure to
the nominated officer.
B. Proceed with the transaction only after receiving authorisation from the
relevant authority.
C. Proceed with the transaction after a period of three days if no response is
received from the relevant authority.
D. Explain to the client that he cannot act as a suspicious activity report is
pending.
E. Explain to the client that a suspicious activity report has been made and
then proceed with the transaction.
B. Proceed with the transaction only after receiving authorisation from the
relevant authority.
A – need authorisation or wait 7 WORKING days
C – wrong notice period: need to be 7 WORKING days
D – tipping off!
E – tipping off!
(technically B should also include the possibility to proceed after the notice period of 7 working days but it is the best answer here)
A man instructs his solicitor to act for him in the purchase of the entire issued share
capital of a private limited company from another company. The solicitor advises on the share purchase and helps to prepare and negotiate all the necessary documentation. 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.
Has the solicitor breached the general prohibition against carrying on a regulated
activity?
A. Yes, because the solicitor has given advice on the purchase of shares in a specific company and no exclusion or exemption applies.
B. Yes, because the transaction involves the purchase of the entire issued share
capital of the company and no exclusion or exemption applies.
C. No, because an exemption applies to professional firms which are supervised by the Solicitors Regulation Authority when they engage in corporate work.
D. No, because an exclusion applies if the transaction relates to the purchase of any
number of shares in a private limited company.
E. No, because an exclusion applies if the transaction involves at least 50% of the
voting shares in the company.
E. No, because an exclusion applies if the transaction involves at least 50% of the
voting shares in the company.
Step 1
Shares are a specified investment
Step 2
Arranging deals in shares is a specified activity
Step 3
Excluded activity as over the 50% of the voting shares in the company are
being sold
A solicitor acts for a client who is raising finance secured against his home to fund his new business. The solicitor will be providing advice and preparing all the necessary documentation in connection with the mortgage. The client asks the solicitor to explain the key differences between a repayment mortgage and an endowment mortgage. Neither the solicitor nor his firm is authorised by the Financial Conduct Authority to carry on a regulated activity.
Can the solicitor give the explanation requested about the types of mortgages?
A. Yes, because such advice is a necessary part of the provision of his legal services.
B. Yes, because he is subject to the Solicitors’ Financial Services (Scope) Rules 2001 and therefore falls within an exemption from the Financial Services and Markets Act 2000.
C.Yes, because the provision of generic advice is outside the scope of the Financial
Services and Markets Act 2000.
D. No, because such advice does not fall within an exemption from the Financial Services and Market Acts 2000.
E. No, because he is not authorised by the Financial Conduct Authority to give advice in
respect of either type of mortgage.
C.Yes, because the provision of generic advice is outside the scope of the Financial
Services and Markets Act 2000
Step 1
Mortgages are a specified investment
Step 2
Advising on the merits of investments is a specified activity
But generic advice is not a specified activity. To be caught the advice requires an element of opinion on the part of the solicitor and a recommendation as to the course of action.
A solicitor acts for a client who is found guilty of shoplifting. The client asks the solicitor to present a plea in mitigation on her behalf. At the hearing, the client gives the court a false address and date of birth in order to conceal the fact that she has previous convictions.
Which of the following statements best describes what the solicitor should do?
A. Cease to act immediately.
B. Not refer to the client’s character or previous convictions.
C. Immediately correct the information about the client’s address and date of birth without further reference to the client.
D. Not refer directly to the client’s previous convictions but imply that she is of good character.
E. Ask the client to correct the information about her address and date of birth and if she refuses, cease to act.
A solicitor has been contacted by a woman who asks him to represent her father by attending at the police station. The father has been arrested on suspicion of attempted murder and is in custody at the police station. The solicitor is fully aware of the circumstances of the allegation as he represented the woman’s brother several days ago when the brother was arrested for the same offence. The brother has now been charged with the offence. The firm will carry out the usual conflict of interest check.
Do the rules of professional conduct allow the solicitor to represent the woman’s father at the police station?
No, although the solicitor can accept instructions from a third party, he cannot accept instructions from a close family member of the proposed client.
B. No, the solicitor cannot accept instructions from a third party under any circumstances.
C. Yes, the solicitor can accept instructions from the woman provided he is satisfied that the woman has the authority to give instructions and that there is no conflict of interest or risk of conflict.
D. Yes, the solicitor can accept instructions from the woman provided he is satisfied that the woman has the authority to give instructions. A conflict of interest can never arise between close family members and there is no need to wait for the outcome of the conflict of interest check.
E. Yes, the solicitor can accept instructions from the woman provided he is satisfied that the woman has the authority to give instructions. A conflict of interest will not arise where close family members are implicated in the same offence and there is no need to wait for the outcome of the conflict of interest check.
You are duty solicitor and are called to attend your local police station. The police have arrested Jack and Ben on suspicion of robbery and both have requested the duty solicitor.
You have a private consultation with Jack who tells you that both he and Ben were involved in the robbery although not to the extent that the police would allege.
You then have a private consultation with Ben. Ben immediately asks you what Jack has said to you as he wants to know if Jack has ‘dropped him in it’ as this is rubbish because he was at home with his mates all night.
Can you act for Ben?
Can you still act of Jack?
No and No!
The starting point is to ask whether you can act in the best interests of each client, Principle 7.
You cannot act if there is a client conflict CCS 6.2.
Here, Jack has implicated Ben while Ben intends to deny any involvement.
You cannot act for Ben as you are unable to act in both Jack’s and Ben’s best interests Principle 7. This would be a conflict between clients.
In addition, we cannot tell Ben what Jack has said as we owe Jack a duty of confidentiality CCS 6.3 and cannot tell Ben without Jack’s consent CCS 6.4(b).
Ben must be advised to seek representation from another firm. When speaking to the police it is important not to disclose any confidential information
Another issue now arises as you potentially have information from Ben (that he denies all involvement in the robbery) which is material to Jack’s case (as Jack says he carried out the robbery with Ben but not to the extent that the police allege).
You have a duty to disclose this to Jack CCS 6.4 . You also have a duty of confidentiality to Ben, which continues even though you no longer act for him CCS 6.3.
Confidentialitywill overridedisclosure.
You are now unable to act in Jack’s best interests Principle 7 as you are unable to disclose material information to him.
You therefore will have to cease to act for Jack as well to ensure that you meet your mandatory Principles.
It is always good practice to ask each client before taking instructions whether they think there might be a conflict.
When we first saw Ben we should have advised him we were acting for Jack and asked whether this would potentially cause an issue.
If he had said yes, then we might have been able to extricate ourselves from the situation before coming into possession of confidential information.
This would have enabled us to continue to act for Jack.
You are on call during the night. Ron has been arrested on suspicion of assault occasioning actual bodily harm (‘ABH’) on his girlfriend, Sophie , contrary to s.47 Offences against the Person Act 1861. Sophie is alleged to have suffered severe bruising following an argument with Ron.
You have your private consultation with Ron and he is subsequently interviewed under caution. During both, Ron denies the assault. He says that he has been ‘stitched up’ by Sophie, who has a serious drinking problem and that her injuries were caused when she fell over after she had picked a fight with him. He told her that the relationship was over and she then said, ‘I’ll make you sorry – I am going to tell the police that you hurt me’. Sophie then called 999 and Ron was arrested.
The next day when you are in the office, opening a file relating to this matter, you discover that Sophie instructed Price Prior’s family law department nine months ago, seeking a non-molestation order against her then boyfriend, Angus . Sophie withdrew her application before the hearing and the file has now been closed.
Can you continue to act for Ron?
NO
no such thing as information barrier in criminal law
You have taken instructions from Ron who has accused his girlfriend of lying in relation to an allegation of assault against him.
You have now discovered that your firm previously acted for Sophie and that she had previously made an allegation of assault against another boyfriend which she subsequently withdrew.
Clearly this information is material to Ron’s case and should be disclosed to him CCS 6.4.
You cannot do so without Sophie’s consent because of your duty of confidentiality to her CCS 6.3, notwithstanding the fact that you no longer act for her.
You therefore cannot act in Ron’s best interests and should cease to act for him because of the conflict between your duties to each client Principle 7.
You are acting for Kathy Selwood, a long standing client of the firm, who has pleaded not guilty to theft.
It is the day before the trial and you are having a meeting with Kathy to go over the prosecution case and take her instructions ready for cross examination. You discuss with Kathy that the prosecution evidence includes a witness who saw the theft take place and who has identified Kathy in a video identification procedure (‘VIPER’) as being the person responsible.
Kathy tells you that she did steal the items but that her mother is willing to come to court and provide Kathy with an alibi for the relevant time. She says that should be enough to ‘get her off the hook’.
Can you continue to act for Kathy?
DEPENDS! (in theory yes, but depends if Kathy insists on having her mum as a witness or on taking the stand herself)
You cannot mislead the court.
Kathy has indicated that she wants to call a witness whose evidence you know is untrue. You cannot comply with her instructions as this would mislead the court CCS 1.4 by calling a witness whose evidence you know to be untrue. You would not be complying with Principles 1, 4 and 5.
If Kathy insists on calling her mother you will have to withdraw from acting.
If you withdraw, you must not disclose the confidential information CCS 6.3. At most, you should only inform the court that your professional duties prevent you from continuing to act. The court cannot pressure you into providing reasons nor try to get you to reconsider; the decision to withdraw rests with you.
Kathy is entitled to put the prosecution to proof.
You could theoretically continue to act for Kathy but you would be very limited in your conduct of the trial as you would be unable to raise a positive case.
A claimant instructs its solicitor to put forward a breach of contract claim despite the solicitor’s advice that the claim is incoherent – it has no legal basis. Which of the following is the best advice as to whether such a claim should be put forward?
A - The solicitor should not help in putting this claim forward. The claimant can pursue the claim but risks a costs order against it.
B - The solicitor should help the claimant in putting the claim forward. The claimant risks a costs order against it.
C -The claimant cannot pursue the claim.
D- The solicitor should not help in putting this claim forward and should prevent the claimant from pursuing the claim.
E -The solicitor should help the claimant in putting the claim forward. The claimant and solicitor risk costs orders against them.
A - The solicitor should not help in putting this claim forward. The claimant can pursue the claim but risks a costs order against it.
Rule 2.4 requires that you (as a solicitor) only put forward statements, representations or submissions to the court which are properly arguable. B and E are therefore wrong. Whether the claimant pursues the claim is up to the claimant, so C and D are wrong. A is correct.
W hat information is the firm required to provide to new clients in writing at the time of engagement?
A. The client’s right to complain about your services and your charges; how a complaint can be made and to whom; and any right they have to complain to the Legal Ombudsman and when they can make any such complaint.
B. The client’s right to complain about your services and your charges; how the firm will charge for the work; and as their matter progresses, the likely overall cost of the matter and any costs incurred.
C. W ho will be carrying out the work for the client; how the firm will charge for the work; and any right they have to complain to the Legal Ombudsman and when they can make such a complaint.
D. W ho will be carrying out the work for the client and the supervising partner; the overall costs of the matter and any costs incurred; and how a complaint can be made and to whom.
E. That complaints will be dealt with properly, fairly and free of charge; the services provided by the firm are regulated by an approved regulator; and whether any work done for the client will be carried out by an authorised person.
A. The client’s right to complain about your services and your charges; how a complaint can be made and to whom; and any right they have to complain to the Legal Ombudsman and when they can make any such complaint.
CCS 8.3
“required” at “time of engagement”
B - mentions as the matter progresses
C - no need to mention who will carry out the work
D - no need to mention who will carry out the work
E -
Which one of the following is not a quality you would expect from a legal professional?
Morality.
A high level of education and training.
A desire to get the best outcome for your client, whatever the circumstances.
A desire to promote the public good.
Integrity.
A desire to get the best outcome for your client, whatever the circumstances.
Correct
Correct. The circumstances may be such that your obligation to act in the best interest of your client is replaced by an overriding duty to promote the public good.
Which one of the following statements correctly describes the key aspects of being a legal professional?
Being a legal professional requires you to demonstrate knowledge, skill, and expertise and therefore a high level of education and training. Provided you act in the best interests of your client, you will meet the standard expected of a legal professional.
You do not need to worry about demonstrating trust, morality and integrity if you are working in-house because your only obligation is to present the best case for your employer.
As well as knowledge and expertise, being a legal professional requires you to demonstrate trust, morality and integrity. Trust, morality and integrity are important so that your clients know that they can trust the advice you give them.
As well as knowledge and expertise, being a legal professional requires you to demonstrate trust, morality and integrity. Trust, morality and integrity are important to maintain the public’s trust in the legal profession.
As well as knowledge and expertise, being a legal professional requires you to demonstrate trust, morality and integrity. Trust, morality and integrity are important to maintain the public’s trust in the legal profession.
Correct
Correct. As well as owing a duty to your clients, you also have a duty to promote the public good. Trust, morality and integrity are therefore important qualities in a legal professional.
Your colleague, a newly qualified solicitor in the property department, is giving you a lift back to the office after a football match. Your colleague has a minor collision with another car. As your colleague exchanges details with the owner of the other car, you hear your colleague say:
“Don’t bother suing me for the damage to your car. I’ve just qualified as a solicitor so you will be wasting your time. It’ll cost you so much in legal costs, which you won’t recover whatever happens, I’m sure you’ll regret suing me for a very long time”.
Which one of the following statements is true?
Your colleague has not breached the standards expected of a legal professional because the collision was not with a client.
Your colleague is giving free advice to the owner of the other car and has not breached the standards expected of a legal professional.
Your colleague has not breached the standards expected of a legal professional because the collision occurred outside working hours.
Your colleague has breached the standards expected of a legal professional.
Your colleague has breached the standards expected of a legal professional.
Correct
Correct. The standards of truth, integrity and morality apply to legal professionals in their personal as well as their professional lives and when they are dealing with members of the public as well as clients.
Which one of the following statements is false?
Clients can refer complaints about poor service from a solicitor to the Legal Ombudsman at any time.
The Solicitors Disciplinary Tribunal deals with serious breaches of the SRA’s rules and disciplines solicitors.
The SRA sets the principles and codes of conduct that solicitors and lawyers regulated by the SRA must comply with.
The Legal Services Board regulates all lawyers in England and Wales.
Clients can refer complaints about poor service from a solicitor to the Legal Ombudsman at any time.
Correct. The statement is false. The right to refer a complaint to the Legal Ombudsman applies to individuals, small businesses, charities, clubs and trusts. It does not apply to larger companies. In addition the client should exhaust the law firm’s procedure before referring a complaint to the legal Ombudsman.
Which one of the following is not a power of the SRA?
Impose a disciplinary sanction on a firm, for example a fine.
Commence disciplinary proceedings against a solicitor by the Solicitors Disciplinary Tribunal
Order a solicitor to repay or refund the whole of part of the costs to the client.
Strike a solicitor off the roll.
Close down a law firm.
Strike a solicitor off the roll.
Correct. This a power of the Solicitors Disciplinary Tribunal.
Which one of the following is not a power of the Solicitors Disciplinary Tribunal?
Award compensation to a party that has suffered loss.
Reprimand a solicitor.
Award costs against a party to proceedings.
Impose a restriction on the area in which a solicitor can practice.
Impose a fine.
Award compensation to a party that has suffered loss.
Correct. This action would have to be taken by a court.
Which ONE of the following is the CORRECT definition of an undertaking as set out in the SRA Glossary?
“A statement, given orally or in writing, whether or not it includes the word “undertake” or “undertaking” to someone who reasonably places reliance on it, that you or a third party will do something or cause something to be done, or refrain from doing something”.
“A statement, given in writing to someone that you or a third party will do something or cause something to be done, or refrain from doing something”.
“A statement, given orally or in writing to someone who reasonably places reliance on it, that you or a third party will do something or cause something to be done, or refrain from doing something”.
“A statement, given orally or in writing, whether or not it includes the word “undertake” or “undertaking” to someone who reasonably places reliance on it, that you or a third party will do something or cause something to be done, or refrain from doing something”.
Correct. Note that
an undertaking can be given orally or in writing, and
does not have to include the word “undertake” or “undertaking”.
If the recipient reasonable places reliance on the statement it will be binding on the person giving it.
Which ONE of the following statements about undertakings is CORRECT?
An undertaking can be given by any individual in a law firm who is legally qualified. An undertaking could therefore be given by a partner or a qualified lawyer, but not by an apprentice, or a secretary.
An undertaking can be given by any individual in a law firm provided it can be reasonably relied upon by the recipient. An undertaking could therefore be given by a partner, a qualified lawyer, an apprentice, secretary or any other individual in the firm.
An undertaking can only be given by a partner in a law firm.
An undertaking can be given by any individual in a law firm provided it can be reasonably relied upon by the recipient. An undertaking could therefore be given by a partner, a qualified lawyer, an apprentice, secretary or any other individual in the firm.
Correct. Note that it is important that any individual in a law firm can be found to have given an undertaking.
Which provision of CCS contains the following requirement:
“You draw the court’s attention to relevant cases and statutory provisions, or procedural irregularities of which you are aware, and which are likely to have a material effect on the outcome of the proceedings.”
CCS 2.6
CCS 2.3
CCS 2.7
CCS 2.4
CCS 2.7
Correct. CCS 2.3 contains the requirement that you do not provide or offer to provide any benefit to witnesses dependent upon the nature of their evidence or the outcome of the case. CCS 2.4 contains the requirement that you only make assertions or put forward statements, representations or submissions to the court or others which are properly arguable. CCS 2.6 contains the statement that you do not waste the court’s time.
You are a solicitor in the residential conveyancing department. Your client, the seller, is due to complete on a sale today. You received part of the completion monies (£450,000) from the buyer’s solicitors yesterday, which you undertook to hold to the order of the buyer’s solicitors pending completion.
You have just received an email from the buyer’s solicitors advising you that their clients have instructed them not to proceed with the completion today as their mortgage advance will not be available for another four days. The buyer’s solicitors have instructed you to return the £450,000 immediately. You have (correctly) explained to your client that by failing to complete today, the buyer is now in breach of contract.
Your client is aware that you hold the £450,000 and has instructed you to send him the money immediately.
Which ONE of the following statements CORRECTLY states what you should do next?
You should forward the £450,000 to your client, as part payment of the balance due to your client.
You must return the £450,000 to the buyer’s solicitors immediately, even though their client is in breach of contract. If you fail to do so you will have breached your undertaking to the buyer’s solicitors.
You should not return the money to the buyer’s solicitors because the buyer is in breach of contract. You should not forward the money to your client because you would be breaching your undertaking to the buyer’s solicitors. You should therefore keep the money in your firm’s account until the buyer has sufficient funds to complete the transaction.
You must return the £450,000 to the buyer’s solicitors immediately, even though their client is in breach of contract. If you fail to do so you will have breached your undertaking to the buyer’s solicitors.
Correct. You undertook to hold the £450,000 to the order of the buyer’s solicitors. This means that you cannot send the money to your client without the agreement of the buyer’s solicitors. The money does not belong to you or to your client. If you fail to return the money, you will be in breach of CCS 1.3.
incorrect
You should not return the money to the buyer’s solicitors because the buyer is in breach of contract. You should not forward the money to your client because you would be breaching your undertaking to the buyer’s solicitors. You should therefore keep the money in your firm’s account until the buyer has sufficient funds to complete the transaction.
Incorrect
Incorrect. You should read CCS 1.3 again. You undertook to hold the £450,000 to the order of the buyer’s solicitors. This means that you must comply with the buyer’s solicitors’ instructions. The money does not belong to you or to your client. If you fail to return the money, you will be in breach of CCS 1.3.
You have been helping your supervisor write advice to a client on the likelihood of his claim against a counter party succeeding. You have just amended the advice and your supervisor has not yet reviewed it. As your supervisor left the office for the evening, she asked you to email it to her that evening so that she could review it before sending it to the client tomorrow morning.
The client rings you up. He has been trying to get hold of your supervisor. The client explains that the advice has suddenly become urgent and asks you to email it to him as soon as possible that evening so that he can send it to his managing director who is waiting for it.
Which one of the following should you do?
Explain the position to the client. Say that you will try to get hold of your supervisor and get back to the client. Then leave for the evening. You have a team drinks event you have been looking forward to. The matter can wait until the morning.
Email the advice to the client straight away. It is nearly final, your supervisor seemed happy with it and you feel relatively confident that your supervisor would be happy for you to send the advice out.
Refuse to send the advice to the client. Tell him that he will have to wait until your supervisor is back in the morning. Then leave the office for the evening, you have a team drinks event you have been looking forward to.
Explain the position to the client. Say that you will try to get hold of your supervisor and check whether it is ok to send him the advice. Then ring your supervisor on her mobile, follow her instructions and ring the client back and update him.
Explain the position to the client. Say that you will try to get hold of your supervisor and check whether it is ok to send him the advice. Then ring your supervisor on her mobile, follow her instructions and ring the client back and update him.
Correct
Correct. This course of action would be the best. You should not send the advice out without your supervisor’s approval. There may be points that she wants to change. In getting your supervisor to check the work first and, at the same time, keeping your client informed of what is going on, you are providing a competent service to your client in a timely manner in accordance with CCS 3.2.
Which paragraph of the SRA Code of Conduct for Solicitors, RELs and RFLs (‘CCS’) contains the provision that you must not seek to influence the substance of evidence, including generating false evidence or persuading witnesses to change their evidence?
CCS 2.2
CCS 2.1
CCS 1.4
CCS 2.2
Correct
Correct. CCS 2.1 states that you must not misuse or tamper with evidence, and CCS 1.4 contains the rule that you must not mislead your clients, the court or other people.
Which one of the following statements, regarding the use of the client account, is correct under the Solicitors Accounts Rules?
Provided you have acted on a transaction for a client, you may retain any remaining client money belonging to them in your client account, earning interest, until the client requests that the money is returned to them.
Withdrawals from an authorised body’s client account must be in respect of the delivery of regulated services – your legal and professional services.
You may only withdraw money from the client account following receipt of instructions to do so from your client.
Withdrawals from an authorised body’s client account must be in respect of the delivery of regulated services – your legal and professional services.
Correct. This is in Rule 3.3.
In which one of the following scenarios can the solicitor properly withdraw money from their firm’s client account, in accordance with the Solicitors Accounts rules?
The client account currently holds £15,000, your client currently has £500 held in the client account. Their £500 was sent three days ago on account of costs generally for their property purchase transaction.
You withdraw £550 from the client account, on receipt of instructions from your client to pay Land Registry fees for registering their purchase of the property.
You withdraw £1,500 from the client account to pay stamp duty land tax on your client’s property purchase.
You withdraw £250 from the client account to pay for the desktop environmental search which needs to be carried out in connection with the client’s property purchase.
You withdraw £250 from the client account to pay for the desktop environmental search which needs to be carried out in connection with the client’s property purchase.
Correct
Correct. Under Rule 5.1 this would fall within reason (a) for being able to withdraw money from the client account – that you are withdrawing the money for the purpose for which it is being held (generally on account of costs involved in their transaction). The client also has sufficient funds for this payment in the client account (Rule 5.3).
Which one of the following would be in accordance with the Solicitors Accounts Rules?
Transferring money from the client account to your business account following a phone call with your client where you let them know that you would shortly be sending them a bill and they authorised the transfer of costs and have sufficient funds in the client account.
Paying a mixed payment into your business account and leaving the client money element in the business account for seven days whilst you prepare and send a bill to the client, to prevent the need to transfer the client money element into the client account and then back to the business account to pay the bill later.
Transferring money from the client account to your business account to pay a bill which has been sent to the client where they have authorised the transfer of the costs and have sufficient funds in the client account.
Transferring money from the client account to your business account to pay a bill which has been sent to the client where they have authorised the transfer of the costs and have sufficient funds in the client account.
Correct
Correct. Transferring money from the client account to your business account to pay a bill which has been sent to the client where they have authorised the transfer of the costs and have sufficient funds in the client account is in accordance with the SRA Accounts Rules.
Which provision of CCS states:
“you ensure that any publicity in relation to your practice is accurate and not misleading, including that relating to your charges and the circumstances in which interest is payable by or to clients.”
CCS 8.8
CCS 8.7
CCS 8.9
CCS 8.8
Correct.
CCS 8.9 contains the requirement that you do not make unsolicited approaches to members of the public in order to advertise legal services.
CCS 8.7 states that you must ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred.
Easy Property Selling Limited (‘EPS’) is a firm of estate agents. It has agreed to introduce property sellers and buyers to Price Prior’s residential property department. Price Prior has agreed to pay EPS £200 plus VAT in respect of each such introduction.
Which ONE of the following statements is CORRECT
This arrangement relates to a referral fee which will not be permitted under CCS 5.2.
This arrangement is an introduction and Price Prior will need to comply with CCS 5.1
This arrangement is not an introduction or a referral because the arrangement is not with a lawyer, so CCS 5.1 does not apply.
This arrangement is an introduction and Price Prior will need to comply with CCS 5.1
Correct
Correct. This arrangement is an introduction. Price Prior is
making a payment to a third party (either within your firm or outside) for introducing the client;
the payment is a fixed fee or calculated with reference to the amount being charged to the client as a percentage of your gross or net fees; and
the third party may be another lawyer, but not necessarily so.
Here the third party is not a lawyer, but this does not stop the arrangement being caught by CCS 5.1.
Which ONE of the following statements completes the following sentence CORRECTLY?
“Section 56(1) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (‘LASPO’) prohibits …
… solicitors from referring or receiving referrals in respect of claims which are subject to legal restrictions imposed in the interests of national security
… solicitors from referring or receiving referrals in respect of a clients who are the subject of criminal proceedings.
… solicitors from referring or receiving referrals in respect of a claimant’s claim for damages in respect of personal injury or death to each other in consideration for a referral fee.
… solicitors from referring or receiving referrals in respect of a claimant’s claim for damages in respect of personal injury or death to each other in consideration for a referral fee.
Correct. This is a prohibited referral fee. Solicitors are not permitted to pay or receive a fee for referring or receiving referrals for these types of claims.
incorrect
… solicitors from referring or receiving referrals in respect of a clients who are the subject of criminal proceedings.
Incorrect. This prohibition is contained in CCS 5.1(d), not section 56(1) LASPO. Check your notes and attempt the question again.
Your supervisor has been asked to act for the local conservative MP on the sale of their house. Your supervisor is a member of the labour party and refuses to act on the sale because they do not want to ‘help’ a member of the conservative party. Which section of CCS has your supervisor breached?
CCS 1.1: ‘you do not unfairly discriminate by allowing your personal views to affect your professional relationships and the way in which you provide your services. ‘
CCS 1.4: ‘you do not mislead or attempt to mislead your clients, the court or others, either by your own acts or omissions or allowing or being complicit in the acts or omissions of others (including your client).’
CCS 1.2: ‘you do not abuse your position by taking unfair advantage of clients or others.’
CCS 3.2 ‘you ensure that the service you provide to clients is competent and delivered in a timely manner.’
CCS 1.1: ‘you do not unfairly discriminate by allowing your personal views to affect your professional relationships and the way in which you provide your services. ‘
Correct. In refusing to accept the instructions, the supervisor has allowed their personal political views to affect their professional relationships.
Your client has asked you to lie to the police and provide a witness statement stating that you were in a meeting with your client at the time a crime was alleged to have been committed. You were not in a meeting with the client at that time. Should you:
Comply with the client’s request in order to comply with Principles 1 and 2.
Comply with the client’s request and provide the witness statement in order to comply with Principle 7.
Refuse to provide the witness statement, as to do so would breach Principles 1, 2, 3, 4 and 5.
Refuse to comply with the client’s request as to do so would breach Principle 6.
Refuse to provide the witness statement, as to do so would breach Principles 1, 2, 3, 4 and 5.
Correct. If you complied with your client’s instruction, you would be breaching Principles 1 (upholding the rule of law and the proper administration of justice), 2 (upholding public trust and confidence in the solicitor’s profession), 3 (act with independence), 4 (act with integrity) and 5 (act with honesty).
You are acting for a client in relation to a dispute. You receive a defence from the individual on the other side which is badly drafted and contains numerous errors. You suspect that the individual does not have legal representation.
Which ONE of the following statements is CORRECT?
The existence of errors in the other side’s defence is good news for your client. You should continue your client’s case as aggressively as you can in order to comply with Principle 7.
You should contact the individual on the other side and suggest that they instruct a lawyer. Failing to do so puts you at risk of breaching CCS 1.1.
The existence of errors in the other side’s defence is good news for your client. You should continue your client’s case as aggressively as you can in order to comply with Principle 3.
You should contact the individual on the other side and suggest that they instruct a lawyer. Failing to do so puts you at risk of breaching CCS 1.2.
You should contact the individual on the other side and suggest that they instruct a lawyer. Failing to do so puts you at risk of breaching CCS 1.2.
Correct
Correct. Acting for your client where the individual on the other side does not have legal representation can be very challenging and puts you at risk of breaching CCS 1.2 ‘you do not abuse your position by taking unfair advantage of clients or others’. The simplest solution for you is for the individual on the other side to get their own lawyer.
The SRA’s requirements in relation to equality, diversity and inclusion apply to which ONE of the following categories:
Managers of law firms only.
All individuals regulated by the SRA in relation to their dealings with clients, the people they work with and other members of the public they deal with.
Legal professionals in their dealings with clients only.
Legal Professionals in their dealings with fellow members of staff only.
All individuals regulated by the SRA in relation to their dealings with clients, the people they work with and other members of the public they deal with.
Correct. Principle 6 is broad. As stated in the SRA’s guidance on their approach to equality, diversity and inclusion (‘EDI’), it applies to an individual’s dealings with the people they work with, clients and others.
Which ONE of the following is NOT a protected characteristic under the Equality Act 2010?
Gender Reassignment.
Age.
Vegetarianism
Disability.
Vegetarianism
Correct. Vegetarianism is not one of the protected characteristics listed in your materials under the Equality Act 2010.
Which one of the following statements about a legal professional’s obligations in relation to EDI under the SRA’s Guidance on their approach to EDI is FALSE?
Firms and individuals regulated by the SRA must encourage diversity at all levels of the workforce.
Law firms have a legal obligation to provide reasonable adjustments to disabled clients and employees to make sure they are not at a substantial disadvantage compared to those who are not disabled. Law firms may pass on the costs of those adjustments to those clients or employees.
Law firms must collect, report and publish data about the diversity of their workforce.
Individuals regulated by the SRA are responsible for upholding the reputation of the profession in their professional and personal life and for treating people fairly and with dignity and respect. They should ensure their personal views do not have a negative impact on others. This includes expressing extreme personal, moral or political opinions on social media.
Law firms have a legal obligation to provide reasonable adjustments to disabled clients and employees to make sure they are not at a substantial disadvantage compared to those who are not disabled. Law firms may pass on the costs of those adjustments to those clients or employees.
Correct. This statement is FALSE. Read the guidance note again to check whether law firms can pass on the costs of such adjustments.
Which ONE of the following statements is CORRECT about the following data protection principle:
‘personal data must be handled in a way that ensures appropriate security, including protection against unlawful or unauthorised processing, access, loss, destruction or damage’.
It applies only to partners and managers in an organisation.
It applies only to law firms.
It applies to you and everyone in your workplace.
It applies to you and everyone in your workplace.
Correct
Correct. This principle is something everyone needs to be concerned with. Accidental disclosure / human error is the most common cause of breach of the data protection legislation. You must comply with your employer’s IT / data protection policy. For example, not disclose your password etc.
Which ONE of the following statements is CORRECT?
Personal data does not include information about a person that is public knowledge.
Information about someone’s professional life cannot be personal data for the purposes of the Data Protection Act.
Personal data’ does not include truly anonymous information. However, if you could still identify someone from the details, or by combining it with other information, it will count as personal data.
Personal data’ does not include truly anonymous information. However, if you could still identify someone from the details, or by combining it with other information, it will count as personal data.
Correct
Correct
You are making amendments to a witness statement you and your supervisor are finalising ready to serve at court and on the other side in a few days’ time. You receive a call from a friend who is working at the firm acting for the other side. The friend asks if you can send her the witness statement that evening so that her supervisor can read it and prepare for the hearing.
Which one of the following correctly states what you should do and why?
Refuse your friend’s request because you would be breaching your duty of confidentiality to your client if you disclosed this information to your friend.
Email the draft witness statement to your friend that evening. You will be serving it on the other side soon, and a few days’ advance notice is unlikely to cause your client any harm. In addition, your friend might help you out on another matter should the occasion arise.
Anonymise the witness statement to remove any personal information about your client, and send it to your friend. You will be serving it on the other side soon, and a few days’ advance notice is unlikely to cause your client any harm, and at least you will be complying with the Data Protection Act.
Refuse your friend’s request because you would be breaching your duty of confidentiality to your client if you disclosed this information to your friend.
Correct. The witness statement contains information which is confidential to your client. You would be breaching your duty of confidentiality to your client under CCS 6.3 if you disclosed this information to any person, let alone the other side, without your client’s consent or being required to do so by law.
In which ONE of the following scenarios should you NOT accept the client’s instructions?
If you consider the client’s instructions to be contrary to your religious belief.
If you do not like the client.
If you would be breaching the law in accepting the client’s instructions.
If you would be breaching the law in accepting the client’s instructions.
Correct
Correct. Under Principle 1 you must act in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice. You would not be able to comply with this Principle if you accepted instructions that require you to breach the law.
The other options may put you in a difficult position personally and there might be an argument for getting a colleague to act on the matter, but it is not a reason to refuse to act at all.
You are an apprentice in the litigation department. You have been working long hours preparing for a case that is coming to trial next week. You are preparing a document your supervisor has asked you to complete so that it can be sent out to the client that day. You think it will take you about three hours to prepare the document. You also think you are likely to be working at the weekend preparing for the trial. You receive a telephone call from a different client whom you have advised previously, asking for your help on a new matter. The new client wants you to attend a conference call from 3pm until 5pm that afternoon. What should you do?
Agree to attend the call with the new client. You want to do the best for that client and build up a good relationship with them. You will worry about the trial later.
Explain to the new client that unfortunately you are very busy at the moment so will not be able to attend the conference call, and recommend they try a different law firm.
Advise the new client that although you may not personally be able to attend the call that afternoon, you will speak to your supervisor to see if you or another lawyer in your team can attend. Then speak to your supervisor and agree whether you should work on the document for the trial or attend the call and advise the client accordingly.
Explain to the client that you cannot attend a call that afternoon and agree to attend a conference call tomorrow morning instead.
Advise the new client that although you may not personally be able to attend the call that afternoon, you will speak to your supervisor to see if you or another lawyer in your team can attend. Then speak to your supervisor and agree whether you should work on the document for the trial or attend the call and advise the client accordingly.
Correct. CCS 3.2 states that you must ensure that the service you provide is competent and delivered in a timely manner. If you do not agree the work allocation with your supervisor there is a risk that you will not be providing a timely service on the matter that is coming to trial. There is also the possibility that you are too busy to act on the new matter, but another lawyer in your team might be able to do so.
A client asks you to act for him and his wife on the re-mortgage of the family home. He explains that he is re-mortgaging the house as security for a loan to finance the expansion of a company he recently started. He is the sole shareholder of the company. He explains that he will be giving the instructions as his wife is overseas visiting family.
Which ONE of the following statements BEST describes what you should do?
You should recommend that the wife obtains her own independent advice on the re-mortgage because there is a risk that you would not be acting in the wife’s best interests if you acted for both the husband and the wife.
You can act for the husband and the wife, but you will need authority from the wife to take instructions from her husband. You should talk to the wife to satisfy yourself that she is happy to proceed and get her to confirm her agreement in writing. Once you have this authority you will be able to act for both the husband and the wife.
You can act for the husband and the wife, but you will need authority from the wife to take instructions from her husband. You should talk to the wife to satisfy yourself that she is happy to proceed and get her to confirm her agreement in writing. You will have a continuing obligation to act in the best interests of both the husband and the wife, so if you become concerned that the re-mortgage is not in the wife’s best interests you will need to stop acting for her.
You can act for the husband and the wife. As the wife is overseas it makes sense for you to act on the husband’s instructions, but you should confirm she is happy for you to act on her behalf when she returns.
You should recommend that the wife obtains her own independent advice on the re-mortgage because there is a risk that you would not be acting in the wife’s best interests if you acted for both the husband and the wife.
Correct. There is a risk that you would not be acting in the wife’s best interests if you acted for both the husband and the wife here. If the husband defaults on the loan, the wife could lose her home and she does not appear to be benefitting from the loan as it is to expand the husband’s business. You should recommend that the wife obtains her own independent advice.
Which ONE of the following is the correct definition of an own interest conflict as set out in the SRA Glossary?
Any situation where your duty to act in the best interests of any client conflicts with your own interests or the interests of a member of your family in relation to that matter.
Any situation where your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter
Any situation where your duty to act in the best interests of any client in relation to a matter conflicts with the interests of an existing client in relation to that matter
Any situation where your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter
Correct
Which ONE of the following options correctly sets out the circumstances in which you can act where there is a conflict of interest?
The clients have a substantially common interest in relation to the matter or the aspect of it, as appropriate; or the clients are competing for the same objective.
There are no circumstances in which you can act where there is a conflict of interest.
The clients have a substantially common interest in relation to the matter or the aspect of it, as appropriate; or the clients are competing for the same objective, and the conditions set out in CCS 6.2(i)-(iii) are met.
The clients have a substantially common interest in relation to the matter or the aspect of it, as appropriate; or the clients are competing for the same objective, and the conditions set out in CCS 6.2(i)-(iii) are met.
Correct
Correct. This is the correct position as set out in CCS 6.2.
Which ONE of the following options correctly defines a conflict of interest?
A situation where you believe there is a significant risk that you will not be able to act in the best interests of your client because you are already acting for a client with a conflicting interest.
A situation where your separate duties to act in the best interests of two or more clients in the same or a related matter conflict.
A situation where you cannot comply with your duty to uphold the rule of law because the interests of two or more clients in the same matter conflict.
A situation where your separate duties to act in the best interests of two or more clients in the same or a related matter conflict.
Correct
Which ONE of the following circumstances is likely to give rise to an ‘own interest conflict’ as defined in the SRA Glossary?
A client asks you to act on the purchase of a company (‘target’). A company search reveals that the target is a wholly owned subsidiary of an existing client of your firm.
A client asks you to represent her in relation to a dispute against ABC Limited. You were instructed to act for ABC on the same dispute yesterday.
Acting for a client on a dispute against your spouse.
Acting for a client on a dispute against your spouse.
Correct
Correct. This is an example of an own interest conflict. As the client has a dispute against your spouse, there is a risk that the interests of the client could conflict with your interest. There is a risk you may not wish the client’s claim to be successful.
Which ONE of the following circumstances could give rise to an ‘own interest conflict’ as defined in the SRA Glossary?
A new client asks you to represent her in relation to a dispute with her employer. You discover that your firm acted for the employer 6 months ago on an international restructuring project.
A client asks you to represent her in relation to a dispute with her employer. When you read the email from your client, you realise that your mother owns 50% of the shares in the company which employs her.
You are a legal apprentice in the legal department at a large listed company. A solicitor from the law firm your company instructed on a recent transaction invites you to a day at the firm’s box at Wimbledon.
A client asks you to represent her in relation to a dispute with her employer. When you read the email from your client, you realise that your mother owns 50% of the shares in the company which employs her.
Correct. This is an example of an own interest conflict. As your mother owns 50% of the shares in the company employing the client there is a risk that the interests of the client could conflict with your interest. There is a risk you may not wish the client’s claim to be successful.
Which ONE of the following circumstances could give rise to a ‘conflict of interest’ as defined in the SRA Glossary?
A tenant wants you to advise them on a dispute with their landlord. The tenant does not realise that you and your partner own the flat as the tenancy has been handled by a property agent.
A new client has asked your firm to act for them on the purchase of a company from a large international company. Your firm has acted for the international company on a number of acquisitions and disposals in the past, although your firm has not been instructed to act for them on this disposal.
A new client wants to instruct your firm on a software licence with an international software provider. Your conflict search reveals that your firm’s property department is currently acting for the software provider on its lease of office space.
A new client has asked your firm to act for them on the purchase of a company from a large international company. Your firm has acted for the international company on a number of acquisitions and disposals in the past, although your firm has not been instructed to act for them on this disposal.
Correct. Conflict of interest is defined in the SRA Glossary as ‘a situation where your separate duties to act in the best interests of two or more clients in the same or a related matter conflict’. You have two clients here, the new client and the international company. Although you have not been instructed by the international company on the same matter, your firm has acted for them on disposals in the past, and this could be a situation where your separate duties to act in the best interests of both clients conflict.
incorrect
A new client wants to instruct your firm on a software licence with an international software provider. Your conflict search reveals that your firm’s property department is currently acting for the software provider on its lease of office space.
Incorrect
Incorrect. Technically the software licence and the lease of the office space are not the same or a related matter. Therefore, strictly, this does not fall within the definition of a conflict of interest. However, many firms would not feel comfortable acting for the new client when they are advising the counter party on an unrelated matter. There is a separate issue here of complying with Principles 2, 3, 4, 5, and 7. In practice most firms would seek the software provider’s consent before agreeing to act for the new client.
Which ONE of the following statements sets out the CORRECT definition of ‘competing for the same objective’?
Any situation in which two or more clients are competing for an “objective” which, if attained by one client, will make that “objective” unattainable to the other client or clients, and “objective” means an asset, contract or business opportunity which two or more clients are seeking to acquire or recover through a liquidation (or some other form of insolvency process) or by means of an auction or tender process of a bid or offer, but not a public takeover.
A situation where there is a clear common purpose between the clients and a strong consensus on how it is to be achieved.
Any situation in which two or more clients are competing for an “objective” which can only be attained by one of the clients, and “objective” means an asset which two or more clients are seeking to acquire by means of an auction or tender process.
Any situation in which two or more clients are competing for an “objective” which, if attained by one client, will make that “objective” unattainable to the other client or clients, and “objective” means an asset, contract or business opportunity which two or more clients are seeking to acquire or recover through a liquidation (or some other form of insolvency process) or by means of an auction or tender process of a bid or offer, but not a public takeover.
Correct. You have correctly identified the definition of competing for the same objective. The other options were the definition of substantially common interest, and an incorrect definition of competing for the same objective.
A company is selling its subsidiary (‘Target’) by way of auction. Your firm has been approached by two separate bidders for the Target. Both bidders would like the same partner and associate solicitor to act for them on their bids.
Which of the following statements best states the correct position?
As both bidders have a substantially common interest in purchasing the Target, the partner and associate solicitor can act for both bidders.
As both bidders are competing for the same objective (the Target), the partner and associate solicitor can act for both bidders.
As there is a significant risk of a conflict of interest arising if you act for both bidders, your firm cannot act for either of them.
As both bidders are competing for the same objective (the Target), the firm can act for both bidders provided different teams of lawyers act for each bidder.
As both bidders are competing for the same objective (the Target), the firm can act for both bidders provided different teams of lawyers act for each bidder.
Correct
Correct. There is a conflict of interests here, but this is a case where both bidders are competing for the same objective (the Target). The firm can act for both bidders provided they meet the conditions set out in CCS 6.2. One of the conditions is that you put in place effective safeguards to protect your clients’ confidential information. If the same partner and associate solicitor act for both bidders, the confidential information of each bidder will not be protected. The firm should therefore ensure that different teams of lawyers act for each bidder.
In which ONE of the following circumstances might it be possible for a solicitor to act for both the parties stated in bold on the grounds that they have a ‘substantially common interest’ as defined in the SRA Glossary?
Su Sukit Singh and Parul Shah who live together and are buying a property together.
Each of the partners in Waterloo & Co – a partnership which is being dissolved and selling all of its ass assets to an unassociated third party, Nelsons of Avon Ltd.
Bagshaws Bank who have agreed to lend £1 million to Beaumont Limited to fund the acquisition of a company.
Su Sukit Singh and Parul Shah who live together and are buying a property together.
Correct. ‘Substantially common interest’ is defined in the SRA Glossary as ‘a situation where there is a clear common purpose between the clients and a strong consensus on how it is to be achieved.’ Here the clear common purpose for Sukit and Parul is buying the house. It is likely that they have a strong consensus on how to achieve that purpose, as they will both want to purchase good title to the house without any problems.
Which of the following SHOULD be included in a client care letter as a matter of good practice?
i. A clear explanation of how the firm will charge for the work.
ii. The names of the lawyers who will be working on the matter.
iii. A description of the work the firm will carry out.
iv. The responsibilities of the firm and the client.
v. An explanation of the client’s right to complain to the Law Society if it is not satisfied with the firm’s service.
Please choose ONE of the following options:
(i), (ii) and (iii)
(i), (ii), (iii) and (iv)
(iv) and (v)
(i) only
(i), (ii), (iii) and (iv)
Correct
Correct. (i) is good practice as well as helping a firm comply with CCS 8.7. (ii), (iii) and (iv) are good practice and recommended in the SRA’s guidance on client care letters. (v) is not correct, a client would not complain to the Law Society. Clients such as individuals who have a right to complain to the Legal Ombudsman should be informed of this in writing under CCS 8.3.
Which ONE of the following statements is CORRECT?
A client care letter should be written in a small font size so that all the terms can be included on one page.
A client care letter should set out what is going to happen and what the client needs to do.
A client care letter should include all the generic terms and conditions between a solicitor and the client, but not information about costs as this should be agreed separately.
A client care letter should set out what is going to happen and what the client needs to do.
Correct. These are two recommendations from the SRA guidance on client care letters
Which ONE of the following statements is CORRECT?
A law firm will have met the SRA’s requirements on client care if it sends a client care letter to its client at the beginning of every matter.
A law firm must send a client care letter to a client at the beginning of every new instruction.
A client care letter must set out all the firm’s terms and conditions in full.
One benefit of a client care letter that is clear, easy to understand and contains the right information is that it can reduce potential complaints by clearly setting out what a client can expect, particularly in relation to costs.
One benefit of a client care letter that is clear, easy to understand and contains the right information is that it can reduce potential complaints by clearly setting out what a client can expect, particularly in relation to costs.
Correct
Correct. This is one benefit of a clearly written client care letter as described in the SRA’s Guidance on Client Care letters.
Civil CLS funding is subject to ____________
A merit test.
A means test.
A merit test and a public interest test.
A means test and a merit test
A means test and a merit test
Correct. Civil CLS funding is only available for clients with limited income and capital, and if the client’s position is sufficiently meritorious.
_________categories of civil claim qualify in principle for Civil CLS funding.
Very few
No
All
Most
Very few
Correct. The vast majority of civil legal work is not eligible for CLS funding.
Which of the following best describes the situation in relation to a CFA where the client wins their case at trial?
The client may recover the basic fee from the opponent but cannot recover the disbursements, success fee or damages
The client may recover the basic fee, disbursements, damages and success fee from the opponent
The client may recover the basic fee and disbursements from the other side, together with damages. The client will owe the solicitor a success fee which will be payable from the damages and is not recoverable from the opponent
The client may recover the basic fee and damages from the opponent. The client will owe the solicitor a success fee which will be payable from the damages and is not recoverable from the opponent.
The client may recover the basic fee and disbursements from the other side, together with damages. The client will owe the solicitor a success fee which will be payable from the damages and is not recoverable from the opponent
Correct. Well done!
Your client, Mr. Ibbotson, would like to know how damages based agreements (‘DBAs’) work in practice. Which one of the following best describes the advice you would give to him on this matter in relation to a typical DBA?
Lawyers do not recover any fees if they lose the case. If they win, they receive a proportion of the damages awarded to the client by way of payment for their work.
Lawyers will recover their basic fee if they lose the case. If they win, they can recover double the basic fee.
Lawyers do not recover any fees if they lose the case. If they win, they can recover their normal fees plus an uplift out of the damages awarded to the client.
Lawyers will recover their basic fee if they lose the case. If they win, they can recover a success fee from the damages awarded to the client.
Lawyers do not recover any fees if they lose the case. If they win, they receive a proportion of the damages awarded to the client by way of payment for their work.
Correct. Well done.
Mrs Meade has been told that her solicitors have taken on her claim on a ‘no win, no fee’ CFA basis. Does this mean that if she loses, she won’t have to pay any costs?
Yes. A conditional fee agreement means that she won’t have to pay any solicitors’ costs if she loses.
Yes. Her solicitors will have to pay the defendant’s costs if she loses.
No. She will still be liable for her own disbursements and might still be held liable for the other side’s costs.
No. She will still be liable for both sides’ costs.
No. She will still be liable for her own disbursements and might still be held liable for the other side’s costs.
Correct. Well done.
Martha Van Hoffer is the managing director of VanH Limited (“VanH”). VanH have instructed your firm to act on their behalf in relation to a large litigation action. Martha is interested in taking out ‘after the event’ insurance, if possible, but is concerned about the level of the premium. She would like to know whether any premium might be recoverable from her opponent if VanH is successful in the litigation. VanH do not have ‘before the event’ legal expenses insurance.
Which one of the following statements is correct if VanH win at trial and is awarded its costs?
If successful, VanH should be able to claim any premium paid from the other side as part of the costs of the proceedings, so long as it is reasonable
VanH will only be able to claim a certain percentage of the premium, provided that it is not in excess of £10,000
VanH will not be able to claim the premium.
VanH is not in fact able to take out ‘after the event’ insurance because it is a company, not an individual
VanH will not be able to claim the premium.
VanH will not be able to claim the premium.
You represent a man suspected of the offence of battery and is charged with common assault. He is currently out of work and so receives welfare benefits.
Which of the following best explains whether you client is eligible for public funding?
He will receive public funding because the offence of battery is an imprisonable offence.
He will automatically pass the means test because he is in receipt of welfare benefits but he must also pass the merits test to be eligible.
He will automatically qualify for public funding because he is in receipt of welfare benefits.
He will have to pass both the means test and the merits test in order to be granted public funding.
He will pass the means test if he can show that his income and capital are below a certain limit.
He will automatically pass the means test because he is in receipt of welfare benefits but he must also pass the merits test to be eligible.
Correct
He is passported through the means test because of his receipt of welfare benefits, but he will still have to show that it is in the interests of justice for him to receive public funding for his defence.
The other answers are plausible but incorrect:
- He does not need to pass the means test – he automatically passes it
- He won’t automatically qualify for public funding because he still has to pass the merits test
- Whether the offence is imprisonable or not is not a deciding factor.
Your client has been charged with burglary. She is in receipt of benefits and therefore is passported through the means test. You are assisting your client in completing the CRM 14 form.
She informs you that she has numerous convictions for burglary, including one last year when she was given a suspended sentence. She denies the offence and says she has an alibi. However, your client is worried about what the arresting officer will say. The arresting officer said she had admitted the offence on arrest, when she did not say anything. She’s also worried about her daughter who is only 12 and will be left on her own if she is sent to prison.
Which of these is not a matter to include in the CRM 14 form?
She is likely to lose her liberty
An alibi witness will need to be traced and interviewed
She has been given a sentence that is suspended which will be activated if she is convicted of the current offence
It is in the interests of her daughter that she is represented
The proceedings will involve the cross examination of a police officer
It is in the interests of her daughter that she is represented
Correct
For the purposes of the merits/ interests of justice test, the interests of another person does not include family members impacted by a sentence.
The other answers while plausible are not correct. All could be included in the relevant sections of the CRM 14 form.
incorrect
The proceedings will involve the cross examination of a police officer
Incorrect
Cross examination of a prosecution witness should be included. Please review your materials on funding and the 10 propositions in particular.
An alibi witness will need to be traced and interviewed
Incorrect
She says she has an alibi so they will need to be traced and interviewed. Please review your materials on funding and the 10 propositions in particular.
She is likely to lose her liberty
It seems likely on these facts that she would receive a custodial sentence. Please review your materials on funding and the 10 propositions in particular.
Your client is a university professor who lives alone and earns £90,000. He is suspected of the offence of battery on a student and is charged with common assault. He is due to appear before the magistrates’ court He has no previous offences and intends to plead not guilty.
Is your client likely to obtain a representation order that grants public funding for his defence?
He will not obtain a representation order because he is not in receipt of benefits
He will not obtain a representation order as will fail the means test
He will obtain a representation order because it is likely he will lose his livelihood
He will not obtain a representation order because it is not in the interests of justice that he be represented
He will obtain a representation order because it is likely that he will suffer serious damage to his reputation
He will not obtain a representation order as will fail the means test
Correct
In light of the university professor’s salary and the size of his household (he lives alone) he will be ineligible for public funding because his weighted gross annual income will be above the upper threshold i.e. £22, 325.
The other answers while plausible are incorrect:
· While he will suffer serious damage to his reputation, might lose his livelihood and therefore it might be in the interests of justice that he be represented, he will not pass the means test.
· While he is not in receipt of benefits that does not mean he will automatically fail the means test.
Which ONE of the following statements is CORRECT?
All organisations providing legal activities for the public must be authorised by the SRA.
Any organisation providing reserved legal activities for the public must be authorised by the Law Society unless they are exempt.
Any organisation providing reserved legal activities for the public must be authorised by the SRA unless they are exempt.
Any organisation providing reserved legal activities for the public must be authorised by the SRA unless they are exempt.
Correct. The SRA Guidance note, “Firm Authorisation” , contains guidance on when organisations need to be authorised by the SRA, including if they provide reserved legal activities.
Which ONE of the following statements is CORRECT?
Reserved legal activities are defined in section 12 Legal Services Act 2007 and are: (i) rights of audience: the right to appear before and address a court, (ii) conduct of litigation, (iii) Reserved instrument activities which includes preparing instruments relating to land, (iv) certain probate activities; and (v) administration of oaths.
Reserved legal activities are defined in section 12 Legal Services Act 2007 and are: (i) rights of audience: the right to appear before and address a court, (ii) conduct of litigation, (iii) acting for a client on the acquisition of a company, (iv) Reserved instrument activities which includes preparing instruments relating to land, and (v) certain probate activities.
Reserved legal activities are defined in section 12 Legal Services Act 2007 and are: (i) rights of audience: the right to appear before and address a court, (ii) Reserved instrument activities which includes preparing instruments relating to land; and (iii) administration of oaths.
Reserved legal activities are defined in section 12 Legal Services Act 2007 and are: (i) rights of audience: the right to appear before and address a court, (ii) conduct of litigation, (iii) Reserved instrument activities which includes preparing instruments relating to land, (iv) certain probate activities; and (v) administration of oaths.
Correct. Reserved legal activities are defined in section 12 LSA and are: (i) rights of audience: the right to appear before and address a court, (ii) conduct of litigation, (iii) Reserved instrument activities which includes preparing instruments relating to land, (iv) certain probate activities; and (v) administration of oaths. The term does not include acting for a client on the acquisition of a company.
Which ONE of the following statements is CORRECT?
A sole practice is a practice operated by a single solicitor. A sole practitioner can employ a maximum of three other members of staff provided they are not qualified solicitors.
A sole practice is a practice operated by a single solicitor. A sole practitioner can employ other members of staff provided they are not qualified solicitors.
‘Sole practice’ means a sole principal. A sole practitioner can employ several qualified solicitors, as long as those solicitors are not also principals (e.g. not partners or co-owners) of the practice.
‘Sole practice’ means a sole principal. A sole practitioner can employ several qualified solicitors, as long as those solicitors are not also principals (e.g. not partners or co-owners) of the practice.
Correct
Correct. ‘Sole practice’ means a sole principal. A sole practitioner can employ several qualified solicitors, as long as those solicitors are not also principals (e.g. not partners or co-owners) of the practice.
The SRA publishes a risk outlook each year. Which ONE of the following is the risk the SRA put at the top of its priority list for the year 2020-21?
Information and cyber security
Keeping client money safe
Money Laundering
Increasing diversity in the legal profession.
Money Laundering
Correct. The SRA put issues with money laundering at the tops of its priority risk in the Risk Outlook for 2020-21.
Which ONE of the following statements is CORRECT?
It is the responsibility of individual solicitors to keep their knowledge up to date, but it is the sole responsibility of the partners in law firms to ensure that the individuals they manage provide a competent service to their clients.
It is the responsibility of supervisors to ensure that the individuals they manage are competent to carry out their role and keep their professional knowledge and skills up to date. There is no corresponding obligation on individual solicitors to keep their knowledge up to date.
It is the responsibility of supervisors to ensure that the individuals they manage are competent to carry out their role and keep their professional knowledge and skills up to date. Individual solicitors also have a responsibility under CCS to maintain their competence and keep their knowledge up to date.
It is the responsibility of supervisors to ensure that the individuals they manage are competent to carry out their role and keep their professional knowledge and skills up to date. Individual solicitors also have a responsibility under CCS to maintain their competence and keep their knowledge up to date.
Correct
Correct. CCS 3.3 requires individual lawyers to maintain their competence to carry out their role and keep their professional knowledge and skills up to date. CCS 3.6 requires legal professionals to ensure that the individuals they manage are competent to carry out their role and keep their professional knowledge and skills up to date. So the responsibility falls on both individual lawyers and supervisors.
Which ONE of the following statements is CORRECT?
Only solicitors with a minimum of five years post qualification experience may supervise individuals working on client files.
Although most persons supervising individuals working on client files will have a legal qualification, such persons do not necessarily have to be legally qualified.
All people supervising individuals working on client files in a law firm must be legally qualified.
Although most persons supervising individuals working on client files will have a legal qualification, such persons do not necessarily have to be legally qualified.
Correct. As long as they have suitable experience, knowledge and competence to deal with any issue which may arise and such persons have clear guidance as to when and to whom issues outside their competence or authority should be referred ‘upwards’, people who are not legally qualified are permitted to supervise client matters.
Which ONE of the following statements is CORRECT?
The Compliance Officer for Legal Practice (‘COLP’) must be an individual who is authorised to carry on reserved legal activities by an approved regulator. This is not a requirement for the Compliance Officer for Finance and Administration (‘COFA’).
The Compliance Officer for Legal Practice (‘COLP’) and the Compliance Officer for Finance and Administration (‘COFA’) must both be legally qualified.
The Compliance Officer for Legal Practice (‘COLP’) and the Compliance Officer for Finance and Administration (‘COFA’) must both be individuals who are authorised to carry on reserved legal activities by an approved regulator.
The Compliance Officer for Legal Practice (‘COLP’) must be an individual who is authorised to carry on reserved legal activities by an approved regulator. This is not a requirement for the Compliance Officer for Finance and Administration (‘COFA’).
Correct. This requirement is true for a COLP, but not a COFA. A COFA’s role is to ensure the firm complies with the SRA Accounts Rules and as such the COFA does not need to be a lawyer.
Which ONE of the following statements is CORRECT?
The COFA has responsibility:
to ensure the firm complies with all the terms and conditions of authorisation by the SRA;
to ensure the firm complies with its statutory obligations;
to record any failures to comply with the firm’s authorisation or statutory obligations and make records available to the SRA;
to report any material failure to the SRA as soon as is practicable.
The COLP and COFA are jointly responsible:
to ensure the firm complies with all the terms and conditions of authorisation by the SRA;
to ensure the firm complies with its statutory obligations;
to record any failures to comply with the firm’s authorisation or statutory obligations and make records available to the SRA;
to report any material failure to the SRA as soon as is practicable
The COLP has responsibility:
to ensure the firm complies with all the terms and conditions of authorisation by the SRA;
to ensure the firm complies with its statutory obligations;
to record any failures to comply with the firm’s authorisation or statutory obligations and make records available to the SRA;
to report any material failure to the SRA as soon as is practicable.
The COLP has responsibility:
to ensure the firm complies with all the terms and conditions of authorisation by the SRA;
to ensure the firm complies with its statutory obligations;
to record any failures to comply with the firm’s authorisation or statutory obligations and make records available to the SRA;
to report any material failure to the SRA as soon as is practicable.
Correct
Correct. The COLP’s role is to ensure appropriate systems are in place to minimise the risk of non-compliance with the Codes. Much of the COLP’s day to day responsibilities will be spent trying to ensure that the firm, its staff and managers are meeting the standards in CCF and CCS.
Which ONE of the following statements is CORRECT?
All the partners and solicitors in a firm are jointly responsible for the firm’s compliance with the SRA Code of Conduct for Firms.
The managers of a firm have joint and several responsibility for the firm’s compliance with the SRA Code of Conduct for Firms.
The COLP and the COFA are the people in a law firm who bear ultimate responsibility to the SRA for ensuring the firm complies with the SRA’s regulatory requirements under the SRA Code of Conduct for Firms.
The managers of a firm have joint and several responsibility for the firm’s compliance with the SRA Code of Conduct for Firms.
Correct. Compliance with the SRA’s requirements is ultimately the responsibility of the owners and managers of the Firm. Under CCF 8.1 managers have responsibility for compliance by the Firm with CCF. This responsibility will be joint and several with other managers of the firm. Nevertheless, COLPs and COFAs clearly have a pivotal function in their organisation for ensuring that the right systems, procedures and checks are in place to minimise the risk of non-compliance.
Which ONE of the following statements about partnerships is CORRECT
One advantage of a traditional partnerships is that although they are governed by the Partnership Act 1890, in practice most of their arrangements are set out in partnership agreements, which are not a matter of public record.
One advantage of a traditional partnership is that the liability of the partners is limited to the amount they have invested in the partnership.
One of the main disadvantages of a traditional partnership is that they are governed by the Partnership Act 1890 which is inflexible and largely out of date.
One advantage of a traditional partnerships is that although they are governed by the Partnership Act 1890, in practice most of their arrangements are set out in partnership agreements, which are not a matter of public record.
Correct. Although technically partnerships are governed by the Partnership Act 1890, in practice most partnerships agree the arrangements for how they are run in partnership agreements. There are no requirements on partnerships to disclose the contents of their partnership agreements which means that arrangements relating to profit sharing and running the partnership can be kept confidential. One disadvantage of a traditional partnership is that the liability of individual partners is unlimited opening the partners to potentially large exposure of risk.
Which ONE of the following statements about Limited Liability Partnerships (‘LLPs’) is CORRECT?
An LLP is a separate legal entity, distinct from its members. An LLP can own property in its own name, and employ employees. However one disadvantage of an LLP is that they have to file certain information with Companies House, including financial statements, which can be accessed by the public.
An LLP is a separate legal entity, distinct from its members. An LLP can own property in its own name, and employ employees. They are also more tax efficient than incorporated companies.
An LLP is a separate legal entity, distinct from its members. An LLP can own property in its own name, and employ employees. They are also recognised in foreign jurisdictions making foreign expansion easier than for a traditional partnership.
An LLP is a separate legal entity, distinct from its members. An LLP can own property in its own name, and employ employees. However one disadvantage of an LLP is that they have to file certain information with Companies House, including financial statements, which can be accessed by the public.
Correct. An LLP is a separate legal entity, distinct from its members. An LLP can own property in its own name, and employ employees. LLPs are subject to many provisions of the Companies Act 2006, which means that they have to file certain information with Companies House, including financial statements and information about the members (or partners), which can be accessed by the public.
LLPs are generally considered to be less tax efficient than incorporated companies. In addition unlike incorporated companies, they are not recognised in foreign jurisdictions so foreign expansion is more difficult.
Which ONE of the following statements is CORRECT?
Incorporated companies can raise finance by issuing shares to investors but cannot borrow money from lenders because they are separate legal entities and cannot grant security to lenders.
Traditional partnerships can use working capital to finance growth but cannot borrow money or issue shares to investors
Incorporated companies can raise finance by issuing shares to investors and can borrow money from lenders.
Incorporated companies can raise finance by issuing shares to investors and can borrow money from lenders.
Correct
Correct. Incorporated companies are separate legal entities in their own right. They can borrow money from lenders, grant security to lenders, and they can also raise finance by issuing shares to investors.
Traditional partnerships can use working capital to finance growth, and can also use overdrafts or take out loans from lenders. Traditional partnerships cannot issue shares to investors.
In which ONE of the following circumstances are you NOT required need to carry out customer due diligence (‘CDD’) under the the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLR’)?
When you submit a proposal to a prospective client in a beauty contest to provide them with legal services.
When you establish a business relationship
When you carry out an occasional transaction.
When you submit a proposal to a prospective client in a beauty contest to provide them with legal services.
Correct. Under regulation 27 MLR a relevant person must carry out CDD if they establish a business relationship, carry out an occasional transaction, suspect money laundering, or doubt the veracity of documents or information provided by the client.
When you submit a proposal to a client in a beauty contest, you don’t know whether you will win the work, so it is too early to carry out CDD.
Which regulation of the MLR sets out the definition of a business relationship?
Regulation 3
Regulation 5
Regulation 4
Regulation 4
Correct
Correct. Regulation 4 sets out the definition of business relationship. The definition of occasional transaction is set out in regulation 3. The definition of beneficial owner is set out in regulation 5.
Which regulation of the MLR sets out the requirements for enhanced CDD?
Regulation 37
Regulation 33
Regulation 12
Regulation 33
Correct
Correct. Regulation 33 sets out the requirements for CDD. Regulation 37 sets out the requirements for simplified CDD and regulation 12 sets out the definition of independent legal professional.
Which ONE of the following statements is CORRECT?
A solicitor can rely on CDD carried out by another law firm, but not if the first law firm conducted the CDD more than six month’s previously.
A solicitor can never rely on CDD carried out by another person.
Technically a solicitor may rely on CDD carried out by another law firm with the consent of that law firm, but in practice this is rare partly because the solicitor will remain liable for any failure to carry out CDD.
Technically a solicitor may rely on CDD carried out by another law firm with the consent of that law firm, but in practice this is rare partly because the solicitor will remain liable for any failure to carry out CDD.
Correct
Correct. A solicitor may rely on CDD carried out by another person under regulation 39, but the solicitor will remain liable for any failure to apply CDD so in practice it is rare to rely on the CDD carried out by another person.
Which ONE of the following statements is CORRECT?
The money laundering regulations apply to corporate solicitors in law firms but not to other areas of practice or to in-house lawyers or other industries.
Every lawyer, whether they work in a law firm or in-house, is at risk of exposure to money laundering.
The money laundering regulations apply to law firms but not to in-house lawyers or other industries.
Every lawyer, whether they work in a law firm or in-house, is at risk of exposure to money laundering.
Correct. The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLR 2017’) apply to a wide range of people and businesses, not just law firms.
Which ONE of the following statements is CORRECT?
There is a risk of a firm being involved in money laundering only when it receives proceeds of crimes in excess of £100,000 into its bank account.
There is a risk of a firm being involved in money laundering only when it receives proceeds of crimes in excess of £10,000 into its bank account.
Money laundering can include receiving small proceeds of minor crimes into your employer’s bank account.
Money laundering can include receiving small proceeds of minor crimes into your employer’s bank account.
Correct
Correct. Receiving the proceeds of crime, however small into your bank account can constitute possessing criminal property and could be a criminal offence.
Which option correctly identifies the key pieces of legislation relating to money laundering in the UK?
The Proceeds of Crime Act 2002 (‘PoCA’), and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLR’)
The Financial Services and Markets Act 2000 (‘FSMA’) and the Money Laundering Regulations 2007 (‘MLR’)
The Proceeds of Crimes Act 2002 (‘PoCA’) and the Money Laundering Regulations 2007 (‘MLR’)
The Proceeds of Crime Act 2002 (‘PoCA’), and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLR’)
Correct, these are the two key pieces of legislation relating to money laundering in the UK.
Which ONE of the following statements about the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLR’) is CORRECT?
The MLR apply to financial institutions, some legal work, auditors, estate agents and casinos.
The MLR apply to all legal work and financial institutions.
The MLR apply to financial institutions, all legal work and auditors.
The MLR apply to financial institutions, some legal work, auditors, estate agents and casinos.
Correct. These organisations are listed in Regulation 8(2) MLR. The MLR do not apply to all types of legal work, only those falling within Regulation 8(2).
Which ONE of the following statements is CORRECT?
The MLR are designed to ensure that organisations that take part in money laundering will be criminally liable.
The MLR are designed to ensure that organisations establish procedures to forestall and prevent operations relating to money laundering.
The MLR are designed to ensure that organisations report their suspicions of money laundering to the police.
The MLR are designed to ensure that organisations establish procedures to forestall and prevent operations relating to money laundering.
Correct. The Proceeds of Crime Act 2002 anticipates the reporting of suspicious transactions involving the proceeds of crime. MLR requires organisations to get themselves in a position to identify potential money laundering and report it as necessary.
Which ONE of the following statements is CORRECT?
A solicitor who advises their client on a litigation claim for personal injury is likely to fall within the definition of independent legal professional and be caught by the MLR.
A solicitor who sets up a company for a client is not likely to fall within the definition of independent legal professional and be caught by the MLR.
A solicitor advising a company on the sale of a business entity is likely to fall within the definition of independent legal professional and be caught by the MLR.
A solicitor advising a company on the sale of a business entity is likely to fall within the definition of independent legal professional and be caught by the MLR.
Correct
Correct. A solicitor advising a company on the sale of a business entity would fall within regulation 12(1)(a) MLR, “the buying and selling of real property” and would therefore fall within the definition of an independent legal professional.
A solicitor who sets up a company for a client is likely to fall within the definition of independent legal professional under regulation 12(1) (e) “ the creation, operation of management of trusts, companies…” and also “trust or company service provider” under regulation 12(2)(a), “forming companies”, and would therefore be caught by MLR.
A solicitor who advises their client on a personal injury litigation matter would not fall within the definition of independent legal professional and is therefore not likely to be caught by the MLR.
Your client, a British national, is purchasing a flat for her daughter for a price of £750,000. She is funding 50% of the purchase in cash from the sale of some shares, and 50% by a mortgage with a high street bank. You have not acted for the client before and you expect that this will be a one-off transaction for the client.
Which ONE of the following options correctly states the evidence of identity and verification you should obtain to demonstrate you have carried out the required level of CDD on this client?
A utility bill or bank statement showing the client’s address for the last three years.
A copy of the title deeds for the client’s current address or if her accommodation is rented, a copy of the rental agreement.
Assuming you meet your client face to face, producing a valid passport or photocard ID should meet the CDD requirements.
Assuming you meet your client face to face, producing a valid passport or photocard ID should meet the CDD requirements.
Correct
Correct. This is the evidence recommended in the guidance on anti-money laundering regulations (‘AMLG’) published by the Legal Sector Affinity Group. It is good practice to have either one ‘government document’ which verifies either the name and address or name and date of birth; or a ‘government document’ which verifies the client’s full name and another supporting document which verifies the name and either their address or date of birth.
You have been instructed by a company Autolext Corporation (‘Autolext’)on the purchase of 60% of the shares in a data analytics company, Data Inc for £2 million. Data Inc is registered in the Cayman Islands. Autolext is registered in Bermuda and has a majority shareholder who is Iranian. Autolext has asked to you set up a wholly owned subsidiary, Autolext Data Limited which will be the vehicle that purchases the shares in the Data Inc. Autolext will pay cash for the shares.
Which ONE of the following options correctly states the evidence of identity and verification you should obtain to demonstrate you have carried out the required level of CDD on this client?
You should identify the name, registered number and address of the registered office of Autolext, and verify it, for example by a search of the relevant company registry in Bermuda. You must also take reasonable measure to determine and verify the law to which the company is subject, its constitution, and the full names of the board of directors (or equivalent management body) and senior persons responsible for its operations.
There is a high risk of money laundering here, so you will need to examine the background and purpose of the transaction, to determine whether the transaction or relationship appear suspicious. This would involve making enquiries to understand the background and financial situation of Autolext, getting additional independent sources to verify the information you obtain and satisfying yourself that the transaction is legitimate.
You should identify the name, registered number and address of the registered office of Autolext, and verify it, for example by a search of the relevant company registry in Bermuda. You must also take reasonable measure to determine and verify the law to which the company is subject, its constitution, and the full names of the board of directors (or equivalent management body) and senior persons responsible for its operations. In addition you will need to examine the background and purpose of the transaction, to determine whether the transaction or relationship appear suspicious. This would involve making further enquiries to understand the financial situation of the company, getting additional independent sources to verify the information you obtain and satisfying yourself that the transaction is legitimate.
You should identify the name, registered number and address of the registered office of Autolext, and verify it, for example by a search of the relevant company registry in Bermuda. You must also take reasonable measure to determine and verify the law to which the company is subject, its constitution, and the full names of the board of directors (or equivalent management body) and senior persons responsible for its operations. In addition you will need to examine the background and purpose of the transaction, to determine whether the transaction or relationship appear suspicious. This would involve making further enquiries to understand the financial situation of the company, getting additional independent sources to verify the information you obtain and satisfying yourself that the transaction is legitimate.
Correct
Correct. There are a number of factors that suggest that there is a high risk of money laundering in this scenario and you therefore need to carry out enhanced CDD. This means that in addition to carrying out ‘standard CDD’ of identifying and verifying the identity of Autolext, you will need to carry out further enquiries to satisfy yourself that the client and the transaction is legitimate.
Regency Investment PLC is listed on the London Stock Exchange and is an existing client of your firm. It regularly instructs you on the acquisition and sale of properties in its portfolio. You have received a new instruction to act for it on the acquisition of the freehold property for £7 million.
Which ONE of the following options correctly states the evidence of identity and verification you should obtain and CDD you should carry out on this client?
As Regency Investment PLC is an existing client, you should already have carried out CDD on it. As a listed company, it is likely that you will have carried out simplified CDD for example by obtaining a copy of the dated page of the website of the relevant stock exchange showing the listing, and verifying it by a search of the company registry. You will need to conduct ongoing monitoring by checking that the identification documents you hold are up to date and checking the transaction is consistent with your firm’s knowledge of the client.
As Regency Investment PLC is a listed public company, you should carry out simplified CDD for example by obtaining copy of the dated page of the website of the relevant stock exchange showing the listing, and verifying it by a search of the company registry.
You should carry out standard CDD by identifying the name, registered number and address of the registered office of Regency Investment PLC, and verifying it, for example by a search of the company registry. You must also take reasonable measure to determine and verify the law to which the company is subject, its constitution, and the full names of the board of directors (or equivalent management body) and senior persons responsible for its operations.
As Regency Investment PLC is an existing client, you should already have carried out CDD on it. As a listed company, it is likely that you will have carried out simplified CDD for example by obtaining a copy of the dated page of the website of the relevant stock exchange showing the listing, and verifying it by a search of the company registry. You will need to conduct ongoing monitoring by checking that the identification documents you hold are up to date and checking the transaction is consistent with your firm’s knowledge of the client.
Correct. This is an existing client whom the firm acts for on a regular basis and a listed public company. It is likely the firm will already have carried out simplified CDD on the client. The firm will need to carry out ongoing monitoring, by checking that the transaction is consistent with the firm’s knowledge of the client and checking at regular intervals that the identification documents it holds for the client are up to date.
Which ONE of the following options best states why financial services are regulated in the UK?
There are many complex investment products available on the market. The provision of financial services is regulated in the UK to ensure that you can only advise on financial products if you have a maths degree.
There are many different investment products available on the market and individuals increasingly look to professional advisers to help them decide which investment to make. The provision of financial services is regulated in the UK to ensure that consumers only invest in safe financial products.
There are many different investment products available on the market and individuals increasingly look to professional advisers to help them decide which investment to make. The provision of financial services is regulated in the UK to ensure that the banks that offer the products do not collapse.
There are many different investment products available on the market and individuals increasingly look to professional advisers to help them decide which investment to make. The provision of financial services is regulated in the UK to ensure that consumers are adequately protected from negligent financial advice.
There are many different investment products available on the market and individuals increasingly look to professional advisers to help them decide which investment to make. The provision of financial services is regulated in the UK to ensure that consumers are adequately protected from negligent financial advice.
Correct
Correct. Individuals need to make decisions on difficult issues including the level of risk they should take and the return they seek when making an investment. Financial advisors in the UK must be authorised to ensure that they do not give negligent advice to their clients.
Which ONE of the following statements is CORRECT?
There are two regulators of financial services in the UK, the Bank of England and the Financial Conduct Authority.
There are two regulators of financial services in the UK, the Bank of England and the Financial Services Authority.
There are two regulators of financial services in the UK, the Prudential Regulation Authority and the Financial Conduct Authority.
There are two regulators of financial services in the UK, the Prudential Regulation Authority and the Financial Conduct Authority.
Correct
Correct. The two regulators of financial services in the UK are the Prudential Regulation Authority and the Financial Conduct Authority. The Prudential Regulation Authority is currently a subsidiary of the Bank of England.
Which ONE of the following statements is CORRECT?
It is a criminal offence to carry on a regulated activity, for example advising on the merits of an investment, unless you are authorised by the Financial Conduct Authority to do so, or exempt.
If you were to carry out a regulated activity, for example advising on the merits of an investment, without being authorised by the Financial Conduct Authority to do so, or exempt, this would be a serious matter of misconduct which would be determined by the Solicitors Disciplinary Tribunal.
It is a civil offence to carry on a regulated activity, for example advising on the merits of an investment, unless you are authorised by the Financial Conduct Authority to do so, or exempt.
It is a criminal offence to carry on a regulated activity, for example advising on the merits of an investment, unless you are authorised by the Financial Conduct Authority to do so, or exempt.
Correct. See section 19 Financial Services and Markets Act 2000 (FSMA).
Which ONE of the following would be MOST HELPFUL for you in navigating the FSMA decision tree?
SRA Code of Conduct for Solicitors, RELs, and RFLs 2019
Financial Services Act 2012
Financial Services and Markets Act 2000 (Regulated Activities) Order 2001
Financial Services and Markets Act 2000 (Regulated Activities) Order 2001
Correct
Correct. The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (‘RAO’) contains the majority of the detail you will need to navigate the FSMA decision tree. Part III lists the specified investments, and Part II lists the specified activities. In addition, each chapter within Part II RAO lists the specified activity and then the exclusions that apply to that specified activity. This is very helpful in helping you navigate questions 1, 2 and 3 of the FSMA decision tree.
Which section of the Financial Services and Markets Act 2000 (‘FSMA’) sets out the general prohibition that no one may carry out a regulated activity unless they are either authorised or exempt?
Section 19 FSMA
Section 23 FSMA
Section 327 FSMA
Section 19 FSMA
Correct. Section 19 FSMA contains the general prohibition. Section 23 relates to offences for contravening section 19. Section 327 relates to the exemption from the general prohibition.
Which ONE of the following CORRECTLY summarises the conditions for carrying out an exempt regulated activity?
The person must be (i) a member of a profession, (ii) must not receive payment or commission unless this is passed on to the client (or the client agrees otherwise), (iii) the activities must be incidental, and (iv) the person must comply with their relevant designated professional body’s rules.
The person must be (i) a member of a profession, (ii) must not receive payment or commission unless this is passed on to the client (or the client agrees otherwise), (iii) the activities must be specified in Part II RAO, and (iv) the person must comply with the FCA Rule Book.
The person must be (i) a solicitor, (ii) must not receive payment or commission unless this is passed on to the client (or the client agrees otherwise), (iii) the activities must relate to a specified investment, and (iv) the person must comply with the SRA (Conduct of Business) Rules 2019.
The person must be (i) a member of a profession, (ii) must not receive payment or commission unless this is passed on to the client (or the client agrees otherwise), (iii) the activities must be incidental, and (iv) the person must comply with their relevant designated professional body’s rules.
Correct. See section 327 Financial Services and Markets Act 2000 (FSMA).
Which section of the Financial Services and Markets Act 2000 (‘FSMA’) defines a regulated activity?
Section 20
Section 22
Section 19
Section 22
Correct
Correct. Section 22 FSMA defines a regulated activity as follows:
‘an activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and – relates to an investment of a specified kind’
Which ONE of the following IS a specified investment under Part III of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (‘RAO’)?
Rights under a contract of insurance
Freehold property
A loan to a company to purchase an office
Rights under a contract of insurance
Correct
Correct. Rights under a contract of insurance is a specified investment under article 75 RAO. A freehold property is not a financial product and is therefore not a specified investment under Part III RAO. A loan to a company to purchase an office does not fall within the definition of a regulated mortgage contract so is not a specified investment under Part III RAO.
Which ONE of the following statements is CORRECT?
Arranging the sale of a client’s shares in a company to their business partner would be a specified activity under article 53 RAO.
Advising a client to use the sale proceeds from their sale of shares in a company to purchase shares in British Gas plc would be a specified activity under article 53 RAO.
Giving a client advice on the legal rights attaching to two different classes of shares in a company would be a specified activity under article 53 RAO.
Advising a client to use the sale proceeds from their sale of shares in a company to purchase shares in British Gas plc would be a specified activity under article 53 RAO.
Correct. Advising a client to use the sale proceeds from their sale of shares in a company to purchase shares in British Gas plc would be a specified activity of advising on the merits of an investment under article 53 RAO because the advice would involve giving an opinion on the part of the solicitor and a recommendation as to a course of action.
Giving advice on the legal rights attaching to two different classes of shares in a company is generic advice, it does not require an element of opinion on the part of the solicitor and a recommendation as to a course of action, so it does not fall within advising on the merits of an investment under article 53.
Arranging the sale of a client’s shares in a company to their business partner would be a specified activity under article 25 (arranging deals in investments) but not under article 53 RAO.
Which ONE of the following statements is CORRECT?
Step 3 of the FSMA decision tree is to work out whether the solicitor is providing an exempt regulated activity.
Step 3 of the FSMA decision tree is to work out whether the specified activity is one of the excluded activities under the RAO.
Step 3 of the FSMA decision tree is to work out whether the activity is specified under Part II RAO.
Step 3 of the FSMA decision tree is to work out whether the specified activity is one of the excluded activities under the RAO.
Correct. Step 3 of the FSMA decision tree is to work out whether the specified activity is one of the excluded activities under the RAO.
Step 2 of the decision tree is to work out whether the activity is specified under Part II RAO.
Working out whether the solicitor is providing an exempt regulated activity forms part of step 4 of the FSMA decision tree.
Which ONE of the following statements is CORRECT?
A solicitor who advises their client to buy 10% of the shares in ABC Limited would not need to be authorised by the FCA because they fall within the exclusion in Article 70 RAO.
A solicitor who arranges for their client to buy 50% of the shares in a private company would NOT need to be authorised by the FCA because they fall within the exclusion in Article 70 RAO.
A solicitor who sells 50% of their client’s shares in a company as agent for their client would need to be authorised by the FCA because they would not fall within the exclusion in Article 70.
A solicitor who arranges for their client to buy 50% of the shares in a private company would NOT need to be authorised by the FCA because they fall within the exclusion in Article 70 RAO.
Correct
Correct. The exclusion in Article 70 applies to the specified activities of arranging deals, advising and dealing as agent (which includes selling), so it could potentially apply to all three options. One of the conditions for Article 70 to apply is that the shares consist of or include 50 per cent or more of the voting shares in the company.
Arranging for your client to buy 50% of the shares meets this condition, so the exclusion WOULD apply and the solicitor would NOT need to be authorised by the FCA.
Advising your client to buy 10% of the shares does not meet this condition, so the exclusion would NOT apply and the solicitor WOULD need to be authorised by the FCA.
Selling 50% of your clients shares as agent meets this condition, so the exclusion WOULD apply and the solicitor would NOT need to be authorised by the FCA.
Which ONE of the following statements is CORRECT?
A solicitor does not need to be authorised by the FCA to arrange for their client to buy shares in a company if the client is entering the transaction on advice given by a financial advisor who is authorised by the FCA.
A solicitor does not need to be authorised by the FCA to arrange for their client to buy shares in a company if the client is entering the transaction on advice given by an advisor who is authorised by the SRA.
A solicitor can only arrange for their client to buy shares in a company if the solicitor is authorised by the FCA or exempt.
A solicitor does not need to be authorised by the FCA to arrange for their client to buy shares in a company if the client is entering the transaction on advice given by a financial advisor who is authorised by the FCA.
Correct
Correct. Arranging for your client to buy shares in a company is a specified activity under Article 25(1) RAO. However if you read further, Article 29 RAO states that arrangements made by a person are excluded from Article 25(1) if they are entered on advice to the client by an authorised person. A financial advisor authorised by the FCA is an authorised person. Therefore under Article 25(1), the solicitor does not need to be authorised by the FCA to arrange for their client to buy the shares.
This conclusion is logical. If the client is acting on the advice of someone authorised by the FCA there is no additional need for the solicitor to be authorised by the FCA.
The financial advisor would need to be authorised by the FCA to advise under FSMA, not the SRA.
Which section of the Financial Services and Markets Act 2000 (‘FSMA’) sets out the exemption from the general prohibition that no one may carry out a regulated activity unless they are either authorised or exempt?
Section 327 FSMA
Section 19 FSMA
Section 325 FSMA
Section 327 FSMA
Correct. Section 327 sets out the conditions that must be satisfied for a person to meet the exemption from the general prohibition. The conditions include: the person must be (i) a member of a profession, (ii) must not receive payment or commission unless this is passed on to the client (or the client agrees otherwise), (iii) the activities must be incidental, and (iv) the person must comply with their relevant designated professional body’s rules. Section 19 FSMA contains the general prohibition. Section 325 relates to the FCA’s general duty.
