PCR, FSMA and MLR

Question 1

What is the ‘general rule’ according to the SRA Code of Conduct and Accounts Rules regarding conflicts of interest?

Answer 1

Generally prohibited from acting for a client where:

O(3.5) ‘client conflict’: significant risk of a new client’s interests conflicting with the interests of one or more of your other clients IN RELATION TO THAT OR A RELATED MATTER.

O(3.4) there is an ‘own interest’ conflict - glossary describes as ‘there is an actual conflict or significant risk of conflict between you and your client’s interests IN RELATION TO THAT OR A RELATED MATTER.

e.g. you are seeking to buy property from a client or borrow money from them…

Question 2

Under what two circumstances are you permitted to act where there is a client conflict (O(3.5))?

Answer 2

The SUBSTANTIALLY COMMON INTEREST ‘SCI’ exception O(3.6)

OR

the COMPETING FOR THE SAME OBJECTIVE ‘CCSO’ exception O(3.7)

Question 3

What are the components of the Substantially Common Interest exception?

Answer 3

For the SCI exception to apply there must be a situation where:

• there is a clear common purpose
• there is strong consensus on how to achieve this common purpose
• the conflict must be peripheral to this purpose

Question 4

Which IBs specifically refer to the O(3.6) exception?

Answer 4

IBs(3.5), (3.11) and (3.12)

Question 5

Describe IB(3.5) and what other IB does it link to?

Answer 5

Suggests you will fail to meet outcome 3.6 exception if you cannot act even-handedly between the clients OR if one client would be prejudiced by not being advised separately.

This links to IB 3.12 - unequal bargaining power the IB directly references the SCI exception.

Question 6

What does IB(3.11) infer about meeting the 3.6 exception?

Answer 6

3.11 suggests that SCI will not apply where parties’ RESPECTIVE INTERESTS in the end result ARE DIFFERENT. e.g. OPPOSITE SIDES OF A TRANSACTION.

Question 7

As IB(3.14) states that ‘acting for the buyer…and seller…in a transaction relating to the transfer of land for value…or some other interest in land for value’ may tend to show you have not achieved Chap 3, are there any situations where 3.14 would occur but not cause conflict?

Answer 7

• NOT transacting at ‘arm’s length’
• blood relations
• associated companies (eg two subsidiaries of the same parent co, or parent co and a subsidiary)
• settlor of a trust and trustees
• trustees of a trust and beneficiaries
• sole trader/ partnership and ltd co where the business of the sole trader is to be transferred to a company under control of same person…

H/e remember if interest in end result not the same cannot act! IB(3.11)

Question 8

If you acted for a commercial landlord and a tenant paying market rent in the transacting of a lease for value which IB and O would you be falling foul of?

Answer 8

IB(3.14)! O(3.5)!