SQE: Professional Conduct

When should a solicitor conduct customer due diligence?

1. When establishing a business relationship

2. When carrying out an occasional transaction

3. When suspecting of money laundering or terrorist financing

What 3 primary requirements do solicitors have to comply with?

1. Legal

2. Regulatory

3. Ethical

What is the purpose of the Solicitors Regulation Authority (SRA)?

To regulate solicitors, law firms and individuals who work for businesses authorised by the SRA

Who can a client complain to?

1. The Law Firm - via the firm's internal complaints procedure

2. Legal Ombudsman- only available to the likes of individuals, small businesses, charities

3. SRA - used for complaints concerning misconduct, dishonesty or breaches of the SRA's rules

4. Solicitors Disciplinary Tribunal (SDT) - deals with serious breaches of the SRA's rules

5. Apply for Court Action

Does every law firm have to have a complaints procedure?

Yes (it is mandated by the SRA)

What is the purpose of legal ombudsmen?

Investigate complaints about legal services to determine if they were reasonable

What powers do legal ombudsmen have?

They can require the solicitor to:

1. Apologise

2. Pay Compensation

3. Correct an Error

They CANNOT discipline or fine / lawyer

What powers does the SRA have following a compliant from a client?

1. Issue a warning to the firm

2. Impose a disciplinary sanction (eg a fine)

3. Reprimand the solicitor for professional misconduct

4. Order the solicitor to repay or refund the whole or part of the costs to the client

5. Institute disciplinary proceedings before the Solicitor's Disciplinary Tribunal

6. Close down a firm (in exceptional circumstances)

What powers does the Solicitors Disciplinary Tribunal (SDT) have following a compliant from a client?

1. Strike a solicitor off the roll

2. Suspend a solicitor from practice for a fixed or indefinite period

3. Reprimand the solicitor for professional misconduct

4. Impose a fine

They CANNOT award compensation

Name 4 key principles prescribed by the SRA:

Requires individuals and firms to act:

1. In a way that upholds the constitutional principle of the rule of law and the proper administration of justice

2. In a way that upholds public trust and confidence in the solicitors' profession

3. With independence

4. With honestly

5. With integrity

6. In a way that encourages DEI

7. In the best interests of each client

Do the SRA principles apply to solicitors in their personal lives?

Yes

What happens in the circumstances where SRA principles conflict with one and other?

The principles which safeguard the wider public interest take priority over the interest of an individual client.

Who does the SRA principles apply to?

All individuals authorised by the SRA to provide legal services, as well as authorised firms and their managers and employees.

What Act imposes legal obligations to protect people from discrimination?

Equality Act 2010

Are employers obliged to have a DEI policy?

Yes

Name 3 protected characteristics prescribed in the Equality Act:

1. Age

2. Disability

3. Gender

4. Religion

5. Marriage / Civil Partnership

6. Race

7. Sexual Orientation

What are the 4 types of discrimination?

1. Direct Discrimination

2. Indirect Discrimination

3. Victimization

4. Harassment

What is 'direct discrimination'?

Occurs where because of a protected characteristic, A treats B less favourably than A treats / would treat others

What is 'indirect discrimination'?

Acts, decisions or policies which are not intended to treat anyone less favourably, but which have the effect of disadvantaging a group of people with a protected characteristic

What is 'harassment'?

A harasses B if A engages in unwanted conduct related to a relevant protected characteristic which has the purpose of:

(a) Violating B's dignity OR

(b) Creating an intimidating, hostile, degrading, humiliating or environment for B

What is 'victimization'?

Occurs where A subjects B to a detriment because either:

(a) B has done a 'protected act', OR

(b) A believes B has done, or may do, a 'protected act'

What is a 'protected act'?

(a) Bringing proceedings under the Equality Act

(b) Giving evidence or information in connection with proceedings under the Equality Act 2010

(c) Doing any other thing for the purposes of / in connection with the Equality Act 2010

(eg supporting the colleague bringing proceedings)

What is a 'duty to make reasonable adjustments'?

Service-providers must make reasonable adjustments to their services in situations where a disabled person would otherwise be placed at a substantial disadvantage compared with people who are not disabled

What are the 3 requirements of the duty to make reasonable adjustments?

1. Changing rules that could present barriers to disabled people

(eg a shirt and tie policy could be changed for a disabled person with a skin condition which means he cannot wear ties)

2. Making changes to overcome barriers created by the

physical features of premises (if these are open to the public or a section of the public)

3. Providing extra aids and services (eg basic training in BSL)

What is an 'undertaking'?

A statement (given orally or in writing) that somebody else reasonably relies on, that pledges that the solicitor or a third party will:

(a) Do something

(b) Cause something to be done

(c) Refrain from doing something

What are the consequences for failing to perform an undertaking?

The solicitor will be investigated by the SRA as it can be a serious disciplinary offence

Who can perform an undertaking?

Any individual in a law firm provided it can be reasonably relied upon by the recipient

What happens if a solicitor becomes aware that they had inadvertently misled the court?

They must, with their client's consent, immediately inform the court - if the client did not consent, the solicitor must stop acting for that client

What happens if a solicitor becomes aware that their client had misled / attempted to mislead the court?

The solicitor has to cease to act unless the client agreed to disclose the truth to the court

Can solicitors publicise their firm by making unsolicited approaches in person or telephone calls to members of the public?

No (unless they are former clients)

Can solicitors publicise their firm by making an unsolicited telephone call to a former client?

Yes (although they cannot for if they are anyone else but a former client)

What should a firm include when providing information about their costs?

1. The total costs of the service (can be estimated)

2. The basis of the charges (eg hourly or fixed fees)

3. The experience and qualifications of anyone carrying out the work / their supervisor

4. The cost of any disbursements

5. Whether any fees or disbursements attract VAT

If a solicitor has been referred / introduced to a new client by a business, what must the solicitor let the new client know?

1. The client must be informed of any financial interest the solicitor / the business has in the referral / introduction (eg commission)

2. The client must be shown the referral / introduction agreement between the solicitor and the business

What cases can a solicitor not refer / be referred to a client?

Personal injury cases

Can the financial benefit of a commission be the primary reason a solicitor's accepts a referral / introduction?

No - the referral has to be motivated purely for the benefit of the client and that any financial benefit to the solicitor is a 'bonus' of the process.

Does a referral agreement between a solicitor and a business have to be recorded + in writing?

Yes - this is show it can be shown to any clients who were obtained because of the referral

What is the duty of confidentiality?

The solicitor must keep the affairs of current and former clients confidential unless disclosure is required, permitted by law or the client consents

What are the 3 exceptions to the duty of confidentiality?

1. Disclosure is required by law (eg a court order, child abuse)

2. Disclosure is permitted (eg by statute regarding money laundering documents)

3. Disclosure is consented to by the client

What is the duty of disclosure?

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

What are the 3 exceptions to the duty of disclosure?

1. The solicitor believes that disclosing the information could cause serious physical or mental harm to the client / a third party

2. The information is contained in a privileged document that you have knowledge of only because it has been mistakenly disclosed

3. The disclosure is prohibited by a duty of confidentiality (eg to a former client, it is legally restricted by the court)

What takes priority: duty of confidentiality or duty of disclosure?

Duty of confidentiality

What should a solicitor do if a duty of confidentiality owed to a former client conflicts with a duty of disclosure owed to a current client?

They must obtain informed consent from the new client which declares that they consent to the confidential information not being disclosed to them (they relinquish the duty of disclosure they are owed on that particular matter)

If the new client refuses to consent, the solicitor should cease acting for them

What is the rule on 'adverse interests'?

A solicitor cannot act for a client where they have an interest adverse to the interest of another current / former client (unless an exception applies)

(eg client A instructs the firm on a breach of contract claim, however it turns out the firm advised client A's opposition 2 months ago regarding the contract in question - thus, client A has an adverse interest to a former client of the firm and therefore the firm cannot act)

What are exceptions to the rule on 'adverse interests'?

1. Effective measures have been taken which result in there being no real risk of disclosure of the confidential information (eg separate departments handling the cases)

2. The current / former client provides written consent that the firm can act for the new client, typically on the condition that measures are taken to protect their information

What are the 3 C's a solicitor should conduct when they receive new instructions from a potentially new client?

1. Customer Due Diligence

2. Conflict Check

3. Client Care Letter

What is the process of customer due diligence?

Identifying your client and verifying their identity on the basis of documents, data or information from a reliable source.

What is a conflict check?

A solicitor must check when accepting new instructions that there is no conflict of interest / own interest conflict

What should a client care letter contain?

A letter that ensure that clients are informed in writing at the time of engagement about:

(a) Confirmation of instructions

(b) Their right to complain about the services and the charges

(c) How a complaint can be made and to who

(d) All information on costs

(e) Explanation on who will deal with the matter

What is the procedure of conducting a conflict check?

Before you take on a new instruction you will need to check whether:

1. The work you are proposing to do for the client conflicts with any work your firm is doing for another client OR if it conflicts with your own interests

2. If you work for a national or international law firm this will involve checking whether the work conflicts with work your firm is doing for an existing client in another office

3. Finally, a more detailed search should be carried out as regards to the client's company number + the names of any counter parties to the matter + any directors of the client / counter parties

Is it necessary to carry out conflict checks for existing clients?

Yes - a conflict check must take place when taking instructions from both new and existing clients

Dp solicitors have an obligation to ensure that the service they provide to clients is competent and delivered in a timely manner?

Yes - if this obligation is ever in doubt, they should withdraw from acting for the client or pass the matter to a better suited solicitor

Can a solicitor terminate their retainer with a client on grounds of self-interest?

No, it is not deemed a 'good reason' for termination

What is deemed as a 'good reason' for a solicitor to terminate their retainer with a client?

1. They cannot obtain clear instructions

(eg each of the two partners from a two-partner firm of accountants give you conflicting instructions)

2. To carry on acting for the client would be a conflict of interest / own interest conflict

3. The client has failed to pay

Does the SRA require firms to send client care letters?

No, although the SRA does require certain information to be set out for the client in writing

Is it required that the solicitor provides information on costs to the client in writing?

No - it does not matter what form it takes as long as the solicitor provides 'the best possible information' about how their matter will be priced

What must solicitors do if a law firm does not resolve a client's complaint within 8 weeks?

Solicitors must inform the client, in writing, of any right they have to complain to the Legal Ombudsman and the time frame for doing so

Does a solicitor need to send a client care letter for every matter?

No - if the client is an established client and you are carrying out repeat work on agreed terms, the client might not need

all the costs information repeated each time

When must a legal business be authorised by the SRA (unless they are exempt)?

1. If they provide reserved legal services for the public

(eg litigation)

2. If they provide immigration services

3. If they provide claims management services

4. If they provide regulated financial activities

What is a 'licensable body'?

A body within which the managers / interest holders includes both lawyers and non-lawyers

(requires SRA authorisation)

What is the purpose of a 'licensable body'?

Means that non-lawyers are able to share in the management and control of businesses which provide reserved legal activities to the public

What is a 'reserved legal activity'?

Activities which can only be provided by someone authorised by the SRA

Name 3 examples of 'reserved legal activities'?

1. Rights of Audience

2. Conduct litigation (eg issue proceedings, acting as defence / claimant)

3. Reserved instrument activities (eg anything property practice related)

4. Certain probate activities

Do all organisations that provide legal services have to be authorised by the SRA?

No - only those who provide 'reserved legal activities'

Do Legal Advice Centres need to be authorised by the SRA?

No, as they do not provide 'reserved legal activities'

Can a 'sole practice' have other people employed under it?

Yes - a sole practitioner can employ several qualified solicitors, as long as those solicitors are not also principals (eg not partners or co-owners) of the practice

Does someone supervising individuals working on client files need to be legally qualified?

No - they just need suitable experience, knowledge and competence to deal with any issue which may arise

What is the responsibility of a 'compliance officer for legal practice' (COLP)?

(a) Ensure the firm complies with all the terms and conditions of authorisation by the SRA

(b) Ensure the firm complies with its statutory obligations

(c) Record any failures to comply with the firm's authorisation or statutory obligations

(d) Report any material failure to the SRA as soon as practicable

What is the responsibility of a 'compliance officer for finance and administration' (COFA)?

(a) Ensure that the firm complies with the SRA Accounts Rules 2019

(b) Report any serious breaches of the SRA Accounts Rules 2019 to the SRA promptly

What does 'SRA' stand for?

Solicitors Regulation Authority

Who is eligible to be a COLP / COFA?

1. Someone who is an employee of a SRA authorised body

2. In the case of a COLP, be authorised to conduct reserved legal activities

Do COLP / COFA have sole responsibility for compliance?

No - compliance is ultimately the responsibility of the owners and managers of the firm

What are the 6 primary ways a law firm can bill a client?

1. Hourly Charging

2. Conditional Fee Agreements (CFA)

3. Fixed fees

4. Capped Fee Agreement

5. Insurance

6. Community Legal Services (legal aid)

What is the unit of time that fee earners typically record when charging hourly?

6 minute blocks

Who decides how much recorded time will be billed to the client or written off?

A partner

When fee earners record their time, should they adjust the recorded time to reflect how long they believe the task should have taken?

No - they should record the actual amount of time taken, and the partner will decide how much to bill.

How often are fees usually invoiced to clients?

Monthly

What is the process of 'hourly charging'?

1. Fee earners record their time (usually in 6 minute blocks)

2. Recorded time is work in progress = 'WIP'

3. The partner will review the WIP and ascertain how much time will be billed to the client and how much will not be billed but will be 'written off'

4. Time is then billed according to the fee earners' charge out rates

What is a 'fixed fee'?

The law firm will invoice a client for a fixed amount, regardless of the amount of time spent by fee earners on the transaction

What is a 'capped 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.

What happens if a recorded time reaches the cap of a capped fee agreement?

The legal team may be asked to stop work on the file while the partner attempts to renegotiate the cap

What is 'money laundering'?

Involves financial transactions where:

1. Proceeds from serious crime are 'cleaned' so that its source is harder to trace

2. Simply receiving or benefitting from the small proceeds of relatively minor crime

Is a firm obliged to have a money laundering officer / nominated officer?

Yes

What is the process of money laundering?

1. The criminal source of the funds is disguised

2. The form of the funds will be converted (often from paper bills to money in a bank account)

3. The trail by which the conversion occurs will be disguised

4. The launderer will retain control of the funds (directly or indirectly)

Name 3 ways a solicitor can be at risk of money laundering:

1. A client depositing cash in the firm's client account solely for onward transmission to a third party

2. A client acquiring property, investing in a business or buying an asset using cash which is the proceeds of crime

3. Setting up legal or transaction structures which are intended to be used for money laundering, and hide the source of the funds

4. A client using a firm's client account to mix clean and dirty cash to disguise the audit trail

Name 4 warning signs of money laundering:

1. Instructions outside your firm's area of expertise

2. Unusual Retainers (eg dispute which settles too easily might indicate sham litigation)

3. Suspicious use of client accounts (eg 'mistakes' regarding an overpayment to your client account)

4. Suspicious property purchase (eg large payments from private funds if the client has a low income)

5. Seller and buyer with similar names or who give the same address

6. Money arriving from a third party who is not your client

7. The client is from a 'high risk jurisdiction'

What does 'POCA' stand for?

Proceeds of Crime Act 2002

What are the 2 types of offences under POCA?

1. Direct Involvement Offences - applies to everyone

2. Non-Direct Involvement Offences - applies to people working in the "regulated sector"

Name 3 'direct involvement offences' under POCA:

1. Concealing, disguising, transferring criminal property or removing criminal property from the UK

2. Entering into / becoming concerned in an arrangement which you know / suspect facilitates the acquisition, retention, use or control of criminal property

3. Acquiring, using or possessing criminal property

What defence is available to a 'direct involvement offence' under POCA?

Authorised Disclosure

What is 'authorised disclosure'?

A disclosure to a constable, customs officer or a nominated officer by the alleged offender that property is criminal property

Can an authorised disclosure be made during the prohibited act and still act as a defence?

Yes, ONLY if when beginning to do the act, the alleged offender did not then know or suspect that the property represented a person's benefit from criminal conduct

(eg a solicitor delays reporting a suspicious client cheque, potentially linked to crime, until after an urgent meeting)

Can an authorised disclosure be made after the prohibited act and still act as a defence?

Yes, ONLY with a good reason

(eg the solicitor is threatened with physical harm unless he makes the deposit)

What is the 'regulated sector' under POCA?

Participating in financial and real property transactions concerning:

(a) The buying and selling of property / business

(b) The managing of client money, securities or other assets

(c) The creation, operation or management of trusts, companies or similar structures

What is a non-direct involvement offence' under POCA?

(a) The person fails to disclose to a nominated officer that they know / suspect or have reasonable grounds to know / suspect that someone is laundering the proceeds of criminal conduct

(b) The person receives the information in the course of business in the 'regulated sector'

What must a disclosure to a nominated officer under POCA contain?

1. The identity of the person who you know / suspect is laundering the proceeds of criminal conduct

2. The whereabouts of the laundered property (if you know it)

3. The information on which your knowledge / suspicion is based upon

When can a solicitor recommence work for a client after having made a disclosure to a nominated officer (which has then been forwarded to the NCA)?

1. When directly authorised to do so by the NCA

2. 7 working days has passed since the disclosure was forwarded to the NCA and there has been no sign of the NCA refusing authority to proceed

3. The NCA refused authority to proceed which lasts for 31 days and has expired without further communication

Can a solicitor tell a client that they are being investigated under POCA?

No - this is classed as 'tipping off' and is an offence

What is a penalty if a person commits an offence under POCA?

1. Imprisonment

2. Fines

Does Money Laundering Regulations (MLR) apply to all types of legal work?

No - MLR do not apply to employment or most litigation cases (but firms will still take the steps required by the MLR regardless)

What is the difference between a 'business relationship' and a 'occasional transaction'?

(a) Business Relationship - at the outset of a matter, it looks like an ongoing relationship will be set up with the client

(b) Occasional Transaction - a transaction which is not carried out as part of a business relationship