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Professional Conduct > Regulation of Firms (SQE1 only) > Flashcards

Regulation of Firms (SQE1 only) Flashcards

1
Q

What are the 3 key aspects of SRA’s role?

A
  1. Authorises firms and other bodies to provide legal services
  2. Sets and enforces standards for solicitor’s profession
  3. Main point of call for disciplinary matters relating to solicitors - can issue warnings, fine and revoke recognition
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2
Q

What are reserved legal activites?

A

Services that cannot be provided unless authorised by SRA - inc:

  • Rights of audience (appear before court, call witnesses)
  • Conduct of litigation (issuing proceedings before court)
  • Reserved instrument activities (preparing instrument of transfer/charge relating to land)
  • Notarial activities
  • Probate activities
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3
Q

What does it mean that SRA takes risk-based approach to regulating firms?

A

Do not set prescriptive rules but encourage firms to set own standards and ensure compliance (after setting out regulatory framework)

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4
Q

To what 4 categories of people do individual lawyers have duties to?

A
  1. Clients - 7 principles, CCS obligatinos etc.
  2. Third parties - uphold confidence in profession, duty to act public generally as well as court
  3. Colleagues - maintain competence and adequate supervision
  4. SRA and other regulators -cooperate with SRA and ensure they can justify their actions
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5
Q

Who is responsible for ensuring compliance with the CCF?

A

‘Managers’ = sole principal in a recognised sole practice, partners/members of LLP, directors of company, partner in partnership

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6
Q

What two roles must firms appoint and what is their job? Must they be different people?

A
  • COLP (Compliance Officer for Legal Practice) = comply with regulatory obligations and record failures to do so
  • COFA (Compliance Officer for Finance and Administration) = comply with SRA Account Rules and report serious breaches to SRA

One person can perform both roles (for small firms)

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7
Q

What is PII and why must firms take it out?

A

Professional Indemnity Insurance - provides cover for firm and clients, pays out claims from clients or TPs

Minimum levels specified in SRA

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8
Q

When must organisations get their legal services business authorised?

A

If they provide any of the following:
1. Reserved legal activities
2. Immigration services (unless regulated by OISC)
3. Claims management services (unless regulated by FCA)
4. Regulated financial activities (unless regulated by FCA)

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9
Q

Will a business who only provides non-reserved legal activities never be authorised?

A

Does not need to be - but may choose to be authorised to reassure clients its practice has protections that arise from being authorised by SRA e.g. requirement to have specific level of PII

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10
Q

What is a sole practice? Is it only one person?

A
  • Solicitor practices on own account and provide services under own/trading name; sole principal
  • Can employ several qualified solicitors as long as they are not also principals

NOT a company

Less common nowadays - profession more specialised and indemnity insurance gone up

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11
Q

What is the difference between a legal services body and a recognised body?

A
  • Legal services body = a firm within which all managers/interest holders are lawyers (partnership, company, LLP)
  • Recognised body = legal services body once authorised by SRA
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12
Q

What is a licensable body? How many non-lawyer managers must it have?

AKA alternative business structure (ABS)

A

Body within which managers/interest holders include both laywers and non-lawyers (must have at least one non-lawyer manager)

Intro of ABSs to the legal services market = non-lawyers are able to share in the management and control of businesses which provide reserved legal activities to the public.
Permits a non-lawyer - e.g. director of finance and administration - to own shares in an incorporated law firm or share the profits of a partnership, as well as having voting powers.

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13
Q

Do law centres/legal advice centres need to be authorised by the SRA? Must pro bono work be covered by indemnity insurance?

I.e. places that give legal advice and undertake casework for free

A
  • Not if they do not provide reserved legal activities (but must be authorised if they do e.g. litigous debt claims!)
  • A solicitor must still comply with CCS even if unpaid
  • Pro bono work must be covered under indemnity reasonably equivalent to that required under SRA indemnity insurance rules
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14
Q

Must in-house practices be SRA authorised?

A

No - but solicitors must comply with CCS standards

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15
Q

What is the status of multinational law firms and the SRA codes?

I.e. firms operating both inside and outside E+W`

A
  • Foreign lawyers practicing in E+W required to comply with CCS, SRA etc.
  • SRA regulated individuals/authorised bodies practicing in offices outside E+W must comply with SRA Overseas Rules
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16
Q

What requirements in the CCS and CCF ensure that legal professionals address the risks to integrity of the legal profession?

A
  • Keep client money safe
  • Do not take unfair advantage of clients
  • Ensure solicitors’ instructions reflect client wishes
  • Address EDI
  • Provide clear complaints procedure
  • Provide clear information that client can understand about service they receive and how much it will cost
17
Q

What must you do when supervising or managing others providing legal services?

A
  1. Remain accountable for the work they carry out
  2. Effectively supervise work done for clients
18
Q

Must someone supervising client files be legally qualified?

A

No - as long as they have suitable experience, knowledge and competence to deal with potential issue and they have clear guidance re when/to whom issues outside their authority should be referred upwards they are permitted to supervise client matters

19
Q

What are the roles of the COLP (Compliance Officer for Legal Practice) and the COFA (Compliance Officer for Finance and Administration)?

A
  • COLP = ensure firm complies with all T&Cs of authorisation by SRA/statutory obligations, record failures to comply with authorisation and make available to SRA, and report any material failure to SRA as soon as is practicable
  • COFA = ensure firm complies with Accounts Rules and reports breaches of such to SRA promptly
20
Q

Do COLPs and COFAs report breaches to the managers or to the SRA?

A

SRA

21
Q

What type of system must COLPs and COFAs put in place?

A

Not prescribed - requirements vary depending on size and type of firm

But most will implement risk/financial management policy

22
Q

What is the criteria for being a COLP or COFA? What must a COLP be in particular?

A
  • Be a manager or employee of authorised body
  • Consent to designation
  • Not be disqualified from acting as a Head of Legal Practice
  • For COLP: be an individual authorised to carry on reserved legal activities

Manager = sole principal, member of LLP, director of company, partner in partnership

Authorised body = body licenced by SRA to practice as a licensed body/SRA-recognised sole practice

23
Q

Must the COLP and COFA always be different people?

A

Can be same person provided they have necessary skills and meet criteria, but likely that this will only be the case for sole practicioners and some small firms

24
Q

Do COLPs and COFAs have sole responsibility for compliance?

A

No - compliance is ultimately the responsibility of owners/managers of firm (managers have responsibility for compliance by firm with CCF) who share responsibility joint and severally

But COLPs and COFAs still have pivotal functions in their organisation

I.e. if a COLP/COFA decides not to take any further action after you alert them of serious breach, you should still pursue matter further

25
Q

What will the COLP generally be responsible for with regard to the CCF?

A

Ensuring that appropriate systems in place to minimise risk of non-compliance with CCF i.e. clear and effective governance structure

26
Q

What systems must the firm/COLP implement?

A
  • How conflicts of interest are identified
  • How client confidentiality is protected

Ultimately obligations on firm but most delegate to COLP (day to day)

27
Q

When will a:

  1. Sole principal
  2. Other manager

not have to be approved by SRA?

A

No - there are exceptions:
1. Sole principal whose practice has been authorised as a recognised sole practice is not requird to be approved as a manager of that practice
2. When the SRA is satisfied that the manager of authorised body is not involved in: day to day strategic management of body; compliance with SRA’s regulatory arrangements; or carrying on reserved legal activities or provision of legal services in E+W

28
Q

A firm must have at least one manager or employee or must procure the services of an individual who is and does what?

A
  • A lawyer of E+W and has practiced as such for at least 3 years; and
  • Supervises the work undertaken by the authorised body

Important in ABSs’ - owners required to employ at least one lawyer wo is qualified to supervise ABS’ reserved legal activities (as non-lawyers should not be responsible for overall supervision of reserved legal activities

29
Q

What are the different methods of billing?

A
  • Hourly charging
  • Conditional fees
  • Fixed fees
  • Capped fees
  • Insurance
  • Community Legal Services
30
Q

What is a ‘WIP’ re hourly charging and how is it reviewed?

A
  • WIP/work in progrss = time recorded in 6 minute blocks
  • Partner will review WIP and decide how much time is billed to the client and how much will be written off (time then billed according to fee earners’ charge out rates)

RECORDING TIME IS NOT THE SAME AS BILLING CLIENT

31
Q

What is the golden rule of time recording?

A

Accurately and correctly record ALL your time - partner will decide how much time will be written of and not the fee-earner (may be written off completely and be regarded as training)

E.g. if it takes you one hour to write an email and you think that the task should have taken you 30 minutes. Do not record 30 minutes. You should record the full amount of time – 1 hour, and the partner will decide how much to bill.

32
Q

What are conditional fee agreements and when will they be used?

A

Lawyers will not recover any fees if they lose the case, but can otherwise recover out of client’s damages subject to a cap

Common in litigation and mediation

33
Q

How do fixed fees work and when will they be used?

A

Invoice is for a fixed amount regardless of time spent on transaction (could be more or less than if on hourly charging basis) - will be invoiced once completed

Used for conveyancing and wills

34
Q

How do capped-fee agreements work?

A

Firm records and bills fees in normaly way but will not exceed a pre-agreed amount for particular transaction

35
Q

What happens when the cap on a capped fee agreement is reached?

A

Legal team asked to pause while partner attempts re-negotiation or work continues as normal and any fees above written off

36
Q

What are the advantages and disadvantages of using a partnership structure in a law firm?

A
  • Advantages = flexible, owners share decisions between themselves, profit sharing, privacy (do not have to be filed)
  • Disadvantages = traditional finance raising methods, shared decision making, unlimited liability, tax burden on individual partners, foreign expansion hard
37
Q

What are the advantages and disadvantages of using a LLP structure in a law firm?

A
  • Advantages = limited liability, tax advantages, increased funding opportunities
  • Disadvantages = less tax efficient than a company, increased filing responsibilities (less privacy), external investment, foreign expansion difficult
38
Q

What are the advantages and disadvantages of using a company structure in a law firm?

A
  • Advantages = limited liability, clear decision making structure, easier to raise money (issue shares), tax advantages, foreign expansion
  • Disadvantages = administration and filings (must follow stipulated processes like AGMs), tax issues (when converting from partnership), transparency

Professional Conduct (8 decks)

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