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LEGAL SERVICES _
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$38309
 The
Universityof

LEGAL SERVICES
Jacqueline Kempton
Published by
The University of Law,
2 Bunhill Row
London EC1Y 8HQ
© The University of Law 2021
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted,
in any form or by any means, without the prior written permission of the copyright holder, application for which
should be addressed to the publisher.
Contains public sector information licensed under the Open Government Licence v3.0
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library.
ISBN 978 1 914219 06 1
 Preface

This book is part of a series of Study Manuals that have been specially designed
to support the reader to achieve the SQE1 Assessment Specification in relation to
Functioning Legal Knowledge. Each Study Manual aims to provide the reader with
a solid knowledge and understanding of fundamental legal principles and rules,
including how those principles and rules might be applied in practice.
This Study Manual covers the Solicitors Regulation Authority's syllabus for the SQE1
assessment for Legal Services in a concise and tightly focused manner. The Manual
provides a clear statement of relevant legal rules and a well-defined road map
through examinable law and practice. The Manual aims to bring the law and practice
to life through the use of example scenarios based on realistic client-based problems
and allows the reader to test their knowledge and understanding through single
best answer questions that have been modelled on the SRA’s sample assessment
questions.
For those readers who are students at the University of Law, the Study Manual is
used alongside other learning resources and the University’s assessment bank to
best prepare students not only for the SQE1 assessments, but also for a future life in
professional legal practice.
We hope that you find the Study Manual supportive of your preparation for SQE1 and
we wish you every success.
The legal principles and rules contained within this Manual are stated as at
1 October 2020.
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 Contents
Preface Vv
Table of Cases xiii

Table of Legislation, Codes and Rules XV

Chapter 1 Providers of Legal Services 1

SQE1 syllabus 1
Learning outcomes 1
1.1 Introduction Z

hz Overview of legal services Z

18 Reserved legal activities 3
19.1 Definition 3
1.3.2 Authorisation 4

1.4 The Legal Services Board 5

we Regulated providers 5
1.5.1. Solicitors 5
1.5.2 Barristers 6
1.5.3. Chartered legal executives 6
1.5.4 Licensed conveyancers 6
1.5.5 Patent attorneys 6
1.5.6 Trade mark attorneys 6
1.5.7. Costs lawyers 6
1.5.8 Notaries 6
1.5.9 Chartered accountants 7
1.5.10 Regulatory overlap 7

1.6 Regulation outside the Legal Services Act 2007 7

5 | Unregulated providers 7

Summary 7
Sample questions 8

Chapter 2 The Regulatory Role of the Solicitors Regulation Authority 11

SQE1 syllabus : 11

Learning outcomes 11

Za Introduction 12

ee The Solicitors Regulation Authority 12

2 Risk-based regulation 13
Contents

2.4 Firm-based authorisation 14

2.4.1 Eligible businesses 14
2.4.2 — Effect of authorisation 16
2.4.3. The authorisation process 16

Jaga) Authorisation of individuals 17

2.5.1 Admission iP
2.5.2 Practising certificates 18

2.6 Solicitors working outside authorised firms 19

2621 Freelance solicitors 49
2.6.2 \In-house solicitors 19
2.6.5 Non-commercial organisations 19
2.6.4 Other organisations 20

LT. Professional indemnity insurance 20

2.7.1. The nature of professional indemnity insurance 20
2.7.2 SRA Indemnity Insurance Rules ; 20
2.7.3. ‘Adequate and appropriate insurance’ 21
2.7.4 Client information 22

Summary Zi
Sample questions 22
Chapter 3 Equality Act 2010 25
SQE1 syllabus 25
Learning outcomes sles
Se Introduction 26
oy Overview of the Act 26
3 The protected characteristics ZF
3.4 Prohibited conduct 28
3.4.1 Direct discrimination 28
3.4.2 — Indirect discrimination 29
3.4.3 Disability discrimination 30
3.4.4 Victimisation 30
3.4.5 Harassment 30

Sle) Duty to make adjustments a

3.6 Solicitors as service providers 31
3.6.1 | Unlawful behaviour ct
3.6.2 Vicarious liability 32
3.6.3. Making adjustments 32
3.6.4 Making a claim 55

ou. Solicitors as employers 33

3.7.1 Unlawful acts 33
3.7.2 Vicarious liability 34
3.7.3. Occupational requirements 34

viii
 Contents

3.7.4 Making adjustments 34

3.7.5 Making a claim 34
3.8 Barristers 55
3.9 Positive action 35
3.10 Overlap with professional conduct 36
Summary 37
Sample questions 38
Chapter 4 Financial Services Al
SQE1 syllabus 41
Learning outcomes 41

4.1 Introduction 42
4.2 Source materials 43
4.3 Financial services regulatory structure 43
4.3.1. The Financial Conduct Authority (FCA) 43
4.3.2 The Prudential Regulation Authority (PRA) 44

4.4 The general framework 44

4.5 The need for authority 44
4.5.1 | The general prohibition 44
4.5.2 The financial promotion prohibition 45

4.6 Regulated activity 45

4.6.1 The four tests 45
46.2 The business test 45
46.3 Specified investments 45
46.4 Specified investment activities 46
46.5 Exclusions 47

4.7 Exemption for professional firms - s 327 exemption 50

4.7.1. ‘Pecuniary or other advantage’ 50
4.7.2 ‘Incidental’ 50
4.7.3. Permitted regulated activities only og
4.7.4 Not prohibited 51
4.7.5 No other regulated activities 51

4.8 SRA Financial Services (Conduct of Business) Rules 52

4.8.1 Status disclosure (Rules 2.1 and 2.2) 52
4.8.2 Best execution (Rule 3.1) e 57
4.8.3. Transactions (Rules 4.1 and 4.2) 52
4.8.4 Commissions (Rule 5.1) OZ
4.8.5. Execution-only clients (Rule 7.1) a
4.8.6 Insurance distribution activities (COB Rules, Part 3) Dy

49 Consumer credit activity By

4.10 — Insurance distribution 5

Contents

bee a Se eee ee

4.11 Financial Promotions Order (FPO) 2005 54

4.11.1 The prohibition 54
4.11.2 Exemptions 54
4.11.3 Exemption for exempt professional firms 54
4.11.4 One-off promotions (FPO 2005, arts 28/28A) 55
4.11.5 Introducers (FPO 2005, art 15) 55

Summary 35
Sample questions 58

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ee) The purpose of the Regulations | 64

5.4 The application of the Regulations 64
Spe) Risk assessment 65
ee Policies, controls and procedures 65
Wwe Internal controls 66
es) Client due diligence 66
5.8.1 The requirement for due diligence 66
5.8.2 Standard due diligence 67
5.8.3 Simplified due diligence 69
5.8.4 Enhanced due diligence 69
5.8.5 Ongoing monitoring 70

D7, Training 70
5.10 Record keeping 70
Deli Criminal Finances Act 2017 71
Summary 71
Sample questions yi
Chapter 6 Proceeds of Crime Act 2002 75
SQE1 syllabus ifs
Learning outcomes 76
6.1 Introduction 76
6.2 Overview of offences 76
6.3 Section 328 Arranging hy
6.3.1. ‘Know or suspect’ i
6.3.2 Criminal property 78
6.3.3 Litigation proceedings 78
6.3.4 Authorised disclosure defence 78
 Contents

6.3.5 Overseas defence 80

6.3.6 Penalties 80
6.4 Section 329 Acquisition, use or possession 81
6.5 Section 327 Concealing etc 81
6.6 Section 330 Failure to disclose 81
6.6.1 Objective test 82
6.6.2 Regulated sector 82
6.6.3 The information 82
6.6.4 Disclosure 82
6.6.5 Training defence 82
6.6.6 Legal professional privilege defence 82
6.6.7. Overseas defence 83
6.6.8 Penalties 83

roms Section 331 Failure to disclose (nominated officers) 83

6.8 Section 333A Tipping off 83
6.8.1 The offences 83
6.8.2 Defences 84
6.8.3 Penalties 84

6.9 Prejudicing an investigation 84

6.10 Confidentiality 85
6.11 The role of the SRA 85
6.12 Warning signs 85
Summary 86
Sample questions 86

Chapter 7 Funding Options 89

SQE1 syllabus 89
Learning outcomes 89

Lat The retainer 90

ee Professional conduct 90

7.5 Fixed fees } Fl

7.6 Business agreements , 92
L0.A Non-contentious business agreements 92
7.6.2 Contentious business agreements 92

7.7.1. Solicitor and client costs and costs between the parties 93
7.7.2 Variable fees 73
7.7.3 Legal expenses insurance 98
7.7.4 Third party funding 77

xi
Contents

aS eer

Summary 100

Sample questions 101

Chapter 8 Legal Aid 103
SQE1 syllabus 103
Learning outcomes 103
8.1 Introduction 104

8.2 The solicitor and the Legal Aid Agency 104

8.3 Civil legal aid 105

8.3.1 Forms of civil services 105
8.3.2 The scope of legal aid 106
8.3.3 Merits test 106
8.3.4 Means test 106
8.3.5 The statutory charge 107

8.4 Criminal legal aid 108

8.4.1 Advice at the police station 108
8.4.2 The duty solicitor scheme 108
8.4.3. Application for legal aid 108

Summary 110
Sample questions 110

Index 113

xii
 Table of Cases

A Arkin v Borchard Lines Ltd [2005] EWCA Civ 655 a7

B Balli, Re [2011] EWHC 1736 (Ch) é

Bowman v Fels [2005] EWCA Civ 226 78

Cc Chapelgate Credit Opportunity Master Fund Ltd v Money and others [2020]
EWCA Civ 246 100
Commission for Racial Equality v Dutton [1989] IRLR 8 Pall

D Da Silva [2006] EWCA Crim 1654 77

David Truex, Solicitor (a firm) v Kitchin [2007] EWCA Civ 618 104

G Government Legal Service v Brookes UKEAT 0302/16 34

H Herbert v HH Law Ltd [2019] EWCA Civ 527 95

j Inventors Friend Ltd v Leathes Prior (a firm) [2011] EWHC 711 92

J JK v MK and E-Negotiation Ltd (trading as amiable) [2020] EWFC 2 3

L Lexlaw Ltd v Zuberi [2020] EWHC 1855 (Ch) 96

M Media Protection Services Ltd v Crawford [2012] EWHC 2373 3

a Sarwar v Alam [2001] EWCA Civ 1401 98

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 Table of Legislation,
Codes and Rules

Access to Justice Act 1999 108

Sch 3, para 5(2) 108
Administration of Justice Act 1985 15

Companies Act 2006 15

Courts and Legal Services Act 1990
s 58 94
s 58(2)(a) 93
s 58A 94
s 58AA 97
s 58AA(3)(a) 95
s 58AA(4) 96
Criminal Finance Act 2017 62
Criminal Finances Act 2017 62, 71

Damages-Based Agreements Regulations 2013 (SI 2013/609) 96

Equality Act 2010 525,568,097

s 4 27, 28
s5 27
s 6 27, 28
Sip 28
s 8 28
s9 af
s 10 27
s 12 27
S215 29, 30
s 13(1) 28
s 13(2) 29
$15 30
Sct7, 29
s 18 29
$19 29
s 20 r 31
$21 31
s 26 50
s 27 30
5 29 31,532,354
5 39 55
s 40 33
s 47 35
s 47(6) 55
s109 32
Table of Legislation, Codes and Rules

s 136 53
s 158 59,00
Sri59 36
Rte Si
PES 33
Sch 1 28

F Financial Services Act 2012 43-4

Financial Services and Markets Act 2000 ATnA2, 00,00. 0770 2
Shiv 44, 47, 50, 53, 58
s 21 45, 54
322 45, 52
s 22(6) 45
s 23 44
s 25 45
s 327 50, 55,075.50
s 327(6) 51
s 328 50
S52? 50
sch 2 45
Financial Services and Markets Act 2000 (Regulated Activities) Order 2001,
SI 2001/544 (RAO 2001) 43-6, 56
Pt 2 53
Pt 3A 59
Financial Services and Markets Act 2000 (Professions) (Non-Exempt Activities)
Order 2001, SI 2001/1227 43, 51
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005,
S| 2005/1529 (FPO 2005) 43
art 8 54
art 15 ea.
art 28 55
art 28A 55
art 53 54
art 54 54
art 55 5S
art 55A 2
18)
art 62 54
Financial Services and Markets Act 2000 (Prudential Regulation Authority-
regulated Activities) Order 2013, S! 2013/556 43, 44

| Insurance Distribution Directive (2016/97/EC) 48

L Legal Aid, Sentencing and Punishment of Offenders Act 2012 104

sen 1,Pt1 106
Legal Services Act 2007 1-2, 4, 7-8, 12, 15, 37
s 1 a 13
s 12 a, 10
$13 4
s 14 4
s 18 4
s 19 4
$ 23(2) 19
 Table of Legislation, Codes and Rules

—.
Money Laundering, Terrorist Financing and Transfer of Funds
(Information on the Payer) Regulations 2017 (SI 2017/692) 64/2/1716, 79)82

reg 5(3) 68
reg 6(1) 68, 69
reg 6(4) 68
reg 8 64
reg 12 64
reg 18 (Ass
reg 19 65
reg 21(3) ba
reg 21(8) 66
reg 21(a) 65
reg 21(b) 66
reg 21(c) 66
reg 24 70
reg 26 65
reg 27 66
reg 28 66, 67, 68
reg 28(11) 70
reg 30 66
reg 31 67
reg 33 69
reg 35(5) 70
reg 35(12) 69
reg 37(3) 69
reg 40 70
reg 43 67
Sch 3 65

Proceeds of Crime Act 2002 70, 75

S oer 76, TT, 767 8 ioe
s 328 76-81, 86, 87
s 328(1) if
s 329 16, 77, 18, 61,86
s 329 78
s 330 16,.77,-81,, 82, 83, 86) oF
$135) 76, 77,83; 86
s 333A 76, 77, 83, 84, 86
s 333A(1) 84
s 333A(3) 84, 88
s 333D(3) 84
s 333D(4) 84
s 338 y 78, 85
s 338(2A) 79
s 338(3) 80
s 340 78
s 342 76,77, 84, 86
Sch 9 82
Provision of Services Regulations 2009 (SI 2009/2999) a2
Public Notaries Act 1801 4

XVii
Table of Legislation, Codes and Rules

S Solicitors Act 1974

S$ 1 17, 24

s6 57

s 57 92
ss 59-63 a
s 87 17,92
SRA Assessment of Character and Suitability Rules ae
r 4.1 ZS
ae “i
Pt 2 i,
Pt 3 nz,
SRA Authorisation of Firms Rules
annex 2 16
SRA Code of Conduct for Firms 14
para 1.1 37
para 1.5 37
para 2.1(a) 65
para 2.5 : 14, 65
para 5.1 50
para 7.1 Zz
SRA Code of Conduct for Solicitors, RELs and RFLs
para 1.1 37
para 1.2 21,94
para 3.2 42, 59
para 3.4 91
para 4.1 50
para 5.6 21
para 6.3 85
para 7.1 36
para 7.6 19
para 8.3 40
para 8.6 22, 40
para 8.7 90
SRA Financial Services (Conduct of Business) Rules 435,51,,95; 08-07
ra 52
Zee 52
Lot 52
r 4.1 52
r 4.2 52
fom 52
ie ed 52
Pt.3 52
Pt 4 53
SRA Financial Services (Scope) Rules 45, 50-51, Sa,oenor
SRA Indemnity Insurance Rules 20°23
fol ”1
SRA Principles
Principle 1 85
Principle 2 36, 39
Principle 4 85
Principle 5 91
Principle 6 37, 39, 40
Principle 7 21, 42, 52, 91
T Terrorism Act 2006 aS
xviii
 Providers of Legal Services

| Introduction

1, Overview of legal services

1.3. Reserved legal activities
1.4 The Legal Services Board
1.5 Regulated providers
1.6 Regulation outside the Legal Services Act 2007
1.7. Unregulated providers IND
INO
|
ON!
On
Cre
Se

SQE1 syllabus
This chapter will enable you to achieve the SQE1 Assessment Specification in relation
to Functioning Legal Knowledge concerned with Legal Services:
* The regulatory role of the Solicitors Regulation Authority.
¢ Reserved legal activities.
¢ Other regulated providers of legal service.
Note that for SQE1, candidates are not usually required to recall specific case
names or cite statutory or regulatory authorities. Cases are provided for illustrative
purposes only.

Learning outcomes
By the end of this chapter you will be able to apply relevant core legal principles
and rules appropriately and effectively, at the level of a competent newly qualified
solicitor in practice, to realistic client-based and ethical problems and situations in the
following areas:
e The legal services market.
¢ Regulation under the Legal Services Act 2007.
e Reserved legal activities.
e Approved regulators.
e Legal service providers.
Legal Services

1.1 Introduction
The legal services market has gone through successive periods of significant change in recent
years. Legal work was once almost exclusively conducted by solicitors and barristers. They
continue to occupy the largest part of the sector in England and Wales and their numbers
have increased in response to a growing demand for legal services. That demand is a
product of a number of factors, including globalisation of the economy, the incorporation
of EU law, increasing affluence and the internet age. However, these factors, together with
a political desire to increase competition, have also brought others into the market. Now
clients are able to look to an increasing range of providers delivering legal services in both
traditional and innovative of ways.
This chapter looks at:
* overview of legal services
¢ regulated legal activities
¢ the Legal Services Board
* regulated providers
e regulation outside the Legal Services Act 2007
* unregulated providers

1.2 Overview of legal services

There is no fixed definition of ‘legal services’. At its widest, the term embraces all manner of
advice, assistance and representation relating to the law. It therefore covers a huge range of
activities, from representation before the Supreme Court to the completion of an online court
form; from the negotiation of a multimillion-pound contract to writing a will. At the margins it
can be difficult to identify a legal service; for example, it is debateable whether the provision
of online information falls within its ambit.
Legal services are provided in a variety of ways. The traditional images of a solicitor in an office
sitting face to face with a client, or a barrister in wig and gown appearing before a court still
hold true. However, conventional law firms are increasingly employing technology, for example to
carry out case management, gather information or carry out online triage. There has also been
a significant increase in the provision of online services for, for example, document preparation,
predictive case outcomes, contract management, and even dispute resolution.
In many instances those who provide services to the public in the UK are subject to regulation.
For example, financial services (see Chapter 4), transport, utilities and social care all have
independent regulators appointed to oversee the provision of those services sector-wide.
The role of an independent regulator is essentially to protect the public. Depending on the
context, a regulator may set standards for the delivery of the service, set pricing levels, deal
with complaints from members of the public and have oversight of the qualification/training of
the individuals delivering the service. The underlying justification is that consumers are entitled
to expect that services will be delivered to them at a satisfactory standard by those who are
properly qualified.
Consumers of legal services have the same expectations; however, legal services are
something of a hybrid. The framework for the regulation of legal services is contained in the
Legal Services Act 2007. Under the Act a key distinction to be made is between those legal
services which fall within the definition of ‘reserved legal activities’ (see 1.3) and those which
do not. Those services which fall within the definition can only be provided by those who are
authorised to do so and who will be subject to regulation as a consequence. Those services
which fall outside the definition can be provided by anyone without any legal regulation.
 Providers of Legal Services

Irrespective of any regulatory requirements, the provision of legal services falls within
the framework of the general law. Providers may therefore be subject to overriding legal
obligations affecting the way in which they work, for example under the Equality Act 2010 (see
Chapter 3) and anti-money laundering legislation (see Chapter 5)

eea et

1.3 Reserved legal activities

In the past the provision of significant aspects of legal work were ‘reserved’, so that such work
could only be carried out by solicitors (and barristers). However, with the opening up of the
legal services market over the years this ‘monopoly’ has been eroded. ‘Reserved’ legal work
still remains, but it is no longer the exclusive preserve of solicitors.
The classification of legal work as ‘reserved’ is to a large extent historical. However, it is also
risk-based. Essentially reserved legal activities comprise those types of legal work where the
risk to the public is the greatest.

Definition

There are six types of legal work set out in s 12 Legal Services Act 2007 and defined as
‘reserved legal activities’:

(a) The exercise of a right of audience

This means the right to appear before and address a court including the right to call and
examine witnesses.

(b) The conduct of litigation

This means:

¢ issuing of proceedings before any court in England and Wales;

e¢ the commencing, prosecuting and defending of those proceedings; and
e the performing of any ancillary functions in relation to those proceedings (such as
entering appearances to actions).
Media Protection Services Ltd v Crawford [2012] EWHC 2373 (Admin)
The Football Association Premier League brought a private prosecution against the landlord of
a public house for infringing its intellectual property rights by screening a football match. The
Football Association Premier League employed a company to investigate such infringements.
It was one of the directors of the company who laid information before the magistrates’ court
which led to the issuing of the summons against the landlord. The court found that the laying
of the information constituted ‘the commencing of the proceedings’. The director had acted
unlawfully in carrying out a reserved legal activity whilst unauthorised. The private prosecution
itself was therefore held to be unlawful.
A contrasting case is:
JK v MK and E-Negotiation Ltd (trading as amiable) [2020] EWFC 2
A husband and wife used an online divorce facilitator to assist in the drafting of the
documents necessary to obtain their divorce and the court order to effect the financial aspects
of their separation. The key aspect here was that, in contrast to the case above, all the
documents were lodged at court by the parties themselves. The court held that therefore the
unregulated company behind the online facilitator had not been engaged in the conduct of
litigation.
Legal Services

(c) Reserved instrument activities

This encompasses preparing and lodging an instrument (formal legal document) dealing with
the transfer or charge of land (eg a contract for the sale of land), relating to real or personal
estate or an instrument relating to court proceedings. Some types of documents, such as wills
and powers of attorney, are excluded.

(d) Probate activities

This means preparing ‘probate papers’, ie the documents needed to obtain a grant of
probate or a grant of letters of administration or documents to oppose such a grant.

(e) Notarial activities

This relates to the activities which, prior to the Legal Services Act 2007, were customarily
carried on by notaries under the Public Notaries Act 1801. Those activities essentially relate to
certifying and authenticating certain documents.

(f) | The administration of oaths

This is the power to administer an oath, for example when a document, such as an affidavit, is
required to be sworn.

1.3.2 Authorisation
Under s 13 Legal Services Act 2007 reserved legal activities can only be carried out by those
who are authorised or exempt.
A person must be authorised to carry out a particular reserved legal activity by a relevant
approved regulator (s 18 Legal Services Act 2007). The Act lists approved regulators for
specific reserved legal activities (see 1.5). An authorised person is subject to the regulatory
requirements of its own regulator in respect of all the legal services it provides, including
those which fall outside the definition of reserved legal activity.
The Law Society is the approved regulator for solicitors named in the Legal Services Act 2007,
but the regulatory function is carried out in practice by the Solicitors Regulation Authority
(SRA). The SRA deals with authorisation for all the reserved legal activities except notarial
activities.
Section 19 Legal Services Act 2007 lists the circumstances in which a person is exempt in
relation to each of the reserved legal activities. For example, in relation to rights of audience
a person will be exempt if a court grants that person a right of audience in a particular case
(eg a McKenzie friend); in relation to probate activities an exemption allows an employee to
act under the supervision of an authorised person. There is also an exemption for some non-
commercial organisations such as charities and independent trade unions.
It is a criminal offence for a person to carry on a ‘reserved legal activity’ if that person is
neither authorised nor exempt (s 14 Legal Services Act 2007). The offence is punishable by
up to two years’ imprisonment. Additionally, in the context of rights of audience and conduct
of litigation, carrying out a reserved legal activity whilst not entitled to do so places the
individual in contempt of court.

© Re Ball [2011] EWHC 1736 (Ch)

In this case, despite having SRA authorisation withdrawn and being struck off by the Solicitors’
Disciplinary Tribunal, a solicitor continued to provide legal services and conduct litigation for
his clients. In his judgment HH Judge Simon Barker QC said: ‘He nevertheless continued to
masquerade as a solicitor before the court and in dealings with other legal representatives
engaged in ongoing proceedings. In so doing, he deceived the court, counsel he instructed,
and opposing representatives, albeit not his own clients. These are extremely serious matters.’
The court imposed a six-month prison sentence for contempt of court.
 Providers of Legal Services

The Legal Services Board

The Legal Services Board (LSB) is responsible for overseeing the regulation of all lawyers in
England and Wales. There are eight separate regulators directly regulating the different types
of lawyer on a day-to-day basis.
The LSB was created by the Legal Services Act 2007. The LSB is given various statutory
responsibilities including ensuring standards of regulation. A body can only act as a regulator
for legal services under the Legal Services Act 2007 if it is approved by the LSB. The LSB
_ therefore oversees and coordinates the regulation of legal services.
In exercising any of its functions the LSB has a duty to promote the regulatory objectives set
out ins 1 Legal Services Act 2007:
* protecting and promoting the public interest;
* supporting the constitutional principle of the rule of law;
* improving access to justice;
* protecting and promoting the interests of consumers;
* promoting competition in the provision of services in the legal sector;
* encouraging an independent, strong, diverse, and effective legal profession;
* increasing public understanding of citizens’ legal rights and duties;
* promoting and maintaining adherence to the professional principles of independence
and integrity; proper standards of work; observing the best interests of the client and the
duty to the court; and maintaining client confidentiality.
Individual regulators are set the same objectives and the LSB will hold them to account. The
LSB monitors the way in which the regulators operate and can make recommendations for
improvement, impose penalties for deficiencies or ultimately withdraw approval. The LSB
exercises control over the regulators, for example it must give consent to any regulatory
changes.

1.5 Regulated providers

In essence regulation is intended to protect the public by ensuring those providing legal
services meet professional standards. Regulated individuals must comply with their own
regulator's regulatory arrangements on such subjects as education and training requirements,
a code of conduct, framework to practice and provision for disciplinary and enforcement
action. Firms are primarily responsible for ensuring compliance with regulators, but individuals
within those firms are responsible for their own conduct.
A variety of providers of legal services are subject to regulation by regulators approved by
the LSB. Each of the approved regulators is linked to a particular profession or specialisation.
The need for regulation arises because the provider is carrying out reserved legal activities;
however, almost invariably, a provider will additionally be doing work which falls outside
the definition. Regulated individuals are subject to regulatory‘requirements in respect of all
the legal services they provide, not just those falling within the definition of reserved legal
activities.

1.5.1 Solicitors

As a group, solicitors are the largest providers of legal services. The work of solicitors and the
regulatory role of the SRA are considered in detail in Chapter 2.
Legal Services

1.5.2 Barristers

The primary role of barristers is as advocates in the criminal and civil courts. They also
provide expert legal advice and draft documentation. Traditionally members of the public
could not instruct a barrister directly; instead the barrister had to be instructed by a solicitor
on the client's behalf. This prohibition has now been relaxed so that barristers may now be
instructed directly in some civil cases.
Most barristers are self-employed and work in sets of chambers sharing premises and
administrative facilities. Some barristers are employed by such bodies as the Civil Service, the
Crown Prosecution Service, law firms and companies.
The approved regulator for barristers is the Bar Standards Board. It can authorise barristers to
provide all types of reserved legal activity, except notarial activities.

1.5.3 Chartered legal executives

The work carried out by chartered legal executives is similar to that carried out by solicitors.
They interview clients, draft documents, prepare cases etc and often specialise in a particular
area of law. Chartered legal executives cannot work independently so they work within law
firms under the supervision of a solicitor (although they can be involved in ownership of a firm).
The approved regulator for chartered legal executives is CILEx Regulation. It can authorise
chartered legal executives to provide all types of reserved legal activity, except notarial
activities.

1.5.4 Licensed conveyancers

Licensed conveyancers deal with property transactions. The approved regulator for licensed
conveyancers is the Council for Licensed Conveyancers. It can authorise licensed conveyancers
to conduct reserved instrument activities, probate activities and the administration of oaths.

1.5.5 Patent attorneys

Patent attorneys are specialists in patents and intellectual property. The approved regulator
for patent attorneys is the Intellectual Property Regulation Board. It can authorise patent
attorneys to conduct all reserved legal activity except probate and notarial activities.

1.5.6 Trade mark attorneys

Trade mark attorneys are specialists in trade mark law and practice. The approved regulator
for trade mark attorneys is the Intellectual Property Regulation Board. It can authorise trade
mark attorneys to conduct all reserved legal activity except probate and notarial activities.

1.5.7 Costs lawyers

Costs lawyers are specialists in legal fees and costs. They may, for example, prepare bills
and costs estimates, appear before the court when costs are assessed and attend case
management conferences. The approved regulator for costs lawyers is the Costs Lawyers
Standards Board. It can authorise costs lawyers to exercise rights of audience, conduct
litigation and administer oaths.

1.5.8 Notaries

For historical reasons notaries are appointed by the Archbishop of Canterbury. Notaries
authenticate and certify signatures and documents, often where there is a foreign element.
They commonly deal with powers of attorney, bills of exchange and documents dealing with
foreign property and international finance. The approved regulator for notaries is the Master
of the Faculties. It can authorise notaries to carry out all reserved legal activities except
exercising rights of audience and conducting litigation. The Master of Faculties is the only
regulator that can authorise notarial activities.
 Providers of Legal Services

1.5.9 Chartered accountants

Chartered accountants can be authorised by the Institute of Chartered Accountants in England
and Wales to carry out probate activities.

1.5.10 Regulatory overlap

Given the way in which firms or bodies are set up there is a degree of overlap between the
regulators. This means that, whilst an individual is regulated by their own approved regulator,
the firm for which they work is regulated by another. For example, a barrister may work in a
firm of solicitors; the barrister would be regulated by the Bar Standards Board, whilst the firm
would be authorised by the SRA.

1.6 Regulation outside the Legal Services Act 2007

Some providers carry out work which falls outside the Legal Services Act 2007 but they are
nevertheless subject to specific statutory legal regulation. The main examples are:
Claims management companies - regulated by the Financial Conduct Authority.
Immigration advisers - regulated by the Office of the Immigration Services Commissioner.
Insolvency practitioners - regulated by the Insolvency Practitioners Association.

1.7 Unregulated providers

Not all legal services are subject to regulation. Unregulated legal services providers conduct
work outside the areas of reserved legal activities under the Legal Services Act 2007. Typical
examples are will writing, family law advice and employment law advice. The unregulated
sector of the legal services market is thought to be substantial. Depending on the definition
of ‘legal services’ some estimates place the unregulated sector at least on a par with the
regulated sector.
A whole variety of providers are delivering legal services in the unregulated sector. Whilst,
no doubt, some of these are intent on bypassing regulation in order to provide a low-quality
service and maximise profits, this is by no means the case across the sector. The vast majority
of providers operate in a completely ethical manner. Many individuals providing legal services
in the unregulated sector have legal qualifications in that they are former or non-practising
lawyers or law graduates. Some groups of providers submit to voluntary self-regulation,
for example will-writers and mediators. Self-regulation often mimics statutory regulation
in terms of having a code of conduct, complaints process and even indemnity insurance
(see Chapter 2).

Summary
¢ The Legal Services Board oversees and coordinates the regulation of legal services
according to the regulatory objectives set out in the Legal Services Act 2007.
¢ Reserved legal activities are:
° the exercise of a right of audience
° the conduct of litigation
© reserved instrument activities
° probate activities
Legal Services

° notarial activities
© the administration of estates

* Reserved legal activities can only be carried out by those authorised by an approved
regulator.
¢ The approved regulators are:
° Solicitors Regulation Authority
° Bar Standards Board
° CILEx Regulation
° Council for Licensed Conveyancers
° Intellectual Property Regulation Board
© Costs Lawyers Standards Board
© Master of Faculties

Sample questions

Question 1
Three friends decide to set up a firm offering conveyancing services to members of the
public. None of the friends are solicitors.
Which of the following best describes the position regarding the regulatory
requirements which will apply to the proposed firm?
A The firm must be authorised by the SRA.
B_ There is no need for the firm to be authorised.
C_ The firm must be authorised by the Legal Services Board.
D_ The firm must be authorised by an approved regulator.
E Authorisation for the firm is dealt with outside the Legal Services Act 2007.

Answer
Option D is correct. As the firm will be offering conveyancing services it will be carrying out
reserved instrument activities - one of the reserved legal activities. The firm must therefore be
authorised (option B is wrong) within the regulatory framework set down by the Legal Services
Act 2007 (option E therefore is wrong). Authorisation can be given by any of the approved
regulators (here probably the Council of Licensed Conveyancers) and is not restricted to the
SRA (option A therefore is not the best answer). Option C is wrong as the Legal Services
Board is responsible for the oversight of regulation; it does not authorise firms itself.
 Providers of Legal Services

Question 2
A solicitor is authorised to provide legal services by the SRA.
Which of the following best describes the effect of authorisation?
A The solicitor can provide all reserved legal activities.
B_ The solicitor will be subject to regulation by the SRA in respect of all the legal services
they provide.
-C_ The solicitor is only subject to regulation by the Legal Services Board in respect of the
reserved legal activities they carry out.
D_ The solicitor is absolved from the need to comply with any further regulatory
requirements.

E The solicitor is only subject to regulation by the SRA in respect of the reserved legal
activities they carry out.

Answer
Option B is correct. An authorised provider is subject to regulation by their own regulator
(here the SRA) in respect of all the legal services they provide, not just those falling within
the definition of reserved legal activities. The SRA cannot authorise an individual to carry out
notarial activities, and so the solicitor cannot carry out all types of reserved legal activity.
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 The Regulatory Role of the
Solicitors Regulation Authority
TZ Introduction 12
2.2 The Solicitors Regulation Authority 12
Gi 2.53. Risk-based regulation 12
2.4 Firm-based authorisation 14
he 2.5 Authorisation of individuals ee
2.6 — Solicitors working outside authorised firms 19
2.7. Professional indemnity insurance 20

SQE1 syllabus
This chapter will enable you to achieve the SQE1 Assessment Specification in relation
to Functioning Legal Knowledge concerned with Legal Services:
¢ The regulatory role of the Solicitors Regulation Authority.
¢ Principles and risk-based regulation.
¢ Professional indemnity insurance.
Note that for SQE1, candidates are not usually required to recall specific case
names or cite statutory or regulatory authorities. Cases are provided for illustrative
purposes only.

Learning outcomes
By the end of this chapter you will be able to apply relevant core legal principles
and rules appropriately and effectively, at the level of a competent newly qualified
solicitor in practice, to realistic client-based and ethical problems and situations in the
following areas:
¢ The role of the SRA.
e The need for authorisation.
¢ Professional indemnity insurance provision.

1]
Legal Services

on) Introduction
The SRA regulates solicitors, the firms in which they work (and the non-lawyers they employ)
and registered European and foreign lawyers. This chapter focuses on the SRA’s role as
an approved regulator under the Legal Services Act 2007 (see Peps 1) in authorising
individuals and firms to provide legal services.
This chapter looks at:
¢ the Solicitors Regulation Authority
e risk-based regulation
¢ firm-based authorisation
¢ quthorisation of individuals
¢ solicitors outside authorised firms
¢ professional indemnity insurance

2.2 The Solicitors Regulation Authority

In the past, regulation of the profession was in the hands of the Law Society. The Law Society
was founded in 1825 to raise the reputation of the profession. The Law Society had a dual
function, as both the regulator of the profession and the representative body for solicitors in
England and Wales. Over time, however, a view took hold that there was an inherent conflict
in the same organisation fulfilling both these roles. With the introduction of the Legal Services
Act 2007 the roles had to be separated. Consequently, the SRA was established by The Law
Society in January 2007 as an independent body to take over the regulation of solicitors from
the Law Society itself.
In its own words, the purpose of the SRA is ‘to protect the public by ensuring that solicitors
meet high standards, and by acting when risks are identified’. The SRA is governed by a
board of 13 members. This board comprises six solicitors and seven lay members. The
headquarters of the SRA are at The Cube, Birmingham, and there is an office in central
London. Its budget is funded from the practising certificate fee (see 2.5.2).
Regulation is underpinned by the SRA Principles which comprise the fundamental tenets
of ethical behaviour that is expected of all those regulated by the SRA (see Ethics and
Professional Conduct for a detailed discussion of the Principles). The Principles require that
those regulated by the SRA 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 and in legal
services provided by authorised persons;
with independence;
with honesty;
with integrity;
in a way that encourages equality, diversity and inclusion;
ee
AM
gaen
ater
a in the best interests of each client.
The SRA’s role is wide ranging. For example, it controls training and admission to the
profession, sets standards for ethical and professional behaviour (see Ethics and Professional
Conduct), frames rules for handling of client money (see Solicitors Accounts), supervises firms
and takes enforcement action where appropriate. The SRA is an approved regulator under the

12
 The Regulatory Role of the Solicitors Regulation Authority

Legal Services Act 2007 and, as such, is empowered to authorise solicitors and firms to carry
out ‘reserved legal activities’ (see 1.3).
As an approved regulator the SRA operates under the oversight of the Legal Services Board.
In exercising any of its functions the LSB has a duty to promote the regulatory objectives (see
also 1.4) set out in s 1 Legal Services Act 2007:
* protecting and promoting the public interest;
* supporting the constitutional principle of the rule of law;
_ © — improving access to justice;
* protecting and promoting the interests of consumers;
* promoting competition in the provision of services in the legal sector;
* encouraging an independent, strong, diverse, and effective legal profession;
* increasing public understanding of citizens’ legal rights and duties;
promoting and maintaining adherence to the professional principles of independence
and integrity; proper standards of work; observing the best interests of the client and the
duty to the court; and maintaining client confidentiality.
These objectives are passed onto the SRA as an approved regulator. In discharging its
regulatory functions, the SRA must, as far as is reasonably practicable, act in a way which is
compatible with those objectives.
Although the legislation sets regulatory objectives, it does not stipulate the purpose of legal
services regulation. In a policy statement in 2015, the SRA said:
In the SRA’s view, the purpose of its regulation is to:
* protect consumers of legal services; and
* support the operation of the rule of law and the proper administration of justice.
Those dual purposes reflect the fact that poor quality legal services have an impact on both
the individual and the justice system as a whole.

2.3 Risk-based regulation

The SRA takes a risk-based approach to regulation. This means that in exercising its regulatory
functions the SRA assesses the risk to the SRA achieving its regulatory objectives (see 2.2). The
SRA is then able to target its resources where the risk is the greatest.
Risk is a combination of the impact of a certain event occurring (the potential harm that could
be caused) and the probability that the event will occur (the likelihood of the event occurring).
This combination enables the SRA to measure to the risk posed in any given situation, set its
priorities and select a response.
Risks in the delivery of legal services can ae a variety of forms. For example, the risks
arising from:
e the way a firm is structured and its viability;
¢ a firm or individual becoming involved in fraud or dishonesty;
e the people, systems and internal processes of a firm;
¢ individuals lacking the requisite skills, knowledge or behaviours;
¢ the way the legal market operates;
e factors, such as economic, political or legal change.

13
Legal Services

The SRA identifies risk involved in any given situation based on the range of information
it holds, receives or can gather about those it regulates. It looks at problems which have
actually arisen or factors which pose potential problems for the future. The SRA will then
assess the risk involved and target its resources appropriately. For example, the SRA may
identify a risk because a firm is the subject of a number of complaints, assess the risk as high
because the firm is large and therefore a large number of people could be affected and then
conclude that it needs to devote resources to work with the firm to ensure that its procedures
are improved.
Risk identification covers multiple levels: individual solicitors, firms and profession-wide. So,
risk will be assessed when the SRA is deciding what, if any, limitations need to be placed
on an individual's practising certificate, whether a firm should be closed down and whether
changes need to be made to the Codes of Conduct. The SRA can use a variety of measures
to proportionately address the issues or reduce the risk, eg set standards, impose fines, issue
warning notices or raise consumer awareness.
The SRA aims to be proactive and address issues before they become problems. Each year
the SRA publishes its Risk Outlook in which it sets out its view of the most significant risks
affecting the profession.
The SRA also expects firms to engage in their own risk management. Paragraph 2.5 of the
SRA Code of Conduct for Firms requires a firm to identify, monitor and manage all material
risks to its business.

2.4 Firm-based authorisation

As an approved regulator the SRA is able to authorise firms as well as individuals.

2.4.1 Eligible businesses

Under the SRA Authorisation of Firms Rules only certain types of businesses are eligible for
authorisation. These are as follows:

2.4.1.1 Recognised sole practice

A sole practitioner is a solicitor who chooses to practise alone. The solicitor will almost
certainly employ administration staff, such as secretaries, etc and may also employ other
solicitors or paralegals. However, the solicitor will own, and therefore be responsible for, the
firm in its entirety.
Whilst sole practitioners used to be very common, there is a general trend for solicitors to
practise in larger organisations. There are a number of reasons for this. One prominent
reason is cost. In recent times, a solicitor’s practice has become more reliant on information
technology. Solicitors’ firms use such equipment for researching legal issues, for running
sophisticated accounts computer packages, and for the day-to-day management of clients’
files. Both the hardware and software required to perform these operations are expensive.
Accordingly, it is easier to share this cost out amongst a number of partners, rather than for
one person to cover the entire cost.
Another reason is practicality. When a partner, or other fee earner, in a law firm goes on
holiday, their clients’ matters may temporarily be taken over by another solicitor within the
firm. The sole practitioner may not have this option. Accordingly, the sole practitioner may
have to arrange for a locum solicitor to supervise their absence from the office.
There is also a growing trend for solicitors to specialise in one particular area of law, for
example family law or insolvency. Unless the sole practitioner is running a niche practice, this
option is not open to them.

14
 The Regulatory Role of the Solicitors Regulation Authority

Sole practitioners are authorised under the same authorisation rules as other types of firm.
Accordingly, their organisation is authorised by the SRA as a ‘recognised sole practice’ rather
than recognising the individual as a sole practitioner.

2.4.1.2 Recognised body

A ‘legal services body’ in which all of the managers and interest holders are legally qualified
is eligible to apply for authorisation by the SRA as a recognised body. The term ‘legal services
body’ is defined in the Administration of Justice Act 1985 and, in general terms, means where
at least 75% of the body’s managers are legally qualified, the proportion of shares and voting
rights held by legally qualified persons is at least 75% and managers who are not legally
qualified are approved by the SRA. In addition, at least one manager must be a solicitor (or
registered European lawyer).
A recognised body may take the following forms:

(a) Partnerships
Most solicitors’ firms operate as partnerships. The firm is owned and run by the partners, who
then employ other solicitors and administration staff to work for them. As the partners own the
firm, they are entitled to share the profits generated by the firm between them.
Some large firms have two types of partners - ‘equity’ partners and ‘salaried’ partners.
A salaried partner is the first step on the partnership ladder. A salaried partner may not be
entitled to share in the profits of the firm, but they will receive a salary from the firm in excess of
that paid to other non-partner fee earners. After a number of years, a salaried partner may be
promoted to an equity partner, whereupon they will be entitled to share in the profits of the firm.

(b) Limited liability partnerships

A limited liability partnership (LLP) is an incorporated partnership. Instead of partners, LLPs
have members. The members will share in the profits of the LLP. Many of the larger law firms
have adopted this business structure in recent years.

(c) Companies
A solicitors’ practice may be incorporated as a company registered under the Companies Act
2006. The company will have directors and shareholders like any other company.

2.4.1.5 Licensed bodies

The concept of alternative business structures (ABSs) was introduced by the Legal Services
Act 2007. Despite the name, ABSs operate in much the same way as conventional law firms,
although they may be offering legal services alongside non-legal services. The key difference
is that the ownership, control or management of an ABS is not wholly in the hands of
individuals who are legally qualified.
For a body to be eligible to apply for authorisation as a licensed body, there must be at least
one manager who is authorised by the SRA (eg a solicitor) or another approved regulator
(eg the Council of Licensed Conveyancers (see 1.5.4)). It also has to be a ‘licensable body’.
A body (’B’) will be a ‘licensable body’ if a non-authorised person (ie someone not authorised
by the SRA or another approved regulator):
(a) is a manager of B; or
(b) is an interest holder of B (eg a person who holds shares in it or is entitled to exercise any
voting rights).
Alternatively (or in addition to the above), a body (’B’) will be a licensable body if:
(a) another body (‘A’) is a manager of B, or is an interest holder of B; and
(b) non-authorised persons are entitled to exercise, or control the exercise of, at least 10% of
the voting rights in A.

15
Legal Services

2.4.2 Effect of authorisation

Once authorised (and unless the SRA specifies otherwise) a recognised body is entitled
to carry on all reserved legal activities (except notarial activities). This term is defined
in s 12 of the Legal Services Act 2007 and includes conducting court proceedings, the
preparation/lodging of documents relating to the transfer or charging of land and the
preparation of probate documents (see 1.3). Authorisation also enables the firm to carry out
immigration work.
The business of a recognised body is limited to:
(a) professional services of the sort provided by individuals practising as solicitors and/or
lawyers of other jurisdictions; and
(b) other professional services set out in annex 2 of the Rules, for example alternative dispute
resolution, estate agency and financial services.
It must at all times have an individual who is designated as its Compliance Officer for Legal
Practice (COLP), and one who is designated as its Compliance Officer for Finance and
Administration (COFA) and whom the SRA has approved.
Once authorised, a licensed body is entitled to carry out the same range of activities as a
recognised body in accordance with the terms of the licence granted by the SRA. As with
recognised bodies, it must at all times have individuals designated as compliance officers,
but for licensed bodies these are termed a Head of Finance and Administration (HOFA) and a
Head of Legal Practice (HOLP).

2.4.3 The authorisation process

Firms that wish to carry out reserved legal activities (or immigration work) must make an
application to the SRA for authorisation.
On receipt of an application the SRA will check that the basic eligibility requirements are met
and then carry out an investigation into the firm. The purpose of the investigation is for the
SRA to satisfy itself that the firm is suitable to carry out reserved legal activities. In accordance
with its risk-based approach to regulation, the precise form that the SRA investigation will
take depends on an assessment of the risks involved. So, in simple terms, where, for example,
a firm has weaknesses in its processes or is managed by individuals who have a poor
professional conduct history the SRA will devote more of its resources in subjecting the firm to
a more rigorous process.
In its Guidance for firms on authorisation, the SRA sets out the key outcomes it is intending to
achieve through the authorisation process:
¢ clients and the general public remain confident that legal services provided by regulated
firms will be delivered to the required standard;
¢ firms will be managed in such a way, and with appropriate systems and controls in place
to promote public confidence in legal services;
¢ those who own and manage law firms have the competence, character and willingness to
achieve the right outcomes for clients and third parties;
* only those individuals and firms who/that meet the SRA’s criteria for authorisation or
approval (including the requirements to be suitable and capable of providing legal
services to the required standard) are authorised or approved.
Following its investigation the SRA may grant blanket authorisation, authorise the provision of
selected legal services or refuse the application.
Some firms which are not required to be authorised (because of the type of legal services
they offer) may nevertheless apply for authorisation with the aim of giving reassurance to its
clients.

16
 The Regulatory Role of the Solicitors Regulation Authority

2.5 Authorisation of individuals

The authorisation of individuals is governed by the SRA Authorisation of Individuals Regulations. In
this context authorisation involves admission as a solicitor and obtaining a practising certificate.
These are the same requirements which must be satisfied for an individual to be able to act
as a solicitor. Section 1 Solicitors Act 1974 states:
No person shall be qualified to act as a solicitor unless—

(a) he has been admitted as a solicitor, and

(b) his name is on the roll, and
(c) he has in force a certificate issued by the Society ... authorising him to practise as
a solicitor (in this Act referred to as a ‘practising certificate’).
Any person who does not comply with this section will fall within the definition of an ‘unqualified
person’ (Solicitors Act 1974, s 87) and so cannot practise as a solicitor. Any person who practises
as a solicitor without having a practising certificate will commit a criminal offence.
Consequently, anyone who is practising as a solicitor is, by definition, subject to the regulation
of the SRA.

2.5.1 Admission

Admission simply means that an individual is accepted into the profession and their name
is placed on the list, or roll, of solicitors kept by the SRA. An individual will be admitted to
the roll of solicitors if they have attained the required qualifications, undertaken the required
training (neither are considered further here) and the SRA is satisfied as to their character and
suitability to be a solicitor.
The SRA Assessment of Character and Suitability Rules set out the factors which the SRA will
take into account in deciding whether an individual is suitable for admission. The Rules apply
to all individuals applying for admission to the roll of solicitors (including those applying to the
SRA for an early assessment of their character and suitability). The Rules also apply to those
applying to become an authorised role holder in a firm (eg a Compliance Officer for Legal
Practice (COLP)) and former solicitors seeking restoration to the roll.
According to Part 1 of the Rules, when considering an individual's character and suitability
under the Rules, the SRA will take into account the overriding need to protect the public and
the public interest and maintain public trust and confidence in the solicitors’ profession and in
legal services provided by ‘authorised persons’. In doing so, it will take into account the nature
of the applicant's role and their individual circumstances on a case-by-case basis.
Part 2 of the Rules sets out the conduct and other behaviour that the SRA will consider when
assessing an individual's character and suitability, which fall into two main heads: criminal
conduct and other conduct or behaviour. There is a non-exhaustive list in Part 3 of the Rules
which sets out the types of aggravating and mitigating factors that the SRA will take into
account under either of these heads.
lf an applicant has been involved in criminal conduct, the action taken by the SRA will depend
upon the type of conduct involved. These are dealt with in the following categories:
e Most serious
A finding in this category is likely to result in the application being refused. These include
where an applicant has been convicted by a court of a criminal offence resulting in a
custodial or suspended sentence, involving dishonesty, perjury, fraud and/or bribery, of
a violent or sexual nature, associated with obstructing the course of justice, associated
with terrorism or which demonstrated behaviour showing signs of discrimination towards
others. Also included are cases where a caution has been accepted from the police for

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an offence involving dishonesty, violence or discrimination or a sexual offence or the

applicant has been included on the Violent and Sex Offender register.
e Serious

A finding in this category may result in the application being refused. These include where
a caution has been accepted for, or the individual has been convicted of, a criminal
offence not falling within the ‘most serious’ category and where an individual is subject to
a conditional discharge or bind over by a court.
The Rules set out a non-exhaustive list of examples of the other types of conduct and
behaviour that the SRA will take into account. These include where:

* the applicant has behaved in a way which is dishonest, violent, threatening or harassing
or where there is evidence of discrimination towards others;
* the applicant has committed and/or has been adjudged by an education establishment
to have committed a deliberate assessment offence, which amounts to plagiarism or
cheating, in order to gain an advantage for himself or others;
¢ there is evidence that the applicant has deliberately sought to avoid responsibility for his
debts, dishonestly managed his finances, been declared bankrupt or cannot satisfactorily
manage his finances;
¢ the applicant has been made the subject of serious disciplinary or regulatory findings or
sanctions.
On making an application for admission, an individual must disclose all matters, wherever they
have taken place (including overseas), which are relevant to the assessment of character and
suitability and provide any further information requested by the SRA by the date specified. Failing
to disclose any material information relating to the application will be taken into account by the
SRA when making its determination. It is important to note that there is an ongoing obligation on
those covered by the Rules to tell the SRA promptly about anything that raises a question about
their character and suitability, or any change to information previously disclosed to the SRA.

2.5.2 Practising certificates

An admitted solicitor is eligible to apply to the SRA for a practising certificate if their name is
on the roll, they have sufficient knowledge of written and spoken English or Welsh and they
are not suspended from practice as a solicitor.
Subject to limited exceptions, the certificate then entitles a solicitor to carry on all ‘reserved
legal activities’ (except notarial activities). In respect of rights of audience, however, although
solicitors have rights of audience in all courts, a solicitor cannot exercise those rights in the
higher courts (Crown Court, High Court, Court of Appeal and Supreme Court) until they have
successfully completed, as appropriate, the Higher Courts (Civil Advocacy) Qualification or the
Higher Courts (Criminal Advocacy) Qualification.
Although the practising certificate is personal to the individual, subject to some limited
exceptions (see 2.6), the reserved legal activities must be provided through an authorised body.
The need for reserved legal activities to be provided through an authorised body will be an
important consideration for, say, a solicitor who works within a mainstream authorised firm
and who wishes to additionally undertake pro bono work. Such work might be conducted
through the firm (eg under a programme set up by the firm) in which case there is no issue.
However, if not, the solicitor cannot rely on their practising certificate alone and will need to
ensure that they fall within and satisfy the requirements of an exception (see 2.6).
Those who are required to hold a practising certificate must apply to the SRA each year to
have their certificates renewed. All practising certificates become due for renewal on 31
October each year. A fee is payable on renewal of the certificate.
A solicitor is obliged to inform the SRA promptly of any material changes to relevant
information about themselves or their practice, including any change to information recorded

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on the roll if the solicitor is subject to any criminal charge, conviction or caution, or if a
relevant insolvency event occurs in relation to them (for example, bankruptcy) (Paragraph 7.6
of the SRA Code of Conduct for Solicitors, RELs and RFLs,)
The SRA has a certain level of discretion regarding the issue of practising certificates. If
the SRA considers it to be in the public interest to do so, it must refuse an application for a
practising certificate or, at any time, it may impose conditions on an existing certificate as it
thinks fit. The SRA may impose such conditions if it is satisfied that the solicitor:
(a) is unsuitable to undertake certain activities or engage in certain business or practising
arrangements;

(b) is putting, or is likely to put, at risk the interest of clients, third parties or the public;
(c) will not comply with, or requires monitoring of compliance with, the SRA’s regulatory
arrangements; or
(d) should take specified steps conducive to the regulatory objectives.
The conditions imposed may specify certain requirements to be met or steps to be taken,
restrict the carrying on of certain activities, the holding of certain roles or prohibit the taking of
specified steps without the SRA’s approval.
A decision by the SRA to refuse an application for a practising certificate or to impose
conditions on one can be made the subject of an application for a review by the SRA or
appealed to the High Court.

2.6 Solicitors working outside authorised firms

2.6.1 Freelance solicitors

A freelance solicitor is one who works on their own. Ordinarily such a solicitor would have to
be authorised as a recognised sole practice (see 2.4.1.1). In some circumstances, however,
such authorisation is not required. Under the SRA Authorisation of Individuals Regulations, a
freelance solicitor is not required to be authorised as a recognised sole practice if:
(a) their practice consists entirely of carrying on activities which are not ‘reserved legal activities’
(for example, family, employment or personal injury work and general legal advice);
(b) any reserved legal activities are provided through an authorised body; or
(c) certain requirements are met. For example, the solicitor must have practised as a solicitor for
a minimum of three years since admission, be self-employed and practise in their own name,
take out indemnity insurance in respect of all the services they provide, does not employ
anyone in connection with those services and only holds limited categories of client money.
Even when authorisation is not required, a freelance solicitor must notify the SRA of their
intention to practise in that capacity. The SRA will place the solicitor’s details on a public
register.

2.6.2 In-house solicitors

An in-house solicitor is employed by, say, a company or a local authority to provide that
employer with legal advice etc. An in-house solicitor is able to deliver reserved legal activities
to their employer, but not to the general public.

2.6.3 Non-commercial organisations

‘Non-commercial organisation’ is defined in s 23(2) Legal Services Act 2007 and includes
not-for-profit bodies, charities, community interest groups and independent trade unions.
Such organisations are generally exempt from the need to be authorised (see 1.3.2).
Solicitors working directly within non-commercial organisations are allowed, on behalf of the
organisation, to provide reserved legal activities to the public.

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When providing services to the public these solicitors will be covered by the wider insurance
arrangements that organisation has in place. The SRA does not specify a specific level of
cover but does require that the solicitor is covered by professional indemnity insurance that is
‘adequate and appropriate’ for the work they are carrying out (see 2.7).

2.6.4 Other organisations

A solicitor is able to work for a commercial unregulated organisation providing legal services
to the public. However, such a solicitor cannot carry out reserved legal activities.

2e/ Professional indemnity insurance

2.7.1 The nature of professional indemnity insurance
Professional indemnity insurance is a necessary requirement for many professions, including
solicitors. Professional indemnity insurance caters for the possibility that the insured may be
guilty of a breach of professional duty which gives rise to financial loss or damage to a third
party. In such circumstances the effect of the insurance policy is that the insurer will indemnify
the insured in respect of the loss or damage.
For solicitors, professional indemnity insurance covers civil claims made against a solicitor in
the course of their practice. Such claims usually arise as a result of negligence on the part
of the solicitor. In simple terms, if a solicitor has been negligent in the conduct of a client's
case the insurer will pay the amount necessary to compensate the client for the loss suffered.
The insurance does not absolve the solicitor from liability; it merely provides a fund from which
such liability can be met. As with any insurance policy, if for any reason the insurer does not
accept the claim or the amount of insurance cover is insufficient, the solicitor is liable for the
shortfall. In addition, indemnity insurance policies usually provide cover for the legal costs of
the solicitor defending the claim and, if the defence is unsuccessful, possibly the client's legal
costs as well.
Indemnity insurance policies are usually written on an annual basis and they therefore need
to be renewed each year. The cover provided is normally in respect of claims made during
the year, rather than events occurring during the year. A firm therefore needs to be forward
thinking. It will need to have insurance in place in future years to cover claims based on
negligent acts occurring today.
Claims against solicitors have the potential to run into millions of pounds. From the firm's
perspective, having insurance in place therefore provides a degree of certainty and financial
security. However, the central purpose of professional indemnity insurance is to protect the public
by ensuring that they are not left without compensation. Clients can be secure in the knowledge
that, if something does go wrong, there is sufficient money in place to meet any claim.
Professional indemnity insurance therefore helps to maintain confidence in the profession.

2.7.2 SRA Indemnity Insurance Rules

The SRA Indemnity Insurance Rules (‘the Rules’) apply to firms authorised by the SRA. All
SRA authorised firms must take out and maintain professional indemnity insurance that is
appropriate for its practice and meets the specific requirements set out in the Rules (qualifying
insurance). Individual assistant solicitors, trainees and others employed by a solicitors’
practice will be covered by the insurance taken out by the firm.
Under the Rules the insurance must be taken out with one or more participating insurers.
These are insurers who are regulated by the Financial Conduct Authority and have an
agreement with the SRA to provide insurance on particular terms.

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The Rules set out the minimum terms and conditions for the insurance policy. These include a
minimum figure for the sum insured. For recognised and licensed bodies (see 2.4.1) the sum
insured for any one claim (exclusive of defence costs) must be at least £3 million and at least
£2 million in all other cases. The firm must not exclude or attempt to exclude liability below
this minimum level of cover.
A firm must have qualifying insurance in place at all times. This means that the insurance
cover must be continuous. The Rules require a firm to put a new policy in place as the current
policy comes to an end. If for some reason a firm cannot effect qualifying insurance at
the end of the policy period, the minimum terms and conditions will extend the cover for a
maximum of 90 days. The firm must inform the SRA that it has entered this extended policy
period. The firm can use this time to try to find insurance cover. After 30 days, if no cover can
be found, the firm must notify the SRA and cannot take on new work. If, at the end of 90 days,
insurance cover still cannot be secured the firm must cease practising.
The SRA can require a firm to produce evidence so that the SRA can be satisfied that the firm
is complying with the Rules.

2.7.3 ‘Adequate and appropriate insurance’

The SRA requires solicitors to take out and maintain professional indemnity insurance
that provides adequate and appropriate cover in respect of services they provide. This
requirement applies to:

* SRA authorised firms (Rule 3.1 SRA Indemnity Insurance Rules). The Rules include minimum
requirements for insurance cover (see above). However, the additional need for insurance
cover to be adequate and appropriate may require a firm to go beyond that minimum.
The minimum may not be adequate and appropriate in all cases and so a firm may need
to take out ‘top-up’ cover.
¢ Freelance solicitors (see 2.6.1) providing reserved legal services to the public (SRA
Authorisation of Individuals Regulations).
¢ Solicitors in non-commercial organisations (see 2.6.3) providing reserved legal services to
the public (Paragraph 5.6 of the SRA Code of Conduct for Solicitors, RELs and RFLs). Here
the non-commercial body will arrange the policy, so the duty placed on the solicitor is to
ensure that it does so.
What constitutes adequate and appropriate insurance will vary. It is for each firm or solicitor
to determine what is needed based on their individual circumstances. This will require a firm
to make an assessment based on such factors as the number and type of clients, its history
of claims and an estimate of the level of claims that could be made. The assessment must be
kept under review because the needs may vary as the firm develops.
An important point to note is that for freelance solicitors and solicitors in a non-commercial
body, the obligation to have adequate and appropriate insurance only arises if they provide
reserved legal services to the public. However, the need for insurance to be adequate and
appropriate applies to all the services that the solicitor provides.
SRA authorised firms cannot exclude or limit their liability to clients below the minimum level
under the SRA’s minimum terms and conditions (see above). This restriction does not apply
to freelance solicitors or solicitors working for non-commercial bodies. There is no restriction
on authorised firms capping their liability above the minimum level. If a cap is set, regard
must be had to a solicitor’s professional conduct obligations. For example, a solicitor must
act in the client’s best interests (SRA Principle 7) and must not abuse their position by
taking unfair advantage of clients (Paragraph 1.2 SRA Code of Conduct for Solicitors, RELs
and RFLs).

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2.7.4 Client information

Solicitors must be open with their clients about their professional indemnity insurance
provision. There are some specific requirements. For example, under the Provision of Services
Regulations 2009 (SI 2009/2999) it is necessary to make available to clients information about
the firm’s compulsory layer of professional indemnity insurance, including details of the insurer
and the territorial coverage of its insurance. Under the SRA Transparency Rules freelance
solicitors providing reserved legal services to the public must inform their clients that they are
not required to meet the SRA’s minimum terms and conditions.
However, solicitors are under wider duties to provide clients with information. The firm’s indemnity
insurance position may be a factor influencing a client's decision with regard to the provision of
legal services. For example, a client may be unwilling to instruct a firm in respect of a £10 million
claim if the amount of cover under the firm’s policy is only £5 million. Solicitors are under a duty
to give clients information in a way they can understand and ensure they are in a position to
make informed decisions about the services they need, how their matter will be handled and the
options available to them (Paragraph 8.6 SRA Code of Conduct for Solicitors, RELs and RFLs. This
is also applicable to firms under Paragraph 7.1 SRA Code of Conduct for Firms).

Summary
* The SRA is the approved regulator for solicitors, the firms in which they work (and their
non-lawyer employees), Registered European Lawyers and Registered Foreign Lawyers.
¢ The SRA adopts a risk-based approach to regulation.
¢ A firm must be authorised by the SRA to carry out reserved legal activities.
¢ The SRA can authorise recognised sole practices, recognised bodies and licensed bodies.
¢ The suitability of an individual to be admitted as a solicitor is governed by the SRA
Assessment of Character and Suitability Rules.
¢ Solicitors holding a practising certificate are authorised to carry out reserved legal
activities.
¢ All firms authorised by the SRA must take out and maintain professional indemnity
insurance.
¢ Indemnity insurance cover must meet minimum requirements and be adequate and
appropriate.
¢ Firms must be open with clients about their professional indemnity insurance provision.

Sample questions

Question 1
Having completed all the necessary training requirements a man wishes to apply for
admission to the roll of solicitors.
At the end of their final year at university the man was drinking with some fellow students in
a local bar. A fight broke out in which the barman was punched in the face and sustained
a black eye. The fight was broken up by the other bar staff. The bar owner put the fight

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down to student ‘high spirits’ and decided not to call the police; instead they reported
the incident to the university authorities. The university carried out an investigation. At first
the man denied being in the bar, but CCTV footage showed that it was the man who had
punched the barman. The man was formally disciplined by the university. The incident was
completely out of character. The man has not been involved in anything similar before
or since.
Should the man tell the SRA about the disciplinary proceedings?
A No, because the man was not convicted of a criminal offence.

B_ No, because the incident took place too long ago to be of relevance in assessing the
man’s character and suitability.
C No, because the fact that it was an isolated incident demonstrates that the man is of
good character.
D Yes, because there is a risk that the university will inform the SRA.
E Yes, because the incident is relevant to the assessment of the man’s character and
suitability.

Answer

Option E is the best answer. The incident and the disciplinary proceedings are relevant in
assessing an application irrespective of when they took place (so Option B is not correct).
Option A is not correct because the SRA looks at all types of behaviour, not just criminal
or recent behaviour. Rule 4.1 sets out examples of ‘other conduct and behaviour’ including
violence, dishonesty and being subject to disciplinary proceedings by a regulatory body.
The man’s behaviour was violent (punching the barman) and dishonest (lying to the university
authorities) and they were disciplined by the university. The fact that the incident has not been
repeated will be taken into account by the SRA, but it is not a justification for withholding
the information (so, Option C is not correct). Option D is not the best answer because,
whilst there is a risk that the university will inform the SRA, this should not be the reason for
disclosure - the man is under an obligation to be open and honest.

Question 2
A solicitor decides to set up in business as a sole practitioner carrying out niche private
client work for high net worth individuals. The solicitor anticipates that they will regularly be
dealing with estates in excess of £20 million. The solicitor will be authorised by the SRA as
a recognised sole practice.
Which of the following best describes how the requirements in respect of professional
indemnity insurance applies to the solicitor?
A The solicitor can limit their liability at below £2 million.
B The cover must be for at least £3 million.

C_ The cover will need to be in excess of the minimum terms and conditions set under the
SRA Indemnity Insurance Rules.
D Having taken out professional indemnity insurance the solicitor will be absolved from
liability for negligence.
E The solicitor is not required to meet the minimum terms and conditions set under the
SRA Indemnity Insurance Rules.

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Answer

Option C is correct. As a recognised sole practice the cover required under the minimum
terms and conditions is £2 million. The ability to limit liability below this sum only applies to
freelance solicitors. The solicitor is required to take out ‘adequate and appropriate insurance’.
Given the size of the estates that the solicitor will be dealing with, the cover will need to be
in excess of the minimum. Indemnity insurance does not absolve a solicitor from liability for
negligence.

Question 3
Having completed all the necessary training requirements, a prospective solicitor has
been offered a position as an assistant solicitor in the Family Department of a large firm
of solicitors authorised by the SRA. In order to take up the offer, the prospective solicitor
will be applying for admission to the roll of solicitors. There is no reason to think that the
application will be refused.
Is it necessary for the prospective solicitor to obtain a practising certificate in order to
take up the position?
A Yes, because having a practising certificate is a mandatory prerequisite for being
admitted to the roll of solicitors.
B Yes, because otherwise in taking up the position the prospective solicitor will be
committing a criminal offence.
C_ Yes, because the firm is authorised by the SRA.
D No, because given the nature of the job the prospective solicitor will not be carrying
out reserved legal activities.
E No, because the prospective solicitor will not be a partner in the firm.

Answer
Option B is the best answer. The job is that of a solicitor. Section 1 Solicitors Act 1974, inter
alia, requires anyone acting as a solicitor to have a practising certificate. Practising as a
solicitor without satisfying the requirements of s 1 is a criminal offence. The requirement is not
dependent on the firm being SRA authorised (option C is wrong). The requirement applies
irrespective of whether the solicitor will be carrying out reserved legal activities (option D
is wrong). The requirement applies to employed solicitors as well as partners (option E is
wrong). Finally, option A is wrong as it is possible to be on the roll without having a practising
certificate.

24
 Equality Act 2010

hat
cSrkive
'
s! Introduction 26
3.2. Overview of the Act 26
3.3 The protected characteristics Li,
3.4. Prohibited conduct 28
3.5 Duty to make adjustments 31
me Solicitors as service providers 31
3.7. Solicitors as employers 33
3.8 Barristers ro
3.9 Positive action 35
3.10 Overlap with professional conduct 36

SQE1 syllabus
This chapter will enable you to achieve the SQE1 Assessment Specification in relation
to Functioning Legal Knowledge concerned with Legal Services:
¢ The regulatory role of the Solicitors Regulation Authority.
¢ Overriding legal obligations.
¢ The Equality Act 2010.
Note that for SQE1, candidates are not usually required to recall specific case
names or cite statutory or regulatory authorities. Cases are provided for illustrative
purposes only.

Learning outcomes
By the end of this chapter you will be able to apply relevant core legal principles
and rules appropriately and effectively, at the level of a competent newly qualified
solicitor in practice, to realistic client-based and ethical problems and situations in the
following areas:
¢ The main anti-discrimination provisions of the Equality Act 2010.
¢ The application of the Equality Act 2010 to solicitors.
e The connection between the Equality Act 2010 and professional conduct.

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3.1 Introduction
The Equality Act 2010 (‘the Act’) is concerned both with protecting the rights of the individual
and ensuring fair treatment and equality of opportunity for all. The Act is part of the general
law applicable to all. However, solicitors have particular duties under the legislation in their
capacities as employers and as providers of legal services.
The duties placed on solicitors under the Act are separate from, but obviously closely linked
to, their responsibilities with regard to equality, diversity and inclusion under the SRA Principles
and the SRA Codes of Conduct (see Ethics and Professional Conduct).
This chapter looks at:
* overview of the Act
e the protected characteristics
¢ prohibited conduct
¢ duty to make adjustments
¢ solicitors as service providers
e solicitors as employers
* barristers
¢ positive action
¢ overlap with professional conduct

3.2 Overview of the Act

The philosophy which lies behind equality legislation is that everyone has the right to be
treated fairly. Achieving that fairness of treatment requires discrimination to be addressed. The
primary focus of the Act is to stop discrimination in its various forms. However, the Act does
not create an overall ban on discrimination. Instead it controls unjustifiable discrimination in a
limited way by outlawing certain types of discrimination for certain purposes. In addition, the
Act imposes some positive duties to take steps to achieve equality.
Under the Act discrimination is addressed using the civil law rather than the criminal law.
There are some criminal offences associated with discrimination, but these are largely outside
the Act, eg inciting racial hatred and some forms of harassment.
The Act enables those who have been wronged to seek redress. The remedy is an individual
action taken by the victim. Employment claims are dealt with in the employment tribunal. Non-
employment claims are brought in the county court. Claimants are usually seeking damages,
but other remedies such as injunctions and declarations may also be appropriate.
In addition, the Equality and Human Rights Commission (EHRC) has some powers to take
action against discriminatory practices. The EHRC is an independent statutory body tasked
with encouraging equality and diversity and eliminating unlawful discrimination. The EHRC
produces guidance on compliance with the Act as well as codes of practice which are taken
into account by the courts/tribunals.
The basic overall shape of the Act is to establish a number of personal characteristics which
are the subject of protection under the legislation (the ‘protected characteristics’). The Act
goes on to define certain types of discriminatory behaviour (‘prohibited conduct’). The Act
then sets out various contexts (work, education etc) in which it will be unlawful to engage in
prohibited conduct in relation to a protected characteristic.

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 Equality Act 2010

3.3 The protected characteristics

Section 4 Equality Act 2010 lists nine personal characteristics which are protected by the
remainder of the Act. The list is wide, but finite. Consequently, discrimination based on
some characteristic which falls outside s 4 is not unlawful under the Act (but may give rise to
professional conduct issues (see 3.10)).
There is a basic common approach across all the protected characteristics. However, they are
not all dealt with in exactly the same way or subject to the same provisions under the detail
of the Act. For example, the provisions aimed at discrimination in the context of disability are
quite distinct in that they require positive steps to be taken.
The protected characteristics are:
Race
Race is defined in s 9 to include colour, nationality or ethnic or national origins. This is a very
wide definition and indeed it allows for one individual to belong to several different racial
groups.
When race discrimination legislation was first introduced it was essential to establish that the
wronged individual belonged to an ethnic or racial group as opposed to a religious group
because only discrimination based on race was outlawed. This is now less significant in view
of the expanded list of protected characteristics in s 4. However, it will still be important to
establish a racial group in some cases; for example in Commission for Racial Equality v Dutton
[1989] IRLR 8 gypsies were held to constitute an ethnic group.
Religion and belief
In contrast to race, religion and belief are not defined other than to say that any religion or
philosophical belief and an absence of religion or philosophical belief is covered (s 10). The
explanatory notes to the Act go further in relation to ‘belief’ in saying that it must be genuinely
held, be a belief as opposed to a view point, relate to a substantial part of human life, attain
a certain level of cogency and be worthy of respect.
Sex
This relates to inequality between men and women. ‘Man’ is defined as ‘a male of any age’
and ‘woman’ as ‘a female of any age’.
Sexual orientation
Sexual orientation is defined in s 12 as a sexual orientation towards:
¢ persons of the same sex
¢ persons of the opposite sex, or
* persons of the same sex and the opposite sex.
This covers heterosexual people as well as homosexual and bi-sexual people. Orientation is
wide enough to cover attraction as well as behaviour.
Age
All ages are covered under the legislation. Section 5 provides that the protected characteristic
of age refers to belonging to an ‘age group’. r
Age is dealt with differently in some respects under the Act. This is to reflect that fact that in
some instances a difference in treatment based on age can be justified.
Disability
Disability is defined in s 6. A person has a disability if:
e they have a physical or mental impairment; and
* the impairment has a substantial and long-term adverse effect on their ability to carry out
normal day to day activities.

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This is supplemented by Schedule 1 which, for example, adds definitions of ‘long term’ and
specifies that certain conditions, such as HIV, are a disability.
The definition is quite narrow and arguably does not reflect the common understanding of the
term ‘disabled’. The phrase ‘substantial and long-term adverse effect’ sets a high threshold. It
is not unknown for discrimination cases based on disability to fail because the victim cannot
bring themselves within s 6.
Gender reassignment
This relates to people who are proposing to undergo, are undergoing or have undergone
treatment for the purpose of reassigning the person’s sex (s 7). The definition does not require
the individual to be under medical supervision in order to be protected under the Act.
Marriage/civil partnerships
This relates to discrimination against people on the basis that they are married or in a civil
partnership (s 8). It only covers those who are legally married or in a civil partnership. It does
not cover any wider marital status and so it does not protect, for example, cohabitants, single
people, divorcees, fiancées etc.
Pregnancy and maternity
Pregnancy/maternity is one of the protected characteristics listed in s 4. However, this
protected characteristic is treated quite differently under the Act. Pregnancy/maternity
is excluded from some elements of the Act and subject to specific protection when this
characteristic is particularly relevant.

3.4 Prohibited conduct

The Act outlaws various types of unequal treatment.

3.4.1 Direct discrimination

The basic definition of direct discrimination is in s 13(1) Equality Act 2010:
A person (A) discriminates against another (B) if, because of a protected
characteristic, A treats B less favourably than A treats or would treat others.
Direct discrimination therefore occurs when a person is treated less favourably than someone
else would have been in the same situation and the reason for the difference is one of the
protected characteristics. This type of unequal treatment could be termed overt or obvious.
There are three elements to the definition of direct discrimination:

e Comparator
The treatment experienced must be different from that of another real or hypothetical
person (the comparator). To establish less favourable treatment the victim must compare
the treatment they received to the treatment of another person who does not belong to or
is not associated with the claimant's protected characteristic.
This comparison can be to the treatment of another actual person or, if there is no
actual comparator available, to the treatment of a hypothetical comparator. The relevant
circumstances of the claimant and the comparator should be the same or not materially
different.
¢ Less favourable
The treatment must be less favourable than that afforded to the comparator. Less
favourable treatment is a broad concept. Any disadvantage will be sufficient. There is no

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need to have suffered tangible or material loss. The test for less favourable treatment is
objective, so there is no requirement to show that the perpetrator intended to treat the
victim less favourably. Motive may, however, be relevant to the issue of remedies. If the
perpetrator has behaved in a malicious or oppressive manner, then aggravated damages
can be awarded.
¢ Protected characteristic

The reason for the less favourable treatment must be a protected characteristic. The
protected characteristic must be the cause of the treatment; it need not be the sole
or main reason for the treatment, but it must have been an influence. Section 13 is
wide enough to cover the situation where the victim is assumed to have a protected
characteristic even though that is not in fact the case. For example, if an individual is
treated less favourably because they are assumed to belong to a particular racial group
based on their name this will amount to discrimination even though the assumption is
incorrect.
There is no general defence of justification of direct discrimination save in relation to age.
Where the protected characteristic is age there is no discrimination if the treatment was a
proportionate way of achieving a legitimate aim (s 13(2) Equality Act 2010).
More detailed provisions apply in respect of discrimination on the grounds of pregnancy
or maternity (ss 17 and 18 Equality Act 2010).

3.4.2 Indirect discrimination

Direct discrimination is overt or obvious and (save in the context of age) cannot be defended
or justified. In contrast, indirect discrimination can be said to be much more subtle. Indirect
discrimination occurs where conditions are imposed which apply to everyone, but which have
the effect of prejudicing members of a particular group.
The basic definition of indirect discrimination is in s 19 Equality Act 2010:
(1) A person (A) discriminates against another (B) if A applies to B a provision, criterion or
practice which is discriminatory in relation to a relevant protected characteristic of B’s.
(2) For the purposes of subsection (1), a provision, criterion or practice is discriminatory in
relation to a relevant protected characteristic of B’s if:
(a) A applies, or would apply, it to persons with whom B does not share the
characteristic,
(b) it puts, or would put, persons with whom B shares the characteristic at a particular
disadvantage when compared with persons with whom B does not share it,
(c) it puts, or would put, B at that disadvantage, and
(d) A cannot show it to be a proportionate means of achieving a legitimate aim.
In essence, therefore, indirect discrimination occurs when a policy or practice is put in place
which is of universal application, but which has an adverse impact on those who share a
protected characteristic. .
There is the possibility of justifying the action on the basis that it is a proportionate means
of achieving a legitimate aim. This requires a balancing exercise between the degree of
discrimination caused and the object or aim to be achieved.
An example of indirect discrimination is an employer requiring an employee to work full time.
This requirement could disadvantage women as a group, since women in society as a whole
bear a greater part of domestic and childcare responsibilities than men and are more likely
to want (or need) to work part time. Unless the employer can objectively justify the need for
a full-time worker to do the job, the requirement could be indirectly discriminatory against a
woman with childcare responsibilities.

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The provisions in the Act relating to indirect discrimination do not apply to pregnancy/
maternity. Discrimination based on pregnancy/maternity will fall under direct discrimination.

3.4.3 Disability discrimination

Although a disabled person may be able to bring a claim for direct or indirect discrimination
there is an additional definition for disability discrimination in.s 15 Equality Act 2010:
A person (A) discriminates against a disabled person (B) if A treats B unfavourably
because of something arising in consequence of B's disability.
It is discrimination to treat a disabled person less favourably not only because of the
individual's disability itself but also because of something arising from, or in consequence of,
that disability. In contrast to s 13, there is no requirement in s 15 to compare the treatment
received by the disabled with the treatment of others.
It is, however, possible to justify less favourable treatment if it can be shown to be a
proportionate means of achieving a legitimate aim. For this type of discrimination to occur, the
perpetrator must have known, or reasonably be expected to have known, that the disabled
person had a disability.

3.4.4 Victimisation
The basic definition of victimisation is in s 27 Equality Act 2010:
A person (A) victimises another person (B) if A subjects B to a detriment because
(a) B does a protected act, or
(b) A believes that B has done, or may do, a protected act.
A protected act is any of the following:
* bringing proceedings under the Act;
* giving evidence or information in proceedings brought under the Act;
* doing anything which is related to the provisions of the Act;
¢ making an allegation that another person has done something in breach of
the Act.
The victim does not need to have a protected characteristic in order to receive protection from
victimisation under the Act.
The term ‘detriment’ is not defined under the Act, but it would encompass any act which has
the effect of putting the individual at a disadvantage or of making their position worse.

o Example
Maya is a legal secretary employed by a firm of solicitors. Maya is bringing a claim
against the firm under the Equality Act 2010. Maya’s claim is that she was passed over
by the firm for promotion on account of her race. Karen is also a legal secretary working
for the same firm. Karen agrees to give evidence on Maya’s behalf. As a consequence, in
the firm’s next round of pay reviews Karen is singled out and is not given any increase in
her salary. Here the firm’s actions would amount to victimisation. Karen would be able to
bring her own claim against the firm under the Act.

3.4.5 Harassment

Under s 26 Equality Act 2010 harassment occurs when an individual is subjected to a specific
form of unwanted conduct which has the effect of violating the individual’s dignity, or creating
an intimidating, hostile, degrading, humiliating or offensive environment for the individual.

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The unwanted conduct must:

* relate to a protected characteristic (except pregnancy/maternity and marriage/civil

partnership);
* be of a sexual nature; or
* be of a sexual nature or related to gender reassignment or sex and result in less
favourable treatment because of the individual's rejection of or submission to the conduct.

3.5 Duty to make adjustments

The Equality Act 2010 is for the most part negative in that, after the event, it judges certain
behaviour to have been unfair and therefore unlawful. However, in relation to disability the Act
imposes a positive duty to take steps to avoid unfairness occurring in the first place. Section
20 imposes a duty to make reasonable adjustments for disabled persons. A failure to comply
with that duty in respect of an individual is discrimination (s 21).
The duty to make reasonable adjustments comprises three requirements:
¢ Provision, criterion or practice
Where a provision, criterion or practice puts a disabled person at a substantial
disadvantage in relation to a relevant matter in comparison with persons who are
not disabled, the requirement is that reasonable steps must be taken to avoid the
disadvantage.
¢ Physical features
Where a physical feature puts a disabled person at a substantial disadvantage in
comparison with persons who are not disabled, the requirement is that reasonable steps
must be taken to avoid the disadvantage.
¢ Provision of auxiliary aid
Where a disabled person would, but for the provision of an auxiliary aid, be at a
substantial disadvantage in comparison with persons who are not disabled, the
requirement is that reasonable steps must be taken to provide the auxiliary aid.
In each case a disabled person must be at a ‘substantial disadvantage’. ‘Substantial’ is
defined as ‘more than minor or trivial’. The threshold is therefore relatively low.

3.6 Solicitors as service providers

3.6.1 Unlawful behaviour
Under Part 3 Equality Act 2010 the anti-discriminatory provisions of the Act are made
applicable to those providing services to members of the public. A service provider is
defined as a person concerned with the provision of services. A service provider can be an
individual or a business. This includes solicitors as providers of legal services (and it includes
all providers of legal services, even if unregulated (see 1.7). There is no requirement that the
provider receive payment for the services. Consequently, the Act also applies to solicitors
providing free legal advice.
Under s 29 it is unlawful for a service provider:
e to discriminate or victimise:
° by not providing the service
© qs to the terms on which the service is provided

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° by terminating the provision of the service, or

° by subjecting the user of the service to any detriment.
¢ Or to harass the person to whom the service is provided.
In essence, people who have protected characteristics should not be discriminated against
when using any service. The Act therefore protects the individual requiring the service. In the
context of legal services this will be the client or prospective client. The Act applies to the
provision of the service rather than the nature of the service. The protection applies to seeking
the service, during the provision of the service and can extend to after the service has been
provided.
Under s 29 it would be unlawful for a solicitor to discriminate against or harass a client
because of a protected characteristic or victimise a client when providing legal services.
Discrimination in this context could take the form of, for example, refusing to act for a
client, providing legal services on less advantageous terms or terminating the retainer. The
prohibition applies to all the protected characteristics except marriage/civil partnership and
age, where the individual is under 18 years of age.

3.6.2 Vicarious liability

Under s 109 Equality Act 2010 acts done by an employee are treated as if done by the
employer. This means that a firm may be held vicariously liable for the behaviour of an
individual employee. This applies irrespective of the fact that the employee’s acts were done
without the firm’s knowledge or approval. The individual remains liable whether or not the
employer is found to be vicariously liable.
Vicarious liability only arises in respects of an act of discrimination which was committed by
an employee in the course of their employment. There is a defence in that a firm will be able
to avoid vicarious liability if it can show that they took such steps as were ‘reasonable’ to
prevent the particular act of discrimination or acts of that description. However, those steps
must have been taken before the discriminatory act occurred.

3.6.3 Making adjustments

Section 29 also imposes the duty to make adjustments. A service provider will be considered
to have discriminated against a disabled person if they fail to comply with the duty to make
reasonable adjustments. In relation to physical features (see 3.5) the requirement is to take
reasonable steps to avoid the disadvantage or to adopt a reasonable alternative method of
providing the service. However, there is no requirement to fundamentally change the nature
of the service being provided. The cost of making adjustments cannot be passed onto those
using the service.
The duty is owed to ‘disabled people generally’. The duty is imposed irrespective of whether
the service provider is already providing services to disabled people. The provider is
therefore required to anticipate the possibility of disabled people using its services and make
appropriate adjustments, rather than waiting for a particular disabled person to encounter a
problem or raise an issue. For example, a firm of solicitors is under a duty to take reasonable
steps to make its office building wheelchair accessible even though none of its current clients
use a wheelchair. The duty arises even if the service provider is unaware that an individual is
disabled or is likely to suffer disadvantage. However, only an individual affected by the failure
to make adjustments can bring a claim.
In assessing whether the adjustments are ‘reasonable’, various factors will be considered,
including the cost of making the adjustment, the nature of the service being provided and the
size of the firm.

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3.6.4 Making a claim

A client can make a claim under the Act to the county court. Initially the burden of proof lies
with the claimant to show a prima facie case of discrimination (s 136). The claimant must
prove facts from which it could be inferred that discrimination has taken place. The burden
then shifts to the defendant. If a prima facie case has been established the court must make
a finding that there has been a breach of the legislation unless the defendant is able to prove
otherwise.
The court can grant any remedy which the High Court could make in tort or judicial review
cases. The usual remedy is damages. There is no limit on the damages that can be awarded.
This may include financial loss, personal injury and compensation for injury to feelings. Claims
in respect of services are usually limited to injury to feelings simply because the claimant
has not suffered a financial or other loss. Damages may be aggravated if, for example, the
defendant's behaviour has been malicious or oppressive. In rare cases damages may be
exemplary. If the firm and the employee are both found to be liable, the claimant does not
receive double compensation; they will be jointly liable for the amount of damages awarded
by the court. The court may also grant other remedies, such as declarations or injunctions, if
appropriate.

3.7 Solicitors as employers

3.7.1 Unlawful acts

Under Part 5 Equality Act 2010 the anti-discriminatory provisions of the Act are made
applicable to the workplace. In basic terms, employees are protected from discriminatory
behaviour at the hands of their employers. Employees in this context includes partners
or those seeking partnership and members or prospective members of Limited Liability
Partnerships.
The provisions of the Act apply to employers in their treatment of their employees or
prospective and, in some cases, former employees. A firm of solicitors (or individual partners)
will usually employ staff. Those who work for a firm of solicitors are therefore protected under
the Act.
Under ss 39 and 40 an employer must not:
¢ discriminate against or victimise a prospective employee:
© in the arrangements made for deciding to whom to offer employment
° as to the terms on which employment is offered, or
° by not offering employment.
* harass a person who has applied to it for employment
¢ discriminate against or victimise an employee:
° as to the terms of employment
° in the way it affords access to opportunities for promotion, transfer or training, or for
receiving any other benefit, facility or service
° by dismissing the employee, or
° by subjecting the employee to any detriment.
e harass an employee.
Detriment is established if a reasonable employee would or might take the view that they had
been disadvantaged in the circumstances in which they had to work. There is therefore no
need for the claimant to prove some physical or financial consequences.

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3.7.2 Vicarious liability

Vicarious liability for the acts of employees (see 3.6.2) also applies in the context of
employment.

3.7.3 Occupational requirements

An exception applies in the employment context which means that in some instances
discrimination will not be unlawful. The exception applies where an employer is able to
demonstrate that, because of the nature of the job, only people with a particular protected
characteristic are able to do it. For example, in a Roman Catholic school it may be lawful
to require stipulation that the head teacher must be a practising Roman Catholic. An
employer will only be able to rely on the exception if they can show that the requirement is a
proportionate means of achieving a legitimate aim. The exception is unlikely to be relevant to
most firms of solicitors.

3.7.4 Making adjustments

Section 39 also imposes the duty to make adjustments for disabled employees or prospective
employees. An employer will be considered to have discriminated against a disabled person
if they fail to comply with the duty to make reasonable adjustments.
In contrast to service providers, employers are only required to make adjustments if they know
or ought reasonably to know that the individual is disabled and likely to be disadvantaged.
The duty is not anticipatory; it only applies to particular individuals. So, for example, a firm
does not need to modify a recruitment process to accommodate the possibility of a disabled
applicant. The duty arises when a disabled person applies or notifies the firm that they intend
to do so.
The Government Legal Service v Brookes UKEAT 0302/16
The claimant, who suffered from Asperger’s Syndrome, applied for a job as a trainee solicitor
with the Government Legal Service Board. The first step in the recruitment process required all
applicants to sit and pass an online multiple-choice test. The claimant asked to be able to sit
the test in the form of short narrative written questions on the basis that her condition placed
her at a disadvantage in attempting multiple-choice style questions. The claimant's request
was refused. The claimant proceeded to attempt the multiple-choice test but did not pass. The
Government Legal Service was found to have failed to make adjustments for the claimant in
not giving her the opportunity to sit the test in a different format (and to have subjected the
claimant to indirect discrimination and disability discrimination).

3.7.5 Making a claim

An employee or prospective employee can make a claim to the Employment Tribunal.
As a first step an employee or prospective employee who considers that they might have
been discriminated against can submit questions to the employer to help determine whether
they have a claim. The purpose of this step is to address the imbalance in employment
cases where the employer alone is usually in possession of the information relating to the
allegations of discrimination.
The employee will then have to participate in a conciliation process through the Advisory,
Conciliation and Arbitration Service to see if the claim can be settled. Conciliation must be
attempted before the Employment Tribunal will be prepared to accept the claim.
The Employment Tribunal can award unlimited compensation. Compensation is intended to put
the employee in the position they would have been in if the wrong had not occurred. Usually
the compensation in employment cases will be for financial loss (such as loss of earnings, loss
of promotion, or loss of bonus), but injury to feelings can also be included. The Tribunal can
also make declarations of the employee’s rights or make a recommendation that the employer

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must take specified steps for the purpose of obviating or reducing the adverse effect on the
employee of any matter to which the proceedings relate.

3.8 Barristers
Under s 47 Equality Act 2010 special provisions apply to barristers.
Barristers are protected from discrimination by members of chambers or clerks of chambers
_in which they are tenants or pupils. Those who have applied for tenancy or pupillage are also
protected.
Barristers are also protected from discriminatory treatment at the hands of the solicitors
instructing them. Section 47(6) provides that:
A person must not, in relation to instructing a barrister:
(a) discriminate against a barrister by subjecting the barrister to a detriment;
(b) harass the barrister;
(c) victimise the barrister.

3.9 Positive action

In certain circumstances the Act allows positive action to be taken in an attempt to address
the disadvantages suffered by those who share a protected characteristic. There is no
requirement for positive action to be taken; instead the Act provides that if such action is taken
it will not be unlawful. The point is that action taken to address the disadvantages suffered by
those who share a protected characteristic may result in less favourable treatment of those
who do not share that protected characteristic. However, if certain requirements are met the
positive action will be lawful.
Section 158 contains a general provision allowing positive action which will apply to solicitors
both as service providers and employers. There are two requirements which must be met for
the action to be considered lawful.
The first requirement is that the firm must reasonably think that:
* persons who share a protected characteristic suffer a disadvantage connected to the
characteristic; or
¢ persons who share a protected characteristic have needs that are different from the
needs of those who do not share it; or
* participation in an activity by persons who share a protected characteristic is
disproportionately low.
The firm must be able to show some basis for its belief, such as a survey of its clients or an
analysis of the make-up of its workforce.
The second requirement is that the action taken by the firm is a proportionate means of
achieving one of the following aims:
* enabling or encouraging persons who share the protected characteristic to overcome or
minimise that disadvantage; or-
* meeting those needs; or
* enabling or encouraging persons who share the protected characteristic to participate in
that activity.

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Positive action can take a variety of forms. It could include, for example, a firm tailoring some
of its services to meet the requirements of a particular group or providing specific training to
some of its employees.
A similar provision is contained in s 159 Equality Act 2010, but it is restricted to the areas of
recruitment and promotion. Section 159 applies where an employer reasonably thinks that
persons with a particular protected characteristic are disadvantaged or disproportionately
under-represented. In the context of recruitment and promotion, the employer can treat a
person with the protected characteristic more favourably than others who do not share that
protected characteristic. However, this is only permitted where the person with the relevant
characteristic is ‘as qualified as’ the others. Qualification in this context is not restricted to
having passed particular examinations, but instead relates to the overall suitability of the
individual for the job or promotion. In practice, it is said that an employer can make use of s
159 in a ‘tie-breaker’ situation.

© Example
A firm has a vacancy for a position as an assistant solicitor. The firm receives 20
applications and decides to draw up a shortlist of five applicants for interview. The first
four applicants are selected. For the fifth place there are two applicants of equal merit,
one of whom belongs to a particular ethnic group, the other applicant is not. The firm
has identified that individuals from this ethnic group are under-represented amongst its
qualified staff. To address this the firm gives the fifth shortlist place to the applicant from
the ethnic group.
The firm's action is lawful under s 159. The other applicant would not have any redress
under the Act.
Sections 158 and 159 are not intended to allow ‘positive discrimination’, which is the practice
of giving an advantage to groups which are often treated unfairly because of a protected
characteristic. For example, if in the above example the firm decided to shortlist all applicants
from the ethnic group irrespective of their suitability for the job, such action would be unlawful.

3.10 Overlap with professional conduct

Paragraph 7.1 of the SRA Code of Conduct for Solicitors, RELs and RFLs requires a solicitor to
keep up to date with and follow the law and regulation governing the way they work. ‘Law
and regulation’ in this context obviously includes the Equality Act 2010. The SRA therefore
expects those it regulates to be aware of and comply with their obligations under the Act.
Paragraph 7.1 places a personal responsibility on the individual, but firms should provide
appropriate training for its staff on the Act. This is good management and will also help the
firm to establish that it took steps to prevent discriminatory acts by its employees and thereby
avoid vicarious liability (see 3.6.2).
In many cases a failure to comply with the Act will of itself give rise to additional professional
conduct issues. Discriminatory acts, by their very nature, diminish trust and confidence in the
profession and therefore breach SRA Principle 2. A solicitor who fails to comply with the Act is
therefore likely to be subject to separate disciplinary action. The sanctions imposed may be
severe. The SRA Enforcement Strategy states:
We will also consider behaviour which harms an individual’s personal autonomy and
dignity and treat fundamental rights to privacy and non-discriminatory treatment as at
the higher end of seriousness, irrespective of any financial or other harm.
The Act establishes minimum legal requirements. However, solicitors are expected to do much
more than comply with the Act. Discrimination is also dealt with separately under both the SRA

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Code of Conduct for Solicitors, RELs and RFLs and the SRA Code of Conduct for Firms. Both
Codes start with the statement in Paragraph 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.
In part, Paragraph 1.1 reflects the prohibitions under the Act, but it also extends beyond the
Act. In Paragraph 1.1 the term ‘discrimination’ is not restricted to the meaning given to it under
the Act. So discriminatory behaviour which is not unlawful under the Act (for example because
it is not based on a protected characteristic or because it is based on a disability which does
‘not fall within the narrow definition in s 6) may nevertheless breach Paragraph 1.1 and result
in disciplinary action.
SRA Principle 6 requires a solicitor to act in a way that encourages equality, diversity and
inclusion. This clearly goes far beyond a direction not to discriminate. It places a positive
requirement on the solicitor to ensure that their actions encourage equality, diversity and
inclusion. These are wide and distinct concepts. In very simple terms:
Equality - treating people fairly
Diversity - encouraging and valuing people with a broad range of different
backgrounds, knowledge, skills, and experiences
Inclusion - acceptance and encouraging everyone to participate and contribute
Solicitors come into contact with a variety of people during their working day: clients, judiciary,
work colleagues, counsel, expert witnesses etc. Treating those people fairly, with dignity and
respect, is part and parcel of upholding the reputation of the profession. The Principle also
extends to a solicitor’s conduct outside practice. For example, a solicitor who, in a personal
capacity, expresses racist views on social media is likely to fall foul of Principle 6.
The importance the SRA places on Principle 6 is evident from its Guidance on Equality,
Diversity and Inclusion:
We expect you to take the necessary steps to run your business or carry out your role
in a way that encourages equality of opportunity and respect for diversity. We expect
you to be inclusive in your approach to everything you do.
Firms should put policies and procedures in place to further equality, diversity and inclusion.
Indeed, a failure to have such policies may in itself be a breach of Principle 6. Equality,
diversity and inclusion should be embedded in the culture of the firm and the attitudes of the
people that work within it.
The principles of equality, diversity and inclusion do not only direct how a solicitor should
interact with others; they also drive the development of the profession as a whole. The
SRA considers the development of a diverse profession to be a hugely important aspect
of its role. Indeed, one of the regulatory objectives set out in the Legal Services Act 2007 is
‘encouraging an independent, strong, diverse and effective legal profession’. The SRA expects
individual firms to play their part by, for example, monitoring, reporting and publishing data
on the diversity of its workforce (Paragraph 1.5 of the SRA Code of Conduct for Firms) and, if
necessary, putting measures in place to improve diversity.

Summary
¢ The following characteristics are protected under the Act:
° race
° religion and belief
° sex

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° sexual orientation
° age
° disability
° gender reassignment
° marriage/civil partnership
© pregnancy and maternity.
¢ The Act outlaws certain forms of discrimination including:
° direct discrimination
° indirect discrimination
° disability discrimination
° victimisation
° harassment.
¢ There is a duty to make reasonable adjustments for disabled people.
¢ Discrimination is outlawed in certain circumstances including in the provision of services
and the workplace.
¢ The Act overlaps with a solicitor’s professional conduct responsibilities.

Sample questions

Question 1
A secretary working in a firm of solicitors is subjected to a number of unwanted sexual
advances by a solicitor working in the same firm. The firm has never provided training for
its employees on the Equality Act 2010. The secretary makes a complaint to the firm’s senior
partner. The senior partner says that the firm was completely unaware of the solicitor’s
behaviour. The senior partner promises to speak to the solicitor in question and insist that
the behaviour stops. Despite this the solicitor continues to make sexual advances to the
secretary. In view of the solicitor’s behaviour the secretary is now contemplating making a
claim to the Employment Tribunal.
Which of the following best describes the likely outcome of such a claim?
A The solicitor’s behaviour will not be considered unlawful because it amounts to normal
workplace banter.
B The solicitor and the firm will be liable for harassment.

C_ The firm is not liable for the solicitor’s behaviour because it did not know about the
behaviour.

D The firm alone will be liable for harassment.

E The secretary will not be entitled to damages because they have not suffered any
financial loss.

Answer
Option B is correct. The solicitor’s behaviour amounts to harassment under the Act (option
A is wrong). The solicitor’s behaviour occurred in the course of their employment and so the
firm will also be vicariously liable even though the firm did not know about the behaviour;
accordingly, option C is wrong. It is highly unlikely that the firm will be able to show that it
took reasonable steps to prevent the behaviour because it had not provided training and its

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response to the complaint was inadequate. If the firm is found liable, the individual employee
cannot escape liability (option D is wrong). Finally, option E is wrong, as even though the
secretary has not suffered a financial loss, they may be awarded damages for injury to
feelings.
Question 2
A solicitor’s brother is going through an acrimonious divorce. The whole family is finding the
divorce proceedings very upsetting. One evening, having drunk a considerable amount of
alcohol, the solicitor goes onto social media and makes various sexist remarks about his
brother's wife. The solicitor’s firm is not acting in the divorce.

Which of the following best describes the repercussions of the solicitor’s actions under
the Equality Act 2010?
A The solicitor’s actions amount to direct discrimination.
B_ The solicitor’s actions amount to victimisation.

C_ The solicitor’s actions are not unlawful under the Equality Act 2010 and do not breach
the rules of professional conduct.
D_ The solicitor’s actions are not unlawful under the Equality Act 2010 but they are likely to
breach the rules of professional conduct.
E The solicitor’s actions amount to indirect discrimination.

Answer
Option D is correct. The Equality Act 2010 only makes discrimination unlawful in certain
contexts (eg in the provision of legal services and in the workplace). As the comments were
made outside those contexts they do not amount to unlawful discrimination under the Act. The
SRA Principles apply to a solicitor’s private life. Making sexist comments is likely to place the
solicitor in breach of Principle 2 and Principle 6.

Question 3
A client instructs a large commercial firm of solicitors in connection with a medical
negligence claim. At the first meeting the solicitor conducting the case hands the client a
standard leaflet explaining the firm’s complaints procedure. The client looks at the leaflet
for the first time later that day. The client, who has learning difficulties, contacts the firm and
asks to have the leaflet provided in ‘Easy Read’ format. The firm has not previously given
any consideration to the provision of information in an ‘Easy Read’ format. The client is told
that the firm does not produce its leaflets in ‘Easy Read’ format.
Which of the following best describes how the firm's duty to make reasonable
adjustments under the Equality Act 2010 applies in this situation?

A The firm has acted unlawfully in not providing the client with the leaflet in ‘Easy Read’
format at the initial interview.
B Now that the firm is aware of the client's disability, it must provide the client with the
leaflet in ‘Easy Read’ format without delay.
C Now that the firm is aware of the client's disability, it should provide the leaflet in ‘Easy
Read’ format at the client’s expense.

D It is not reasonable to expect the firm to provide the leaflet in ‘Easy Read’ format.
E The firm has not breached its duty under the Equality Act 2010 but is likely to be in
breach of its professional conduct obligations.

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Answer

Option A is correct. The duty to make reasonable adjustments in the context of the provision
of services is anticipatory. The firm should have anticipated the need for clients with some
disabilities to have the leaflet in ‘Easy Read’ format and to have had the leaflet produced
accordingly. The client's need for adjustments should have been established by the solicitor
at the first interview and the client given the leaflet in the correct format. Given the situation
that has arisen, the firm should provide a leaflet in the correct format without delay, but option
B is not the best answer because the firm’s duty had already arisen; it is not dependent on
knowledge of the client's disability. Option C is wrong as the cost of making adjustments
cannot be passed on to the disabled person. Given the size of the firm, the importance
of providing clients with information about complaints (Paragraph 8.3 of the SRA Code for
Solicitors, RELs and RFLs requires written information to be provided at the outset) and the
fact that the firm has chosen to present that information in leaflet form, it would not be
unreasonable to expect the firm to also produce the leaflet in ‘Easy Read’ format (accordingly,
option D is wrong). Finally, option E is not the best answer here. While the firm is likely to be
in breach of its professional conduct obligations (eg SRA Principle 6 and Paragraph 8.6 of the
SRA Code of Conduct for Solicitors, RELs and RFLs), it is also in breach of the requirements
under the Equality Act 2010.

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4 Financial Services

4.1 Introduction 42
4.2 Source materials 43
hi 4.5 Financial services regulatory structure 43
4.4 The general framework 44
-— The need for authority 44
4.6 Regulated activity 45
4.7 Exemption for professional firms - s 327 exemption 50
4.8 SRA Financial Services (Conduct of Business) Rules 52
4.9 Consumer credit activity 52
FS4.10 Insurance distribution ef
4.11. Financial Promotions Order (FPO) 2005 54

SQE1 syllabus
This chapter will enable you to achieve the SQE1 Assessment Specification in relation
to Functioning Legal Knowledge concerned with Legal Services:
¢ The regulatory role of the Solicitors Regulation Authority.
¢ Overriding legal obligations.
e The financial services regulatory framework, including authorisation and how it
applies to solicitors’ firms.
e Recognition of relevant financial services issues, including the identification of
specified investments, specified activities and relevant exemptions.
¢ Application of the Financial Services and Markets Act 2000 and related
secondary legislation to the work of a solicitor.
¢ Appropriate sources of information on financial services.
Note that for SQE1, candidates are not usually required to recall specific case
names or cite statutory or regulatory authorities. Cases are provided for illustrative
purposes only.

Learning outcomes
By the end of this chapter you will be able to apply relevant core legal principles
and rules appropriately and effectively, at the level of a competent newly qualified
solicitor in practice, to realistic client-based and ethical problems and situations in the
following areas:
e The structure of financial services regulation.
¢ The regulation of solicitors in carrying out financial services work.

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4.1 Introduction
The financial service industry comprises firms and individuals that advise on, sell and arrange
financial products and services. For most people it is an alien world and yet almost every
individual will be forced to engage with it at some point, for example when taking out an
insurance policy or becoming a member of a pension scheme. At these moments the customer
or consumer will be highly dependent on the expertise of others in making the right financial
decisions. For the customer or consumer the stakes are high: the wrong financial product or
the wrong decision could spell financial ruin. It is therefore not surprising that the provision of
financial services is highly controlled and regulated with the basic aim of ensuring that such
services are provided properly by those appropriately qualified to do so.
Financial services work is not mainstream for most solicitors. However, a solicitor may engage
in such work from time to time, for example:

(a) in conveyancing, if a client needs help in finding a mortgage and a supporting package,
which could include a life insurance policy;
(b) in probate, when the executors sell off the deceased's assets;
(c) in litigation, if helping a successful client to invest damages just won;
(d) in company work, in making arrangements for a client to buy or sell shares in a company,
and also in arranging corporate finance;
(e) in family work, if arrangements have to be made on a divorce in respect of endowment
life policies and/or a family business;
(f) in tax planning or portfolio management, for a private client including trustees.
Before undertaking any financial services work a solicitor should first consider their
professional conduct obligations. Under SRA Principle 7, a solicitor must act in the client's best
interests. A solicitor cannot act in the client’s best interests unless the solicitor is competent
to act in the area concerned. Additionally, Paragraph 3.2 of the SRA Code of Conduct for
Solicitors, RELs and RFLs provides that the service provided by a solicitor must be competent.
Therefore, a solicitor should not undertake financial services work unless the solicitor has
sufficient expertise in that field.
Even if possessing sufficient expertise, a solicitor will be subject to the same legislation that
applies throughout the financial sector and so will also have to consider what that legislation
permits them to do. Many activities in connection with investments are subject to regulation
under the Financial Services and Markets Act 2000 (FSMA 2000) and, for example, to give
advice on these, or even to make arrangements for clients to acquire or dispose of them, may
require the solicitor to be authorised to carry out that activity. To do this without authority could
involve the commission of a criminal offence. Therefore, when handling a matter in which
investments are involved, even if only peripherally, a solicitor needs to take great care before
advising and assisting such clients.
This chapter looks at:
¢ source materials
e financial services regulatory structure
¢ the retention and storage of accounting records
e the general framework
e the need for authority
¢ regulated activity
* exemption for professional firms
¢ SRA Financial Services (Conduct of Business) Rules

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* consumer credit activity

¢ insurance distribution

* financial promotions

4.2 Source materials

The main piece of legislation in this area is FSMA 2000. However, the Act itself provides only a
general framework, and the detail is in secondary legislation (mainly Orders in Council made
by the Treasury), for example:
(a) Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001/544
(RAO 2001);
(b) Financial Services and Markets Act 2000 (Professions) (Non-Exempt Activities) Order 2001,
S| 2001/1227;
(c) Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, SI 2005/1529
(FPO 2005);
(d) Financial Services and Markets Act 2000 (Prudential Regulation Authority-regulated
Activities) Order 2013, S| 2013/556.
Materials on financial services work include:

(a) the SRA Financial Services (Scope) Rules (Scope Rules);

(b) the SRA Financial Services (Conduct of Business) Rules (COB Rules).

4.3 Financial services regulatory structure

The regulation of financial services is mainly in the hands of two bodies established under
the Financial Services Act 2012: the Financial Conduct Authority and the Prudential Regulation
Authority. In addition the Financial Policy Committee (a committee of the Bank of England) is
responsible for monitoring the stability of the whole UK financial system.

4.3.1 The Financial Conduct Authority (FCA)

The FCA undertakes market regulatory functions, including responsibility for the conduct of
business regulation of all firms (such as solicitors’ firms), including dual-regulated firms, and for
the prudential regulation of firms (ie their safety and soundness) not regulated by the Prudential
Regulation Authority (known as FCA-authorised or FCA-only firms). The FCA is also responsible
for the regulation of consumer credit and second charge mortgages secured over property.
The FCA is set the following objectives in FSMA 2000:
(a) securing an appropriate degree of protection for consumers (the consumer protection
objective);
(b) protecting and enhancing the integrity of the UK financial system (the integrity objective);
(c) promoting effective competition in the interests of consumers in the market, including for
regulated financial services (the competition objective).
The FCA’s powers extend to being able to require firms to withdraw or amend misleading
financial promotions with immediate effect and to block the launch of, or stop, a service or
product.
The FCA also has a role relating to the regulation and supervision of the London Interbank
Offered Rate (LIBOR), an internationally recognised interest rate benchmark used to set a
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range of financial transactions. The FCA undertaking this role was against a background of
widespread concerns about the operation of LIBOR amongst regulators and users of LIBOR,
including attempts to manipulate it. LIBOR is now a ‘specified benchmark’ for the purposes
of two regulated activities in the RAO 2001, namely providing information in relation to, and
administering, a specified benchmark. The manipulation of a specified benchmark is also a
criminal offence under the Financial Services Act 2012.

4.3.2 The Prudential Regulation Authority (PRA)

The PRA is a subsidiary of the Bank of England and is responsible for the authorisation,
prudential regulation and general supervision of those firms which manage significant
financial risks, namely banks, building societies, insurers, credit unions, certain investment
firms and Lloyd’s of London. These firms are known as PRA-authorised firms or dual-regulated
firms, as they will also be regulated by the FCA for conduct purposes.
The Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 sets out
which regulated activities in the RAO 2001 are PRA-regulated activities, and any firm with
permission to carry out such activities will be designated a PRA-authorised firm. The activities
include accepting deposits, effecting a contract of insurance and dealing with investments as
principal.

4.4 The general framework

Businesses carrying on certain activities, known as ‘regulated activities’, will need to be
authorised by the appropriate regulator, which in the case of a solicitors’ firm will be the
FCA. FSMA 2000 contains a special provision for professional firms which do not carry out
‘mainstream’ investment business but may carry out a regulated activity in the course of
carrying out their professional work, such as corporate work. If certain conditions are satisfied,
such a firm will be exempt from having to obtain authority from the FCA, provided it is
regulated and supervised by a professional body designated by the Treasury (a designated
professional body or ‘DPB’). The SRA is a DPB for these purposes.

4.5 The need for authority

There are two main restrictions of most relevance to solicitors:

(a) carrying out a regulated activity (the general prohibition);

(b) making a financial promotion (the financial promotion prohibition).

4.5.1 The general prohibition

Section 19 FSMA 2000 provides that: ‘No person may carry on a regulated activity in the UK
unless authorised or exempt.’
Authorised persons are persons with permission granted by the appropriate regulator (the
FCA) under FSMA 2000.
Carrying out a regulated activity without authorisation or exemption is a criminal offence
_.under s 23 FSMA 2000. The penalty on conviction is up to two years’ imprisonment or unlimited
fine. Breach of s 19 may also render unenforceable any resulting agreement which has as a
party to it the person who contravened s 19, or made with an authorised person carrying on a
regulated activity.
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4.5.2 The financial promotion prohibition

Under s 21 FSMA 2000 an unauthorised person cannot engage in a financial promotion. It is a
criminal offence under s 25 FSMA 2000 to make an unauthorised financial promotion.

4.6 Regulated activity

Under s 22 FSMA 2000 a regulated activity is defined as an activity of a specified kind that is
carried on by way of business and relates to a specified investment or property of any kind.
Hidden within this definition are a number of tests.

4.6.1 The four tests

In order to determine if an activity is regulated there are four tests:
(a) Are you in business?
(b) Is there a specified investment (see 4.6.3), or does the specified activity relate to
information about a person's financial standing or the setting of a specified benchmark?
(c) Is there a specified activity (see 4.6.4)?
(d) Is there an exclusion (see 4.6.5)?
The particular activities and investments are specified by the Treasury in the RAO 2001.
Information about a person's financial standing includes providing, or advising upon, credit
reference and credit information services (FSMA 2000, Sch 2). The term ‘benchmark’ is defined
in s 22(6) FSMA 2000. Benchmarks are also ‘specified’ in RAO 2001 and include, for example,
LIBOR (see 4.3.1).

4.6.2 The business test

To qualify as a regulated activity it must be carried on by way of business. Whilst at the

margins determining whether a person is ‘in business’ may be a complex issue, in the vast
majority of cases it will be obvious. A solicitor giving advice etc in that capacity as part of
their practice will be ‘in business’.

4.6.3 Specified investments

A specified investment is one specified as such in RAO 2001. The qualifying criteria for each
type of investment are detailed, but broadly specified investments include:
(a) company stocks and shares (but not shares in the share capital of open-ended investment
companies (OEICs) or building societies incorporated in the UK);
(b) debentures, loan stock and bonds;
(c) government securities, such as gilts;
(d) OEICs. These are similar to unit trusts, but use the structure of a company rather than
a trust;
(e) insurance contracts (including life policies and annuities); _-
(f) regulated mortgage contracts (most residential mortgages);
(g) home reversion/home purchase plans (the former enables a homeowner to sell the
whole or a proportion of their property to a finance provider in order to raise funds, and
then become a tenant of the property, whilst the latter serves the same purpose as a
mortgage but is structured in a way that is compliant with Islamic law);
(h) deposits (these would include cash ISAs and sums of money held in bank or building
society accounts). However, the only specified activity relating to these investments is

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‘accepting deposits’, which is mainly carried out by banks and building societies. The
main specified investment activities set out in 4.6.4 do not apply to deposits. Sums
received by solicitors acting in the course of their business are exempt under RAO 2001;
(i) credit agreements (an agreement whereby a solicitor allows a client time to pay is
exempt provided that the number of repayments does not exceed 12, the payment term
does not exceed 12 months and the credit is provided without interest or other charges).
Investments that will not be relevant include:

(a) interests in land;

(b) certain National Savings products.

4.6.4 Specified investment activities

A specified activity is one specified as such in RAO 2001. In relation to specified investments,
these include (but are not limited to):
(a) dealing as agent;
(b) arranging;
(c) managing;
(d) safeguarding;
(e) advising;
(f) lending money on/administering a regulated mortgage contract.
There are also specified activities that are very particular in their scope, such as establishing,
operating or winding up a collective investment scheme or personal pension scheme.

4.6.4.1 Dealing as agent

This involves buying, selling, subscribing for or underwriting the investments when a solicitor is
dealing on behalf of a client (ie rather than on the solicitor’s own account) and commits that
client to transactions. For example, selling shares on behalf of a client pursuant to a financial
order made on divorce.

4.6.4.2 Arranging
Solicitors will have many clients whose transactions involve investments (eg endowment
policies in conveyancing, unit trusts and shares in probate). The solicitor will very often
be involved as the contact between the client and the life company, or the client and the
stockbroker. It is in this context that the solicitor may be ‘arranging’.

4.6.4.3 Managing
Managing requires active participation beyond the mere holding of investments and applies
only to ‘discretionary management’ (ie involving the exercise of discretion). This investment
activity will be most common in firms that undertake probate and trust work, where the
solicitor is acting as trustee or personal representative (PR).

4.6.4.4 Safeguarding
This involves safeguarding and administering investments belonging to a client. This is also
particularly relevant for firms which undertake probate and trust work.

4.6.4.5 Advising
This involves giving advice to a person in their capacity as an investor on the merits of buying,
selling, subscribing for, or underwriting an investment. Advice must be about a specific
investment; generic advice is outside the scope of FSMA 2000. Therefore a solicitor can, if

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they have the knowledge, advise a client on the respective merits of investing in shares rather
than making a deposit with a bank, but if the solicitor advises the client to buy shares in a
particular company, say Tesco, this will be a regulated activity.

o Example
Hiran, a solicitor, has recently managed to secure a large settlement for his client,
Bethany, in respect of a recent litigation matter. Bethany tells Hiran that she wishes to
invest the settlement money in buying shares in a local company, and asks Hiran which
company she should invest in.
Referring to the four-stage test, Bethany is seeking Hiran’s advice in his capacity as a
solicitor, so Hiran is ‘in business’. Shares are a specified investment, and Hiran has been
asked to advise on the purchase of these shares - advising is a specified investment
activity. Therefore if Hiran gives this advice he will breach the ‘general prohibition’ under
s 19 FSMA 2000, which is a criminal offence, unless Hiran can take advantage of an
exclusion or exemption (see below).

4.6.5 Exclusions

There are various exclusions set out in RAO 2001. The effect of an exclusion is that an act
which would otherwise be a regulated activity is no longer regarded as such. If an exclusion
applies to a particular activity a solicitor is carrying out, the solicitor does not need to be
authorised for that particular transaction. Those exclusions likely to be relevant to solicitors
include:
(a) introducing;
(b) using an Authorised Third Party;
(c) acting for an execution-only client;
(d) acting as trustee or personal representative;
(e) the ‘professional/necessary’ exclusion;
(f) the ‘takeover’ exclusion.
Each exclusion is only applicable to certain of the specified activities.

4.6.5.1 Introducing
This exclusion only applies to the activity of arranging. For the exclusion to apply the solicitor
must simply introduce the client to an authorised person and then have no further role in
this aspect of the client’s matter. If the solicitor retains any ongoing role, such as acting as a
means of communication between the client and the authorised person, then the exclusion
cannot be relied upon.
This exclusion will not apply if the transaction relates to an insurance contract.

4.6.5.2 Authorised third persons - the ATP exclusion

This exclusion applies to the activities of dealing as agent and arranging.
The exclusion applies where the transaction is to be entered into based on the advice of
an ATP, ie a person authorised by the FCA. Here the solicitor retains an ongoing role in the
transaction, but it is clear that the financial advice is being provided by the ATP.
A solicitor cannot rely on this exclusion if the solicitor receives from any person other than
the client any pecuniary reward (eg commission) or other advantage arising out of the client
entering into the transaction, for which the solicitor does not account to the client.
This exclusion will not apply if the transaction relates to an insurance contract.

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Although this exclusion does not apply to advising, the practical result of using an ATP is that
a solicitor will not be engaged in the activity of advising. The advice is being provided by the
ATP, not by the solicitor.

4.6.5.3 The execution-only client exclusion

This exclusion applies to the activities of dealing as agent and arranging.
There is an exclusion similar to the ATP exclusion. However, rather than the positive
requirement that the transaction is entered into on the advice of the ATP, the requirement here
is negative - ie advice has not been sought from the solicitor.
This exclusion applies where the client, in their capacity as an investor, is not seeking and
has not sought advice from the solicitor as to the merits of the client’s entering into the
transaction (or, if the client has sought such advice, the solicitor has declined to give it but has
recommended that the client seek such advice from an authorised person).
There is the same restriction in respect of commissions and contracts of insurance.

4.6.5.4 Trustees or personal representatives

This exclusion applies to arranging, managing, safeguarding and advising fellow trustees
and/or beneficiaries. It also applies to lending money on, or administering, a regulated
mortgage contract.
This exclusion has limitations. It is available to a solicitor acting as a trustee or PR, and not to
a solicitor acting fora trustee or PR. However, the exclusion does apply if a member of the
firm is a trustee or PR but the activity is actually carried out by other members of the firm. The
exclusion does not apply if the solicitor is remunerated for what the solicitor does ‘in addition
to any remuneration he receives as trustee or personal representative, and for these purposes
a person is not to be regarded as receiving additional remuneration merely because his
remuneration is calculated by reference to time spent’. For managing and safeguarding, the
exclusion is also not available if the solicitor holds themselves out as providing a service
comprising managing or safeguarding.
The Law Society’s guidance provides that this exclusion will not apply to contracts of
insurance. It also does not apply to taking up or pursuing insurance distribution (see 4.10).

4.6.5.5 Activities carried on in the course of a profession or non-investment business - the

‘professional/necessary’ exclusion
This applies to advising, arranging, safeguarding and dealing as agent.
There is an exclusion if the activity is performed in the course of carrying on any profession or
business and may reasonably be regarded as a necessary part of other services provided in
the course of that profession or business, ie where it is not possible for the other services to
be provided unless the regulated activity is also provided. Examples of where this exclusion
may apply include: when acting on the acquisition of a company, giving advice on the merits
of buying it and arranging for the acquisition of its shares; or, in probate work, arranging for
the sale of all of the assets to pay Inheritance Tax.
However, the exclusion does not apply if the activity is remunerated separately from the other
services. Further, as a result of the Insurance Distribution Directive (2016/97/EC), if the activity
consists of taking up or pursuing insurance distribution (see Chapter 5), this exclusion is not
available.

4.6.5.6 Activities carried on in connection with the sale of a body corporate - the takeover exclusion
(or body corporate exclusion)
This exclusion applies to arranging, advising and dealing as agent.

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The exclusion will apply to a transaction to acquire or dispose of shares in a body corporate
(other than an OEIC), or for a transaction entered into for the purposes of such an acquisition
or disposal, if:
(a) the shares consist of or include 50% or more of the voting shares in the body
_ corporate; and
(b) the acquisition or disposal is between parties each of whom is a body corporate, a
partnership, a single individual or a group of connected individuals.
It is possible to add the number of shares being acquired by a person to those already held
by him in order to determine whether the 50% limit has been achieved. A ‘group of connected
individuals’ is a single group of people, each of whom is or will be a director or manager of
the company being sold, or a close relative of any such director or manager, or person acting
as trustee for any of the above persons.
Even if the above criteria are not met, eg the number of shares acquired is less than 50%,
but the object of the transaction may nevertheless reasonably be regarded as being the
acquisition of day-to-day control of the affairs of the body corporate, the exclusion still applies.
This is an extremely valuable exclusion for the corporate department where a client is seeking
to take over, or sell its interest in, a company, whether public or private.
This exclusion does not apply to advising on, arranging, or dealing as an agent in respect of
buying or selling contracts of insurance.

4.6.5.7 Summary table

The table below summarises the specified investment activities to which the exclusions apply.

Specified activity Applicable exclusions

Dealing as agent e ATP

e Execution-only
e Professional/necessary
¢ Takeover

Arranging e Introducing
e ATP
¢ Execution-only
e Professional/necessary
e Acting as trustee/PR
e Takeover

Advising ¢ Professional/necessary
¢ Acting as trustee/PR
¢ Takeover

Managing ¢ Acting as trustee/PR

Safeguarding ° Professional/necessary
¢ Acting as trustee/PR

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@ Example
Natalie is a solicitor. Natalie is approached by Byron, who owns 100% of the share capital
in Merron Ltd. Byron wishes to sell 75% of these shares to his son.

Referring to the four tests, Byron is seeking Natalie’s advice and assistance in her capacity
as a solicitor, so Natalie is ‘in business’. Shares are a specified investment, and in dealing
with the matter Natalie will be carrying out specified investment activities (eg advising
and arranging). Therefore, Natalie will need to rely on an exclusion or exemption to avoid
breaching s 19 FSMA 2000 and committing a criminal offence.
Here the transaction concerns the transfer of more than 50% of Merron Ltd, and so she
can rely on the takeover exclusion. Therefore Natalie may complete this work without
breaching the general prohibition.

4.7 Exemption for professional firms -— s 327 exemption

Under s 327, professional firms are able to carry out certain regulated activities provided
certain conditions are met. There is an exemption from having to obtain authority from the
FCA where the firm is regulated and supervised by a designated professional body (a DPB),
such as the SRA.
The exemption is very important for solicitors. The majority of solicitors’ firms are not
authorised by the FCA. Therefore, in order to engage in financial services work most solicitors
will have to be able to rely on the exemption.
The exemption makes a special provision for firms that do not carry out mainstream financial
services but which undertake regulated activities in the course of other work, eg conveyancing,
personal injury and trust work. The effect is that firms authorised by the SRA can carry out
certain regulated activities (exempt regulated activities) without being regulated by the FCA if
the firm can meet the conditions in s 327 FSMA 2000.
Under s 327, the general prohibition in s 19 FSMA 2000 will not apply to a regulated activity
carried on by a firm of solicitors if the following conditions are met:
(a) the firm must not receive from a person other than its client any pecuniary or other
advantage arising out of the activity for which it does not account to its client;
(b) the manner of providing ‘any service in the course of carrying on the activities must be
incidental to the provision’ by the firm of professional services, ie services regulated by
the SRA;
(c) the firm must carry out only regulated activities permitted by the DPB;
(d) the activities must not be prohibited by an order made by the Treasury, or any direction
made by the FCA under s 328 or s 329;
(e) the firm must not carry on any other regulated activities.

‘Pecuniary or other advantage’

If the firm wishes to take advantage of the s 327 exemption then it must account for any
such pecuniary advantage to its client. This is mirrored by Paragraph 4.1 of the SRA Code of
Conduct for Solicitors, RELs and RFLs and Paragraph 5.1 of the SRA Code of Conduct for Firms.

‘Incidental’
There are two ‘incidental’ tests: a specific test and a general test.
The ‘specific’ test relates to the particular client concerned. Under the SRA Financial Services
(Scope) Rules, the relevant regulated activity must arise out of, or be complementary to,

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the provision of a particular professional service to a particular client. The firm could not,
therefore, carry out a regulated activity in isolation for a client; the relevant regulated activity
must ‘arise out of’ or be ‘complementary to’ some other service being provided by it. This
other service must not be a regulated activity but must be a ‘professional’, ie legal, service
(eg in corporate work, giving legal advice, drafting documents or dealing with a regulatory
matter; or in probate work, winding up the estate or giving tax advice). It follows that the
professional service being provided to the client should be the primary service, and the
regulated activity should be ‘incidental’ or ‘subordinate’ to the provision of the professional
service. Note also that both the professional service and the regulated activity must be
supplied to the same person. Therefore, in a probate matter, where the probate client is the
executor, advice to a beneficiary under the will would not satisfy this test.
To satisfy the ‘general’ test of being incidental, the activities carried out by the firm which
would otherwise be regulated cannot be a mgjor part of the firm’s activities. For example, a
firm will be ineligible if its income from investment business is half or more of its total income.
Further factors are:
(a) the scale of regulated activity in proportion to other professional services provided;
(6) whether and to what extent the exempt regulated activities are held out as separate
services; and
(c) the impression given of how the firm provides those activities, for example through
advertising its services.

4.7.3 Permitted regulated activities only

In its regulatory role the SRA has published the SRA Financial Services (Scope) Rules and the
SRA Conduct of Business (COB) Rules. Firms must comply with the requirements prescribed by
these rules at all times when seeking to use this exemption.
The Scope Rules set out the scope of the activities that firms can carry out under the
professional exemption. For example:
(a) A solicitor or firm must not carry on any activity that is specified in an order made by the
Treasury under s 327(6) FSMA 2000. Examples of such activities include recommending
to a client to dispose of any rights the client has under a personal pension scheme and
advising a client to become a member of a particular Lloyd’s syndicate. Further prohibited
activities are set out in the Scope Rules themselves, such as creating or underwriting a
contract of insurance.
(b) if a firm wishes to undertake insurance distribution activities (see 4.10), it must notify the
SRA, be registered in the Financial Services Register and have appointed an insurance
distribution officer who will be responsible for such activities.
(c) There are further restrictions in the context of corporate finance and credit-related
regulated financial services activities.

4.7.4 Not prohibited

The Treasury has set out, in FSMA 2000 (Professions) (Non-Exempt Activities) Order 2001, a
list of activities that cannot be provided by professional firms under the s 327 exemption. The
activities that are most relevant to solicitors are incorporated into the Scope Rules.
The FCA also has power, under s 328, to issue directions limiting the application of the exemption
in respect of different classes of persons or different descriptions of regulated activities.

4.7.5 No other regulated activities

The s 327 exemption cannot be used by firms which are authorised by the FCA. For example,
a firm could be authorised by the FCA concerning defined regulated activities. Such a firm
could not use s 327 for any other ‘non-mainstream’ regulated activities.

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4.8 SRA Financial Services (Conduct of Business) Rules

The COB Rules regulate the way in which a firm may undertake financial services under the
professional exemption. The COB Rules apply only when the firm is carrying out an exempt
regulated activity; they do not apply if the firm is not carrying out a regulated activity at all.

4.8.1 Status disclosure (Rules 2.1 and 2.2)

A firm must provide clients with certain information concerning the status of the firm. For
example, the firm must confirm to the client that it is not authorised by the FCA, and explain
that complaints and redress mechanisms are provided through the SRA and the Legal
Ombudsman. Any information that is provided under these rules must be given in a manner
that is clear, fair and not misleading.

4.8.2 Best execution (Rule 3.1)

A solicitor must act in the best interests of the client (SRA Principle 7). Therefore, the firm must
carry out transactions for clients as soon as possible unless it reasonably believes that it is in
the client’s best interest not to.

4.8.3 Transactions (Rules 4.1 and 4.2)

The firm must keep records of:
(a) instructions from clients to carry out transactions; and
(b) instructions to third parties to carry them out.

4.8.4 Commissions (Rule 5.1)

The firm must keep records of commissions received in respect of regulated activities and how
those commissions were dealt with.

4.8.5 Execution-only clients (Rule 7.1)

Where a firm acts for an execution-only client (see 4.6.5.3) and the investment concerned
is a retail investment product (eg life policies, unit trusts, stakeholder and personal pension
schemes), it must send a letter to the client confirming that the client is not relying on the
advice of the solicitor, and the firm must keep a copy of this letter.
This rule would apply, for example, when the packaged retail investment product is a contract
of insurance. Here the ‘execution only’ exclusion would not apply, and therefore the solicitor
would have to rely on the exemption for professional firms (see 4.7) (and therefore comply
with the COB Rules).

4.8.6 Insurance distribution activities (COB Rules, Part 3)

There are stringent requirements which must be met when any insurance distribution
activities are carried out. For example, all information about insurance distribution must be
communicated to clients in a way that is clear, fair and not misleading, and information on the
nature of the remuneration received in relation to a contract of insurance must be provided to
the client before the conclusion of the initial contract.

49 Consumer credit activity

Consumer credit activity (for example, credit brokerage, debt collecting under a consumer
credit or hire agreement, debt advice and debt management or administration) is a relatively
new type of regulated activity for the purposes of s 22 FSMA 2000. The activities (known as

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credit-related regulated financial services activities) are set out in Part 2 and Part 3A RAO
2001. Accordingly, solicitors carrying out such activities will need to be authorised by the FCA
to carry out this business, or ensure that the activities fall within the s 327 exemption (see 4.7).
Representing a client in a litigation matter which has arisen from a consumer credit or hire
agreement is not a credit-related activity for these purposes.
A solicitor could be carrying out a credit-related activity by virtue of the way in which the
solicitor accepts the payment of their fees, including allowing a client time to pay. However,
such an arrangement will be regarded as an exempt agreement under RAO 2001 if all of the
following conditions apply:
(a) the number of repayments does not exceed 12;
(6) the payment term does not exceed 12 months; and
(c) the credit is provided without interest or other charges.
In most other cases, such arrangements are likely to be covered by the s 327 exemption (in
which case Part 4 of the COB Rules will apply).

4.10 Insurance distribution

The definition of ‘insurance distribution’ in RAO 2001 includes:
The activities of advising on, proposing or carrying out other work preparatory to the
conclusion of contracts of insurance, of concluding such contracts, or of assisting in the
administration and performance of such contracts, in particular in the event of a claim ...
‘Contracts of insurance’ are defined widely, and include life policies (eg endowment policies),
car insurance, buildings and contents insurance, defective title insurance, after-the-event legal
insurance and annuities.
Rights under contracts of insurance are specified investments (see 4.6.3), and in addition
to the specified investment activities discussed in 4.6.4, there are other specified activities
set out in the RAO 2001 which specifically cover insurance contracts, such as assisting in the
administration and performance of a contract of insurance. Law firms carrying out probate,
property and personal injury work are most likely to be involved in such activities. Whatever the
type of contract of insurance involved, if a solicitor assists a client in obtaining one, even if all
the solicitor does is to introduce the client to an insurance broker, the solicitor will be carrying
out a specified activity. Similarly, if a solicitor is involved in an insurance claim against an
insurance company, this will also be caught. All of these activities involve insurance distribution.
There is a detailed definition of ‘insurance distribution activity’ in the SRA Glossary.
Given that the main exclusions will almost certainly not apply to insurance distribution, the
firm will have to rely on the s 327 exemption (see 4.7), seek authorisation from the FCA, or rely
on the limited exceptions available for insurance distribution activities (which are beyond the
scope of this manual).

© Example
Franklin, a solicitor, is acting for Sanjay on purchasing a commercial property. Sanjay
needs to obtain defective title insurance. Franklin is to arrange this for Sanjay.
Using the four tests, Franklin is providing this service to Sanjay in his capacity as a solicitor
and so he is ‘in business’. Contracts of insurance are a specified investment and arranging
is a specified investment activity. Therefore Franklin needs to rely on an exclusion or
exemption to avoid breaching s 19 FSMA 2000 and committing a criminal offence.
However, none of the exclusions will apply here. Therefore, in order to arrange the
insurance, Franklin must use the s 327 exemption. Here, arranging the insurance is

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incidental to Franklin dealing with the property transaction. If Franklin’s firm can comply
with the other conditions outlined above (eg the COB and Scope Rules) then Franklin will
be able to arrange the defective title insurance without breaching the general prohibition.

4.11 Financial Promotions Order (FPO) 2005

4.11.1 The prohibition
Section 21 FSMA 2000 provides that a solicitor who is not authorised by the FCA will be
unable to make a financial promotion (ie ‘communicate an invitation or inducement to engage
in investment activity’) unless its contents are approved by an authorised person. The structure
of the definitions is similar to that for regulated activities, with the Treasury having power by
order to specify which investments and activities are ‘controlled’. Broadly, the definitions are
much the same, although not quite identical.
The result is that almost the same tests as for regulated activities can be applied, namely:
(a) Are you in business?
(b) Are you making an invitation or inducement?
(c) In connection with an investment?
(d) In connection with an investment activity?
However, the ‘exclusion’ test is not applicable. Therefore, although a solicitor may be carrying
out an activity which is not regulated, it may be ‘controlled’ and subject to the restrictions
on financial promotions. The result is that almost anything a solicitor may say or write in
connection with many transactions could be construed as a financial promotion. Therefore
if a solicitor advises PRs to sell the deceased’s assets, this could be an invitation to deal in
investments if, for example, the estate included shares or gilts.
All communications are caught, both real-time and non-real-time. A real-time communication
is any communication made in the course of a personal visit, telephone conversation or
other interactive dialogue. A non-real-time communication is any other communication,
eg letters, e-mails or brochures. Therefore communications to the other side (eg letters)
and communications to advisers (eg a fax to a broker) are included just as much as
communications to clients.
A real-time communication is ‘solicited’ where it is made in the course of a personal visit,
telephone call or other interactive dialogue, if that call, visit or dialogue:
(a) was initiated by the recipient (eg the client) of the communication; or
(b) takes place in response to an express request from the recipient of the communication
(FPO 2005, art 8).

4.11.2 Exemptions
There are some exemptions set out in the FPO 2005. Many of these are in terms similar to the
exclusions for regulated activities. These include:
(a) trustees and PRs (FPO 2005, arts 53/54);
(b) takeover of body corporate (FPO 2005, art 62).

4.11.3 Exemption for exempt professional firms

There are two exemptions designed specifically for firms claiming the special exemption
under the FSMA 2000 for exempt regulated activities. These deal with real-time and non-real-
time promotions.

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ca ra Real-time promotions (FPO 2005, art 55)

A solicitor who carries on exempt regulated activities may make a real-time promotion, for
example during a meeting or a telephone conversation:
(a) if made to a client who has, prior to the communication being made, engaged the
solicitor to provide professional services; and
(6) where the controlled activity to which the communication relates is exempt because of
the exemption for professional firms, or is excluded from being a regulated activity by the
‘necessary’ exclusion; and
(c) where the controlled activity to which the communication relates would be undertaken for
the purposes of, and be incidental to, the provision of professional services to or at the
request of the client.
The effect is that if the activity is excluded from being a regulated activity by an exclusion
other than the ‘necessary’ exclusion, art 55 does not apply.

4.11.3.2 Non-real time promotions (FPO 2005, art 55A)

This applies to letters, e-mails, brochures, websites etc, where the solicitor carries on exempt
regulated activities, provided the promotion contains certain specific statements.

4.11.4 One-off promotions (FPO 2005, arts 28/28A)

One-off, non-real-time communications and solicited real-time communications are exempt
under the FPO 2005, art 28 if certain conditions are satisfied. Basically the communication
must be one that is personal to the client.
One-off, unsolicited real-time communications are exempt under art 28A, provided the solicitor
believes on reasonable grounds:
(a) that the client understands the risks associated with engaging in the investment activity to
which the financial promotion relates; and
(b) that, at the time of the communication, the client would expect to be contacted by the
solicitor in relation to that investment activity.

4.11.5 Introducers (FPO 2005, art 15)

A solicitor may make any real-time communication in order to introduce a client to an ATP,
provided:
(a) the solicitor is not connected to (eg a close relative of) the ATP;
(b) the solicitor does not receive other than from the client any pecuniary reward or other
advantage arising out of making the introduction; and
(c) the client is not seeking and has not sought advice from the solicitor as to the merits
of engaging in investment activity (or, if the client has sought such advice, the solicitor
has declined to give it, but has recommended that the client seeks such advice from an
authorised person).

Summary
Regulated activity
In order to determine if an activity is regulated there are four tests:
¢ Are you in business?
e Is there a specified investment?

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¢ Is there a specified investment activity (or an activity related to information about a

person’s financial standing or the setting of a specified benchmark)?
e ls there an exclusion?

Specified investments
These include:
* shares (but not shares in the share capital of an open-ended investment company or
building society incorporated in the UK);
¢ debentures;
° gilts;
e¢ unit trusts and OEICs;
¢ contract of insurance;
* regulated mortgages;
e¢ home reversion/home purchase plans;
¢ deposits.
Investments that will not be relevant include:
¢ interests in land;
¢ National Savings products.

Specified investment activities

These include:
* dealing as agent;
* arranging;
* managing;
¢ safeguarding;
¢ advising.

Exclusions
These include:
¢ introducing;
Alp:
¢ —execution-only;
e trustee/PR;
¢ professional/necessary;
e takeover.

Exempt regulated activities

A firm not authorised by the FCA should pay attention to:
e FSMA 2000;
¢ RAO 2001;

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* any rules made by the FCA;

¢ SRA Scope Rules.
Conditions set out in the FSMA 2000, the RAO 2001 and the Scope Rules overlap.
The main conditions for claiming the s 327 exemption are:
the activity must arise out of, or be complementary to, the provision of a particular
professional service to a particular client;
¢ the manner of provision by the firm of any service in the course of carrying out the
activities is incidental to the provision by the firm of professional services;
¢ the firm must account to the client for any reward or other advantage which the firm
receives from a third party;
¢ the Scope Rules do not prohibit the firm using the exemption.
Most credit-related regulated financial services activities and insurance distribution carried out
by firms are likely to be carried out under the s 327 exemption.

Conduct of Business Rules

The SRA COB Rules apply only when the firm is carrying out an exempt regulated activity; they
do not apply if the firm is not carrying out a regulated activity at all.
The SRA COB Rules cover:

¢ best execution;
e records of transactions;
¢ records of commissions;
e letters to execution-only clients;
e insurance distribution activities;
* credit-related regulated financial services activities.

Financial promotions
There are four questions:
e Are you in business?
¢ Do you make an invitation or inducement?
* is there a specified investment?
e ls there a specified investment activity?
There are two special exemptions for professional firms:
e real-time promotions;
* non-real-time promotions.
Other exemptions include:
* one-off promotions;
e jntroducers;
e trustees, PRs;
e takeover of body corporate.

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Sample questions

Question 1
A solicitor acts for a client who is a director of a private limited company. The client also
owns 60% of the share capital in the company. The client intends to retire and plans to sell
the entire shareholding to a fellow director of the company. The client asks the solicitor to
advise on the sale and to prepare and negotiate all the necessary documentation. The
solicitor’s firm is not authorised by the Financial Conduct Authority to carry out regulated
activities under the Financial Services and Markets Act 2000.
Which of the following best explains why the solicitor is likely to be able to advise and
act as the client requests?
A Because shares in private companies are not specified investments.
B Because the solicitor would not be carrying out a specified investment activity.
C_ Because the solicitor can rely on the exemption for professional firms.
D Because the solicitor would be giving generic advice.
E Because the solicitor can rely on the ‘takeover’ exclusion.

Answer
Option E is correct. The client is seeking advice and assistance from the solicitor who is ‘in
business’. Shares in a private company are a specified investment (option A is wrong), and in
acting as the client requests the solicitor will be carrying out the specified investment activities
of advising and arranging (option B is wrong). The solicitor will need to rely on an exclusion or
exemption to avoid breaching s 19 FSMA 2000.
The takeover exclusion applies to a transaction to acquire or dispose of shares in a body
corporate if the shares include 50% or more of the voting shares and is between parties each
of whom is a body corporate, a partnership, a single individual or a group of connected
individuals. Here the client wishes to sell his 60% shareholding in the company to a fellow
director, so the takeover exclusion requirements are satisfied.
Advising on the sale of shares would not be considered generic advice (option D is wrong).
Option C is wrong because the exemption for professional firms is of no relevance as the
solicitor will not be carrying out a regulated activity (and the requirements of s 327 would not
be met).

Question 2
A solicitor has just finished acting for a client in a personal injury case. The client has
decided to buy a flat using the damages that the client has received in the case. The
client has identified a number of possible flats to buy. The solicitor knows nothing about
the property market; nevertheless the client asks the solicitor to advise on which flat
would provide the best investment. The solicitor’s firm is not authorised by the Financial
Conduct Authority to carry out regulated activities under the Financial Services and Markets
Act 2000.
What would be the position if the solicitor gave the advice as requested?

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A Criminal proceedings may be brought against the solicitor.

B__ Disciplinary proceedings may be brought against the solicitor.
C The solicitor will have complied with their duty to act in the best interests of the client.
D Criminal proceedings may be brought against the firm, but not against the solicitor
personally.
E The solicitor will have complied with their duty to act with integrity.

“Answer
Option B is correct. Land is not a specified investment and so in giving the advice the solicitor
will not be committing an offence under FSMA 2000. However, the solicitor is not competent to
give the advice. Therefore, the solicitor is in breach of Paragraph 3.2 of the Code of Conduct
for Solicitors and disciplinary proceedings may be brought against them. Giving advice when
not competent to do so would not constitute acting with integrity nor acting in the client's best
interests.

Question 3
A solicitor has been acting for a client in a litigation matter. The case recently concluded
with the client being awarded £3 million in damages. The client asks the solicitor for advice
on investing this money in debentures and bonds. The solicitor lacks sufficient expertise to
advise the client and so the solicitor refers the client to an independent financial adviser.
After the client has seen the adviser, the client asks the solicitor to arrange the purchase
of the investments that the adviser has recommended. The adviser pays the solicitor £50
commission, which, without reference to the client, the solicitor decides to retain.
Did the solicitor’s actions amount to a regulated activity under the Financial Services
and Markets Act 2000?
A _ No, because the exemption for professional firms prevents the solicitor’s actions from
being a regulated activity.
B No, because the client has taken advice from an authorised third person.
C_ No, because the transaction did not involve a specified investment.
D Yes, because the solicitor lacked competence.
E Yes, because the solicitor received a pecuniary reward.

Answer
Option E is correct. Debentures and bonds are specified investments (option C is wrong) and
the solicitor has engaged in the specified activity of arranging. Ordinarily the solicitor would
be able to rely on the ATP exclusion, but this is not available where the solicitor receives
commission and fails to account to the client; accordingly option B is wrong. Option A is
wrong as the s 327 exemption does not (in contrast to an exclusion) result in the act ceasing
to be a regulated activity. Instead s 327 enables a regulated activity to be carried on without
authorisation (in any event the financial services were not incidental on the facts). Finally,
option D is wrong as ‘competence’ does not influence whether the act amounts to a regulated
activity (but is a professional conduct issue).

59
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 Money Laundering

Le | Introduction 62
9.2 The relevance of money laundering for solicitors 62
- 9.5 The purpose of the Regulations 64
9.4 The application of the Regulations 64
& 55. Risk assessment 65
5.6 Policies, controls and procedures 65
5:7 Internal controls 66
5.8 Client due diligence 66
89 Training 70
5.10 Record keeping 70
5.11. Criminal Finances Act 2017 i

SQE1 syllabus
This chapter will enable you to achieve the SQE1 Assessment Specification in relation
to Functioning Legal Knowledge concerned with Legal Services:
e The regulatory role of the Solicitors Regulation Authority.
¢ Overriding legal obligations.
e Purpose and scope of money laundering legislation including the international
context.
¢ Due diligence requirements.
Note that for SQE1, candidates are not usually required to recall specific case
names or cite statutory or regulatory authorities. Cases are provided for illustrative
purposes only.

Learning outcomes
By the end of this chapter you will be able to apply relevant core legal principles
and rules appropriately and effectively, at the level of a competent newly qualified
solicitor in practice, to realistic client-based and ethical problems and situations in the
following areas:
¢ The nature of money laundering.
¢ Solicitors’ obligations under anti-money laundering legislation.
¢ Due diligence.

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5.1 Introduction
Money laundering is the process by which criminals seek to alter or ‘launder’ their proceeds of
crime so that it appears that these funds come from a legitimate source.
For example, a criminal may be in possession of stolen money and instructs a number of
intermediaries each to invest a relatively small proportion of the money. The investments
can later be sold, and the criminal then appears to be in possession of the proceeds of a
legitimate transaction. Such transactions can become highly complex, making it very difficult
for investigators to follow the ‘audit trail’ and track the funds.
By the very nature of their work solicitors constantly deal with transactions and handle money
on behalf of their clients. Consequently solicitors are particular targets for criminals in their
efforts to launder their proceeds of crime or give their criminal activities the appearance of
legitimacy.
This chapter looks at:
¢ the relevance of money laundering for solicitors
e the purpose of the Regulations
e the application of the Regulations
e risk assessment
¢ policies, controls and procedures
¢ internal controls
* client due diligence
* training
* record keeping
¢ Criminal Finance Act 2017

5.2 The relevance of money laundering for solicitors

Anti-money laundering legislation is part of the general law applicable to all. However, it has
a particular relevance and significance for solicitors. Money laundering was identified by the
SRA in its latest Risk Outlook (see 2.3) as a key risk facing the profession.
There will inevitably be a handful of solicitors who are knowingly and deliberately complicit in
money laundering. The focus here is not on them; they are criminals and the criminal law will
deal with them in any event. Instead, the focus is on ordinary solicitors who may be targeted,
and at risk of being used, by criminals. These solicitors will be caught up in money laundering
if they do not take sufficient care.
Those engaged in money laundering will often seek to use a solicitor to facilitate their criminal
activities. Some criminals, for example, will simply wish to instruct a solicitor because it lends
an air of respectability to their activities. However, the susceptibility of solicitors to money
laundering largely arises from the type of work they do. Almost all solicitors handle money
for their clients and others and, depending on the nature of the firm, that money may be held
in other jurisdictions. Solicitors also conduct the type of transactions which criminals view as
ideal methods for laundering money.
It is generally accepted that money laundering involves three distinct stages:
Placement: money from criminal activity is introduced into the financial system.
Layering: the money is distanced from the criminal activity by passing it through a number
of parties or transactions.

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integration: the money is integrated back into the financial system and the criminal is now
In possession of ‘laundered’ money.
A solicitor can become involved at any stage. However, there are some areas of solicitors’
work that are thought to present a particular risk:

(a) Company and trust work

Both companies and trusts can be complex legal entities. Therefore, when setting them up
money can be hidden behind complicated structures and layers of ownership. Solicitors
can also sometimes be involved in the ongoing management of companies and trusts
and so be used by criminals to create the appearance of respectability for their activities.
(b) Use of a client account

Passing money through a firm’s client account is an obvious way of ‘swapping’ illicit
money for clean money.

© Example
Mark is a solicitor specialising in commercial work. Mark is instructed by Henry in the
purchase of a business. The day after the initial interview, Henry telephones to say that he
has been called away because his mother is seriously ill and so he has placed £750,000
in the firm’s client account to ensure that, if necessary, the purchase can go ahead in his
absence.
Three weeks later Henry telephones Mark and says that he has decided not to go ahead
with the purchase. Henry says that it will help his cash flow if, rather than returning the
£750,000 to him direct, it is transferred to a company that Henry owns abroad. Mark
makes the transfer.
Henry could be a criminal and the £750,000 represents the proceeds of his crimes. If
that is the case, Mark has enabled the illicit money to be swapped for legitimate money
apparently originating from a firm of solicitors and then being transferred out of the
jurisdiction.

(c) Real estate

Acting for a client in the purchase of a property is said to be the classic area of a
solicitor’s work at risk of money laundering. By definition, money has to pass through the
firm’s client account to enable the transaction to proceed. At the end of the transaction
the criminal is in possession of an asset, often appreciating in value, which can be sold in
order to produce ‘legitimate’ proceeds plus profit. Buyer and seller may, or may not, be
complicit in the illegal activity.

o Example
Nicola instructs Jasmin, a solicitor, to act for her in the purchase of a house. The purchase
price of the house is £500,000. Nicola says that she does not need a mortgage to buy the
house as she has just received an inheritance. Nicola transfers £500,000 into the firm’s
client account to complete the purchase.
Inexplicably the seller drops the price to £400,000 and the purchase completes. Nicola
instructs that the surplus of funds which the firm is holding for her should be paid to
a business associate in settlement of a debt. Jasmin pays the surplus to the business
associate.
It may be that the £500,000 represents the proceeds of crime and the seller is complicit in
the criminal activity. If this is the case Jasmin has enabled Nicola to acquire a legitimate
asset for later sale and allowed the surplus to be ‘cleansed’ by passing through the firm’s
client account and transferred to a third party.

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(d) Sham litigation

Litigation is not an area of work that is obviously at risk from money launderers. However
such a risk may arise in the context of sham litigation.

oO Example
Frank is a solicitor specialising in commercial litigation. Frank is instructed by Rosen Ltd to
issue a claim against a foreign company. Frank duly issues the claim. However the foreign
company does not defend the claim and judgement is entered in default.
The foreign company immediately pays the sum due to Frank’s firm. Frank pays the money
onto Rosen Ltd.
Rosen Ltd and the foreign company may have been complicit in engaging in sham
litigation for the purpose of transferring illicit funds from abroad into the UK. Frank has
assisted in that process.

9.3 The purpose of the Regulations

The regulatory requirements are to be found in the Money Laundering, Terrorist Financing and
Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (‘the Regulations’).
As the name indicates the Regulations also cover terrorist financing. In essence terrorist
financing involves the use of funds (whether or not the proceeds of crime) for illicit political
purposes. The UK, in common with many other jurisdictions, combines measures against
money laundering with measures against terrorist financing because both activities involve
criminals entering into transactions with the intent of hiding the origins and/or destinations of
the funds. This chapter concentrates on money laundering as this is the type of activity which
solicitors are most likely to encounter in practice.
Crime has become a global phenomenon. The ease with which money and people can now
pass from one country to another means that money laundering is also global in nature.
Such activity demands an international response. The Financial Action Task Force is an inter-
governmental body established as a consequence of concern at the growing incidence of
money laundering around the world. The Regulations (together with other legislation) is the
UK’s response to the recommendations made by the Financial Action Task Force that countries
should introduce their own laws to meet international! objectives.
As with all legislation in this area the Regulations are intended to disrupt serious crime
(including terrorism) by inhibiting criminals’ ability to reinvest or benefit from the proceeds of
crime. As upholders of justice and the rule of law solicitors should naturally be concerned to
stop crime. However, the Regulations codify the steps which those who are at risk of coming
up against money launderers (sometimes referred to as ‘gatekeepers’) should be expected to
take in order to protect society as a whole.
The Regulations require systems and procedures to be put in place with a view to preventing
money laundering and/or ensuring that such behaviour comes to the attention of the
appropriate authorities for investigation. The approach is essentially risk based to ensure that
the more significant measures are targeted at those situations which carry the higher risk.

9.4 The application of the Regulations

The Regulations apply to persons acting in the course of businesses carried out in the UK. This
includes ‘independent legal professionals’ (reg 8), defined in reg 12 as:
 Money Laundering

a firm or sole practitioner who by way of business provides legal or notarial

services to other persons, when participating in financial or real property
transactions ....
Trust Or company service providers, tax advisers and insolvency practitioners are also
included. Therefore, the majority of solicitors’ firms will be subject to the Regulations. Failure to
comply with the Regulations is a criminal offence.
The SRA has a supervisory role in respect of anti-money laundering under the legislation.
There is a requirement for the ‘beneficial owners, officers or managers’ of the firm and sole
Practitioners to apply to the SRA for approval under the Regulations. Approval must be
granted unless the applicant has been convicted of a ‘relevant offence’ (a long list of offences
which fall within this definition is set out in Sch 3 and includes offences under previous money
laundering legislation, the Terrorism Act 2006 and any offence which has deception or
dishonesty as one of its components). Acting without such approval is a criminal offence and
may result in imprisonment, a fine or both (reg 26).
In addition to the requirements under the Regulations, as a matter of professional conduct
firms must have in place structures, arrangements, systems and controls that ensure
compliance with regulatory and legislative requirements (Paragraph 2.1(a) SRA Code of
Conduct for Firms) and must identify, monitor and manage material risks to the business
(Paragraph 2.5 SRA Code of Conduct for Firms). These requirements include action needed to
prevent the firm being used for money laundering or terrorist financing.

9.9 Risk assessment

A firm is required to take appropriate steps to identify and assess the risk of the firm being
used for money laundering (reg 18). This will entail a firm-wide risk assessment to include risk
factors relating to, for example, the services offered by the firm and how they are delivered,
the nature of the firm’s clients and the industries in which they operate.
A risk assessment is a fundamental requirement and the starting point for all anti-money
laundering activities within the firm. The SRA has indicated its determination to take
enforcement action against a firm where the risk assessment is inadequate or where the firm
does not have any risk assessment at all in place.
The National Risk Assessment published by HM Treasury in 2017 specifies the services
provided by law firms most likely to be targeted by money launderers are: trust and company
formation, conveyancing and client account services (see 5.2). Firms need to ensure that their
risk assessment addresses the risks in these areas.
A firm is required to keep an up-to-date written record of all of the steps it has taken in terms
of the risk assessment.

5.6 Policies, controls and procedures

A firm is required to establish and maintain written policies, controls and procedures
(proportionate to its size and nature and approved by its senior management) to mitigate
and manage effectively the money laundering and terrorist financing risks identified in its risk
assessment (reg 19). This will include risk management practices, how the firm conducts client
due diligence, the firm’s reporting and record-keeping systems, policies put in place when
new technology is adopted and in relation to complex, unusually large or unusual patterns of
transactions which have no apparent economic or legal purpose.

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9.7 Internal controls

A firm must appoint a Money Laundering Compliance Officer (MLCO), being an individual at
the level of senior management, to be responsible for compliance with the Regulations (reg
21(a)). In addition the firm must have a ‘nominated officer’ (often referred to as the Money
Laundering Reporting Officer or MLRO) to receive reports from within the firm concerning any
instances of suspected money laundering and to liaise, if necessary, with the National Crime
Agency (NCA) (reg 21(3)). The roles of MLCO and nominated officer can be fulfilled by the
same individual.
In addition to the above, a firm is required to adopt two further internal controls:
(a) The screening of relevant employees prior to and during the course of their employment
to assess their skills, knowledge, conduct and integrity. This relates to employees whose
work in the firm is relevant to compliance with the Regulations or who otherwise contribute
towards the identification, prevention and detection of money laundering and terrorist
financing (reg 21(b)).
(b) Establishing an independent audit function to examine, evaluate, make recommendations
and monitor the firm’s policies, controls and procedures adopted to comply with the
Regulations (reg 21(c)).
A firm must also establish and maintain controls which enable it to ‘respond fully and rapidly’
to enquiries from law enforcement as to whether it maintains, or has maintained during the
past five years, a business relationship with any person and the nature of that relationship
(reg 21(8)).

9.8 Client due diligence

5.8.1 The requirement for due diligence
Subject to limited exceptions, firms carrying out relevant business are obliged to obtain
verification of the identity of each of their clients (referred to as ‘customer due diligence’ in
the Regulations). The need to verify the client’s identity arises in a number of circumstances
including the following (reg 27):
(a) where the client and solicitor agree to form a business relationship;
(b) carrying out an occasional transaction (ie one not carried out as part of a business
relationship) that amounts to a ‘transfer of funds’ (essentially any transaction at least
partially carried out by electronic means on behalf of a payer through a payment service
provider, for example, a credit transfer) exceeding €1,000;
(c) carrying out an occasional transaction that amounts to €15,000 or more, whether the
transaction is executed in a single operation or in several operations which appear to be
linked;
(d) where the solicitor suspects money laundering or terrorist financing;
(e) where the solicitor doubts the veracity or adequacy of documents or information supplied
to verify the client's identity.
The verification (as set out in reg 28) is required as soon as possible after first contact
and must take place before a business relationship is established or the carrying out of
the transaction (reg 30). However, a solicitor may verify the identity of the client during the
establishment of a business relationship if:
(a) there is little risk of any money laundering or terrorist financing occurring;
(b) it is necessary not to interrupt the normal conduct of business; and

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(c) the identity is verified as soon as practicable after contact is first established.
However, if the solicitor is unable to complete the client due diligence in time, the solicitor
cannot:
(a) carry out a transaction with or for the client through a bank account; or
(b) establish a business relationship or carry out a transaction otherwise than through a bank
account,
and in such circumstances the solicitor must also terminate any existing business relationship
and consider making a disclosure to the NCA (reg 31).
The steps which a solicitor must take in order to verify the identity of the client varies
according to the type of client involved and the risk of money laundering.

5.8.2 Standard due diligence

Standard due diligence will apply to most clients. The solicitor is obliged to verify the identity
of the client on the basis of ‘documents or information in either case obtained from a reliable
source which is independent of the person whose identity is being verified’ (reg 28).
For natural persons, evidence of identity may be based on documents such as passports
and photocard driving licences. Guidance for the legal sector (from the Legal Sector Affinity
Group) considers it good practice to have either:
(a) one government document which verifies either the person’s name and address, or the
person’s name and date of birth; or
(b) a government document which verifies the person’s full name, plus another supporting
document which verifies the person’s name and either their address or their date of birth.
For non-limited liability partnerships, it will be necessary to obtain information on the
constituent individuals who make up the partnership. However, where partnerships are well-
known, reputable organisations with long histories in their industries and with substantial
public information about them, the Law Society’s guidance advises that it should be sufficient
to obtain their name, registered or trading address and nature of business.
For companies, it is necessary to verify the existence of the company. The standard
identifiers are:
(a) its name;
(b) its company number or other registration; and
(c) the registered office address and principal place of business (if different).
Unless it is a company listed on a regulated market, reasonable measures are to be
taken to obtain and verify the law to which it is subject, its constitution or other governing
documents and the names of the board of directors or other senior persons responsible for
its operations (reg 28).
Firms should be assisted in this regard by the obligation placed on a ‘UK body corporate’
(which includes listed and unlisted companies and limited liability partnerships) to provide
certain information on request when it forms a business relationship with a firm (and other
persons to whom the Regulations apply), which includes the information listed above (reg 43).
The legal sector guidance advises that it may also be appropriate to consider whether the
person providing the instructions on behalf of the company has the authority to do so.
In addition, where simplified due diligence does not apply it will be necessary to consider the
identity of beneficial owners.

Beneficial owners

A solicitor must identify any ‘beneficial owner’ where the beneficial owner is not the client. The
definition of a beneficial owner varies depending on the nature of the client.

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In the case of companies, reg 5(1) defines a beneficial owner as:

(a) any individual who exercises ultimate control over the management of the body
corporate;
(b) any individual who ultimately owns or controls (in each case whether directly or indirectly),
including through bearer share holdings or by other means, more than 25% of the shares
or voting rights in the body corporate; or
(c) an individual who controls the body corporate.
This regulation does not apply to a company listed on a regulated market. It does apply to UK
limited liability partnerships.

© Example
A Co Ltd instructs a firm of solicitors. The solicitors will have to obtain documentary
confirmation of the name, number, registered address and the other information set out
in reg 28. This can be obtained by carrying out a company search at Companies House.
However, the solicitors also need to identify any ‘beneficial owner’ of the company.
If Mr Smith owns 50% of the shares, Mr Jones owns 30% of the shares and Mr McConnell
owns the remaining 20%, Smith and Jones will be the beneficial owners.
It may be that, instead of being owned by individuals, the client company is owned by a
parent company. The legal sector guidance states that a risk-based decision should be taken
as to whether to make further enquiries. However, it is common for law firms to seek to identify
the beneficial owners of any parent company up to and including the ultimate parent entity.
In the case of a partnership (other than a limited liability partnership), reg 5(3) defines a
beneficial owner as any individual who:
(a) ultimately is entitled to or controls (whether the entitlement or control is direct or indirect)
more than a 25% share of the capital or profits of the partnership, or more than 25% of
the voting rights in the partnership; or
(b) otherwise exercises control over the management of the partnership (ie the ability to
manage the use of funds or transactions outside of the normal management structure and
control mechanisms).
In the case of a trust, beneficial owner means each of the following (reg 6(1)):
(a) the settlor;
(b) the trustees;
(c) the beneficiaries;
(d) where the individuals (or some of the individuals) benefiting from the trust have not been
determined, the class of persons in whose main interest the trust is set up, or operates;
(e) any individual who has control over the trust, ie one who has power (whether exercisable
alone, jointly with another person or with the consent of another person) under the
trust instrument or by law, for example, to add or remove a person as beneficiary, or to
appoint or remove trustees.
As a trust does not have legal personality, the trust itself will not be the client, and so where
a solicitor advises any individual client in relation to a trust, the solicitor will be required to
understand who the other beneficial owners of the trust are, as defined above.
Whilst generally the beneficiaries of a trust will be individuals, they may at times be a
company. If this is the case, it is necessary to apply reg 6(4) to determine the beneficial
owners of the company in question.

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In the case of other arrangements or entities, for example unincorporated associations

and foundations, beneficial owner means those individuals who hold equivalent or similar
positions to those set out above in reg 6(1).

5.8.3 Simplified due diligence

Simplified due diligence is permitted where a firm determines through an individual risk
assessment that the business relationship or transaction presents a low risk of money
laundering or terrorist financing, taking into account the risk assessment. The factors to
be taken into account in determining whether a client or transaction poses a lower risk
include whether the client is a company listed on a regulated market and the location of the
regulated market and where a client is established and does business (reg 37(3)). However,
the Regulations make it clear that the presence of one or more of the factors set out does not
necessarily indicate that there is a lower risk in a particular situation.
The solicitor must obtain evidence that the transaction and the client are eligible for simplified
due diligence. The exact verification required depends on the identity of the client, and the
solicitor will not necessarily need to obtain information on the beneficial owners. For example,
for a well-known plc listed in the UK, the solicitor must obtain confirmation of the company’s
listing on the Stock Exchange.

5.8.4 Enhanced due diligence

Enhanced due diligence is required where there is something about the arrangement or
transaction which creates a high risk of money laundering. The Regulations set out a list
of circumstances in which enhanced due diligence must be carried out (reg 33). These
include where:
(a) the case has been identified as one where there is a high risk of money laundering or
terrorist financing in the firm's risk assessment or in the information made available by the
SRA and the Law Society;
(b) the client or the counter-part to the transaction is in a high-risk third country (as defined in
the Regulations);
(c) the client has provided false or stolen identification documentation or information and the
solicitor has decided to continue dealing with the client;
(d) the client is a politically exposed person (PEP), or a family member or known close
associate of a PEP;
(e) a transaction is complex or unusually large, or there is an unusual pattern of transactions,
or the transactions have no apparent economic or legal purpose;
(f) in any other situation where there is a higher risk of money laundering or terrorist
financing. In determining this, there is a wide range of factors for a firm to take
into account, for example whether the business relationship is conducted in unusual
circumstances (such as where a solicitor has not met the client face to face), or payments
will be received from unknown or associated third parties.
In these situations, a solicitor must take measures, as far as reasonably possible, to examine
the background and purpose of the transaction and consider whether it is appropriate, for
example, to obtain further independent verification of the client's or beneficial owner's identity
or more detail on the ownership, control structure and financial situation of the client. It will
also be necessary to conduct enhanced ongoing monitoring of the business relationship.
A PEP is an individual who is entrusted with prominent public functions, other than as a
middle-ranking or more junior official (reg 35(12)). PEPs have been a focus for the Financial
Action Task Force, EU members and other countries due to growing concerns about PEPs
using their political positions to corruptly enrich themselves. Individuals with prominent public
functions include the following:

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(a) Heads of State, heads of government, ministers and deputy or assistant ministers;
(b) members of parliament;
(c) members of supreme courts, of constitutional courts or of other high-level judicial bodies
whose decisions are not generally subject to further appeal, except in exceptional
circumstances;
(d) members of courts of auditors or of the boards of central banks;
(e) ambassadors, chargés d'affaires and high-ranking officers in the armed forces;
(f) members of the administrative, management or supervisory bodies of State-owned
enterprises.
Family members include a spouse, civil partner, children, their spouses or civil partners
and parents. Known close associates include those with whom there are close business
relationships.
Where the solicitor is dealing with the PEP (and this includes where a PEP, family member
or close associate is a beneficial owner of a client), additional obligations are placed on
the solicitor, namely having approval of senior management (for example, the managing
partner) to act for the client, taking adequate measures to establish the source of wealth and
source of funds involved in the business relationship or proposed transactions, and conducting
enhanced ongoing monitoring of the business relationship (reg 35(5)).

5.8.5 Ongoing monitoring

A solicitor is obliged to undertake ongoing monitoring of business relationships, to ensure that
the transactions are consistent with the solicitor’s knowledge of the client (reg 28(11)).

5.9 Training
Firms are obliged to provide (and maintain a record of) training to their employees in respect
of money laundering (reg 24). Employees should be made aware of the law relating to money
laundering, terrorist financing and to the requirements of data protection relating to them. The
Regulations also specify that employees should be given regular training on how to recognise
(and then deal with) transactions that potentially involve money laundering or terrorist
financing.
The Regulations do not specify how the training should take place. However, the legal sector
guidance suggests that appropriate methods of delivery may include face-to-face learning or
e-learning. The guidance also recommends the use of a staff manual on money laundering
issues.
Where no such training is given, this may provide the employee with a defence to some of the
offences under the Proceeds of Crime Act 2002 (see Chapter 6).

5.10 Record keeping

A firm must keep various records in respect of money laundering. The records are a copy
of any documents and information obtained by the solicitor to satisfy the due diligence
requirements and sufficient supporting records (consisting of the original documents or
copies) in respect of a transaction which is the subject of due diligence measures or ongoing
monitoring to enable the transaction to be reconstructed (reg 40). These records must be kept
for at least five years from when the business relationship ends or the end of the occasional
transaction.

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5.11 Criminal Finances Act 2017

This Act includes the corporate offence of failure to prevent the criminal facilitation of tax
evasion. The Act applies to law firms as ‘relevant bodies’.
The offence makes a firm liable for failing to prevent UK tax evasion offences by its employees
or other ‘associated persons’. Such offences include the fraudulent evasion of VAT, income tax,
national insurance contributions and the common law offence of cheating the public revenue.
There is strict liability for the offence in that no knowledge or intention is required on the part
of the firm or its senior management. The only defence available is that the firm had in place
reasonable prevention procedures or is able to show that it was reasonable not to have had
such procedures in place. The penalty for breach is unlimited fines, and confiscation of assets
may be ordered.
Firms should already have policies and procedures in place to comply with their obligations
under the Regulations. However, firms will need to ensure that such policies and procedures
also comply with the Criminal Finances Act 2017. For example, due diligence procedures will
need to take into account specifically the risk of criminal facilitation of tax evasion posed by
its partners and employees as well as by other ‘associated persons’ (ie agents of the firm or
those who perform services for or on behalf of it, such as barristers, surveyors and foreign
law firms) and be adapted or introduced accordingly. A firm-wide risk assessment, internal
procedures, staff training and ongoing monitoring will also be required.

Summary
¢ Money laundering is the process whereby the proceeds of crime are changed so that they
appear to come from a legitimate source.
¢ The Government has introduced legislation to disrupt this process.
¢ Solicitors who undertake relevant business must comply with the Money Laundering,
Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI
2017/692).
¢ Under the 2017 Regulations, firms must appoint a money laundering compliance officer
and a nominated officer, who will receive internal reports concerning money laundering
and must consider whether to report the matter to the NCA.

Sample question

Question 1
A solicitor is instructed by a client in a family case. The client tells the solicitor that their
marriage has broken down, but their spouse will not defend the divorce and has already
agreed to the matrimonial home and all other family assets being transferred to the client.
The client instructs the solicitor to commence divorce proceedings and deal with the transfer
of the assets in accordance with the agreement.
The client is known to the solicitor because they are both members of a local gym. The
solicitor knows that the client has told others at the gym that their spouse is under criminal
investigation for tax fraud.

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Which of the following best explains the steps that the solicitor should take with regard
to due diligence?
A The solicitor should carry out enhanced due diligence because there is a high risk of
money laundering.
B_ The solicitor should carry out standard due diligence because the client has not
personally been involved in any criminal activity.
C_ The solicitor should carry out standard due diligence because the client is a private
individual.
D_ The solicitor should carry out simplified due diligence because family work presents a
low risk of money laundering.
E The solicitor does not need to carry out any due diligence because the client is already
known to the solicitor.

Answer
Option A is correct. Due diligence is required irrespective of the fact that the solicitor has
some personal knowledge of the client (option E therefore is wrong). Simplified due diligence
is based on an assessment of the individual facts of the case, not on the type of work involved
(option D is wrong). Options B and C do not represent the best answers because while
normally standard due diligence would be appropriate, here the facts suggest a high risk of
money laundering and so enhanced due diligence is required. The criminal investigation is
relevant (even though the client is not the subject) and the willingness of the spouse to transfer
all the assets to the client is unusual. The risk here is that the divorce is a sham and that the
spouse is seeking to distance themselves from assets purchased with the proceeds of crime by
transferring those assets to the complicit client.

Question 2
A solicitor is instructed by a client in the purchase of a property. At the first meeting, in
accordance with the firm’s client due diligence policy, the solicitor asks to see the client's
passport. The client explains that they have just had to send the passport off for renewal
and does not expect their new passport to arrive for several weeks. The client produces a
bank statement showing the client’s name and address and promises to bring in a photo
card driving licence tomorrow.
The following day, the client says that they cannot find their driving licence. Instead the
client produces a letter from the client's neighbour stating that they have known the
client for two years and confirming the client’s full name. The client then says that, as a
demonstration of goodwill, the client will provide the solicitor with the full purchase price of
the property in cash later that day.
Which of the following best explains what the solicitor should do?

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A Proceed and complete the purchase because the bank statement contains the client's
name and address.
B Refuse to act because the solicitor does not have sufficient verification of the client's
identity.
C Agree to undertake the initial steps in the purchase pending receipt of the new
passport because there is little risk of money laundering.
D Proceed and complete the purchase because the letter is independent verification of
the client's identity.
E Agree to undertake the initial steps in the purchase pending speaking to the neighbour
direct.

Answer

Option B is correct. As a general rule verification should be obtained at first contact.

Verification must be obtained from a reliable source which is independent from the client.
The letter would not fall within this description (meaning that option D is wrong), even if the
contents are confirmed face to face (option E is wrong), as the neighbour is a personal friend
and may have been duped by the client. Good practice dictates that verification should
be based on at least one government document. A bank statement might be sufficient in
combination with a government document, but not in isolation; accordingly, option A is not
the best answer. It is possible to delay verification if, inter alia, there is little risk of money
laundering. That cannot be the case here given the client's inability to produce suitable
documentation and the cash payment proposal. The solicitor should refuse to act in these
circumstances. Accordingly, option C is wrong.

73
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 Proceeds of Crime Act 2002

6.1 Introduction 76
6.2 Overview of offences 76
6.5 Section 328 Arranging iT
6.4 Section 329 Acquisition, use or possession 81
6.5 Section 327 Concealing etc 81
6.6 Section 330 Failure to disclose 81
6.7. Section 331 Failure to disclose (nominated officers) 83
6.8 Section 333A Tipping off 83
6.9 Prejudicing an investigation 84
6.10 Confidentiality 85
6.11. The role of the SRA 85
6.12 Warning signs 85

SQE1 syllabus
This chapter will enable you to achieve the SQE1 Assessment Specification in relation
to Functioning Legal Knowledge concerned with Legal Services:
The regulatory role of the Solicitors Regulation Authority.
Overriding legal obligations.
Purpose and scope of money laundering legislation including the international
context.
Circumstances encountered in the course of practice where suspicion of money
laundering should be reported in accordance with the legislation.
The appropriate person or body to whom suspicions should be reported, the
approximate time for such reports to be made and the appropriate procedure to
be followed.
Direct involvement and non-direct involvement offences, and defences to those
offences, under Proceeds of Crime Act 2002.
The offences under the Proceeds of Crime Act 2002 set out in this chapter may be
referred to in the SQE1 assessment. Otherwise, references to cases and statutory or
regulatory authorities in this chapter are provided for illustrative purposes only.

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Learning outcomes
By the end of this chapter you will be able to apply relevant core legal principles
and rules appropriately and effectively, at the level of a competent newly qualified
solicitor in practice, to realistic client-based and ethical problems and situations in the
following areas:
¢ The reporting of money laundering suspicions.
¢ The key offences under the Proceeds of Crime Act 2002.
* The defences to the key offences under the Proceeds of Crime Act 2002.

6.1 Introduction
The Proceeds of Crime Act 2002 is, like the Money Laundering Regulations (see Chapter 5),
part of the UK’s response to international efforts against money laundering.
The Proceeds of Crime Act 2002 is wide ranging and encompasses a variety of criminal
behaviour. Of particular interest to the legal profession is that in addition to criminalising
acts of money laundering itself, it creates a number of offences applicable to legitimate
businesses, including solicitors, who fail to respond appropriately when faced with the money
laundering activities of others.
Solicitors are often targeted by criminals seeking to launder their proceeds of crime or give
their criminal activities the appearance of legitimacy (see Chapter 5). However, solicitors
are at risk of committing criminal offences themselves if they are not vigilant as to the threat
of money laundering and/or fail to report suspected money laundering to the appropriate
authorities.
This chapter looks at:
* overview of offences
¢ s 328 Arranging
¢ s 329 Acquisition, use or possession
¢ s 327 Concealing etc
¢ s 330 Failure to disclose
¢ s 331 Failure to disclose (nominated officers)
¢ s 333A Tipping off
¢ s 342 Prejudicing and investigation
¢ Confidentiality
¢ Role of the SRA
¢ Warning signs

6.2 Overview of offences

The Proceeds of Crime Act 2002 (POCA 2002) creates three offences which involve the direct
handling of the proceeds of crime. The offences are widely drafted. Whilst they encompass
the actions of those who instigated the criminal behaviour in the first place, and their

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associates, they will also extend to the work carried out by solicitors where the effect of that
work is to facilitate money laundering.
Under POCA 2002 it is an offence to:

enter into, or become concerned in an arrangement, which a person knows or suspects

facilitates the retention, use or control of the proceeds of crime ($ 520);
* acquire, use or possess the proceeds of crime (s 329);
* conceal, disguise, convert or transfer the proceeds of crime, or to remove the proceeds of
crime from the jurisdiction of England and Wales (s 327).
In addition, POCA 2002 creates other offences targeted at the action or inaction of someone
who becomes aware of possible money laundering. In the main these offences only apply to
those in the regulated sector. This means that the offences will apply to most solicitors. The
offences are:
¢ failure to disclose information about money laundering to the appropriate authorities
(s 330);
* failure on the part of a firm’s nominated officer to disclose information about money
laundering to the appropriate authorities (s 331);
* ‘tipping off’ an individual that an investigation into money laundering is underway
(s 333A);
* prejudicing an investigation into money laundering (s 342).

6.3 Section 328 Arranging

This is the offence involving direct involvement with the proceeds of crime which is most likely
to be relevant to solicitors.
Section 328(1) Proceeds of Crime Act 2002 provides:
A person commits an offence if he enters into or becomes concerned in an
arrangement which he knows or suspects facilitates (by whatever means) the
acquisition, retention, use or control of criminal property by or on behalf of another
person.
Section 328 is widely drafted and encompasses virtually any act which assists in the process
of money laundering by another person. There is not even a requirement that the funds
actually pass through the hands of the person concerned with the arrangement, ie the
solicitor.
Much of the mainstream work of solicitors could constitute an arrangement. For example,
where a solicitor transfers a house to a relative of a client, the solicitor would ‘[become]
concerned in an arrangement’.

6.3.1 ‘Know or suspect’

To constitute an offence under s 328, the individual must know-or suspect that the arrangement
facilitates some act regarding the proceeds of crime. The threshold for the mental element of
the offence is therefore ‘suspicion’. The test is a subjective one and the bar is set rather low:
© 2 v Da Silva [2006] EWCA Crim 1654
This case was decided under earlier legislation, but the court made reference to the
requirements under POCA 2002 which was in place by the time that the appeal hearing
took place.

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Lord Justice Longmore said:

What then does the word ‘suspecting’ mean.....? It seems to us that the essential
element in the word ‘suspect’ and its affiliates, in this context, is that the defendant
must think that there is a possibility, which is more than fanciful, that the relevant facts
exist. A vague feeling of unease would not suffice. But the statute does not require the
suspicion to be ‘clear’ or ‘firmly grounded and targeted on specific facts’...
It would therefore seem that all that is required for ‘suspicion’ is that there is a possibility,
which is more than fanciful.
‘Know or suspect’ is a phrase which appears throughout the legislation.

6.3.2 Criminal property

A key element of the offence under s 328 (and other offences under POCA 2002) is that it
concerns criminal property.
‘Criminal property’ is defined by s 340 as a person's direct or indirect benefit from criminal
conduct. The definition includes not only, for example, the stolen property itself but also any
profits made from the original crime.
To constitute ‘criminal property’ the person must know or suspect that the property constitutes
or represents a benefit from criminal conduct.
There must have been an initial criminal offence committed for the property to become
‘criminal’. ‘Criminal conduct’ is defined to include any offence committed within the United
Kingdom, ranging from armed robbery to fraudulent receipt of welfare benefits.
The definition also includes an international element. The proceeds of criminal conduct
committed abroad will come within the definition of criminal property if the conduct was a
criminal offence under the law of the country where it took place and the conduct would have
been criminal and punishable by more than one year imprisonment if it had occurred in the UK.

6.3.3 Litigation proceedings

In Bowman v Fels [2005] EWCA Civ 226, the Court of Appeal considered whether taking steps
in litigation could be construed as ‘arranging’ under s 328. The Court concluded that taking
steps in litigation (including pre-action steps) and the resolution of issues in a litigious context
were excluded from the scope of s 328.
The current legal sector guidance provides that dividing assets in accordance with a court
judgment (for example, following a divorce) also does not fall within the definition of
arranging. However, the guidance goes on to state that careful consideration should be made
of whether the client would be committing an offence by receiving stolen property. Being
involved in the reinvestment of such assets would fall foul of s 328.
The solicitor would not be able to take advantage of this exclusion if the litigation was a sham
created for the purposes of money laundering.

6.3.4 Authorised disclosure defence

6.3.4.1 Making an authorised disclosure
The making of an authorised disclosure is a defence to the offence under s 328 (and to the
offences under s 329 and s 327 (see 6.4.and 6.5)). Authorised disclosures are dealt with
under s 338.
Under s 338 the disclosure must be made by the person who, but for the disclosure, would
be committing an offence. To be authorised under s 338, and therefore prevent an offence
being committed, the disclosure must be in relation to criminal property and satisfy certain
requirements as to its timing and the person to whom it must be made.
A disclosure is authorised under s 338 if it is made to a constable, an officer of Her Majesty’s
Revenue and Customs or a nominated officer. Therefore, for solicitors in most cases it is the

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person appointed by the firm as the nominated officer to whom the disclosure should be
made. The nominated officer is often referred to as the Money Laundering Reporting Officer
(MLRO), although technically the two roles are distinct and may be fulfilled by different
individuals within the firm.
It is the nominated officer's responsibility to report concerns about money laundering to the
National Crime Agency (NCA). In the UK money laundering comes within the remit of the
financial intelligence unit of the NCA. The NCA deals with law enforcement in the context of
organised crime within the UK and works with foreign law enforcement agencies in respect of
global organised crime.
A report made to the NCA by the nominated officer is called a suspicious activity report (SAR).
The NCA operates an online procedure for making suspicious activity reports. It is
preferable for a report to be made online as this enables the report to be made at any
time and actioned quickly. It is, however, possible to make a report by post using the NCA’s
standard forms.
The nominated officer is not under any obligation to make a SAR when concerns are raised
by another person in the firm. It is for the nominated officer to exercise their own judgement in
deciding whether the matter should be passed on to the NCA. Although the nominated officer
risks committing a criminal offence if they fail to make a report where there were reasonable
grounds to suspect money laundering (see 6.7).

6.3.4.2 Disclosure prior to the act taking place

A solicitor does not commit an offence under s 328 if the solicitor makes an authorised
disclosure to the firm’s nominated officer as soon as is practically possible prior to the
transaction taking place, and the consent of the nominated officer or the National Crime
Agency (NCA) is obtained.
However, once the nominated officer has made a suspicious activity report to the NCA, the
nominated officer is unable to give consent until one of the following conditions is met:
(a) the nominated officer, having made a disclosure to the NCA, receives the consent of
the NCA;
(b) the nominated officer, having made a disclosure to the NCA, hears nothing for seven
working days (starting with the first working day after the disclosure is made);
(c) where consent is refused by the NCA, the nominated officer may not give consent unless
consent is subsequently granted within 31 days starting on the day refusal is given, or
a period of 31 days has expired from the date of refusal. This 31-day period gives the
authorities time to take action to seize assets or take other action with respect to the
money laundering. (The 31-day period can be extended in certain circumstances.)
Although the term used in the legislation is ‘consent’, a more accurate description (now
adopted by the NCA) is ‘a defence against money laundering’. The sole purpose and effect
of consent is to provide a defence against a money laundering offence, it does not confirm
that proceeding with the transaction is the. right, ethical or even legal step to take. The solicitor
must still look to the law, rules of professional conduct and wider considerations before
deciding to proceed.

6.3.4.3 Disclosure during the prohibited act

A solicitor may seek to make an authorised disclosure whilst the prohibited act is ongoing.
However, if the solicitor is to avoid breaching s 328 by making the disclosure, the solicitor must
satisfy the provisions of s 338(2A):
(a) the disclosure is made whilst the prohibited act is ongoing; and
(b) when the solicitor began to do the act, the solicitor did not know or suspect that the
property constituted or represented a person's benefit from criminal conduct; and

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(c) the disclosure is made as soon as is practicable after the solicitor first knows or suspects
that the property constitutes or represents a person’s benefit from criminal conduct, and
the disclosure is made on the solicitor’s own initiative.

o Example
A solicitor is conducting a conveyancing transaction on behalf of a client. Until the client
exchanges contracts to sell the property, the solicitor has no knowledge or suspicion that
the house was bought with the proceeds of crime. Accordingly, there is no breach of s
328, as the solicitor does not possess the requisite knowledge or suspicion. After contracts
have been exchanged, the solicitor correctly begins to suspect that the house was bought
with the proceeds of crime. Accordingly, the solicitor is now concerned in an arrangement
which facilitates the acquisition, retention, use or control of criminal property and therefore
is in breach of s 328.
In order to seek the protection of making an authorised disclosure, the solicitor must
disclose their suspicions to the firm’s nominated officer on the solicitor’s own initiative and
must do so as soon as is practicable after the first suspicions arise.

6.3.4.4 Disclosure after the prohibited act

A solicitor may also seek to make an authorised disclosure after the prohibited act has been
completed. However, the solicitor must have a good reason for their failure to disclose prior
to completing the act (s 338(3)). The disclosure must be made as soon as is practicable, and
again the solicitor must make the disclosure on the solicitor’s own initiative.

6.3.4.5 Reasonable excuse for non-disclosure

A solicitor may have a defence to breaching s 328 where the solicitor intended to make an
authorised disclosure but has a reasonable excuse for failing to do so. ‘Reasonable excuse’
has not been defined by the courts, but it is likely to be narrowly construed, for example there
may be a reasonable excuse where the relevant information is already in the public domain.
Solicitors should certainly document their reasons for non-disclosure.

6.5.5 Overseas defence

There is a defence to s 328 where the individual knew that the ‘criminal conduct’ occurred
abroad and the conduct in question was lawful in the country where it took place. The
Secretary of State has the power to override this provision.

6.3.6 Penalties

An individual convicted under s 328 may receive a maximum sentence of 14 years’

imprisonment.

o Example
Ayesha is a solicitor acting for a client on a corporate transaction. The client is buying
Xan Ltd. During the course of due diligence Ayesha discovers that a number of Xan Ltd’s
lucrative contracts were obtained by paying bribes.
What should Ayesha do?
Ayesha needs to consider whether anything of a criminal nature has occurred. Obtaining
property using bribes is a criminal offence. These contracts will have generated cash
which will be owned by Xan Ltd. Therefore, when Ayesha’s client buys the company,
the client will be acquiring the proceeds of crime. Simply by completing the transaction
Ayesha will be concerned in an arrangement which facilitates the acquisition, retention,
use or control of criminal property, which is an offence under s 328 POCA 2002. Ayesha
needs to report the matter to the firm’s nominated officer. The nominated officer will then
need to seek the consent of the NCA for the transaction to proceed.

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Section 329 Acquisition, use or possession

A person commits an offence under s 329 POCA 2002 if they acquire, use or have possession
of criminal property. ‘Criminal property’ has the same meaning as under s 328 (see 6.3.2).
Typically, this provision will be used to prosecute those who had no involvement with the
original crime, but have enjoyed the benefit (for example, family members who have lived
off the proceeds of crime). However, it can be of relevance to solicitors. An issue may arise in
connection with s 329 where, for example, a solicitor receives money for costs for work carried
out for a client charged with a criminal offence and there is a possibility that the money in
question is criminal property.
The authorised disclosure defence (see 6.3.4) and the overseas defence (see 6.3.5) also apply
to s 329.
There is a further defence to s 329: the adequate consideration defence. An offence will not
be committed if there was adequate consideration for acquiring, using and possessing the
criminal property, unless the individual knew or suspected that those goods or services might
help to carry out criminal conduct. The Crown Prosecution Service guidance for prosecutors
says that this defence applies where professional advisers, such as solicitors, receive money
for or on account of costs, including disbursements. However, the fees charged must be
reasonable and the defence is not available if the value of the work is significantly less than
the money received.
An individual convicted under s 329 may receive a maximum sentence of 14 years’
imprisonment.

6.5 Section 327 Concealing etc

It is an offence under s 327 to conceal, disguise, convert or transfer criminal property or
remove it from England Wales Scotland or Northern Ireland. ‘Criminal property’ has the same
meaning as under s 328 (see 6.3.2).
This is the main money laundering offence. There is the potential for solicitors to fall foul of
this provision because the purpose of many transactions conducted by solicitors is to ‘convert’
(for example, money into property) or to ‘transfer’ (for example, money or ownership between
parties).
The authorised disclosure defence (see 6.3.4) and the overseas defence (see 6.3.5) also apply
to s 327.

6.6 Section 330 Failure to disclose

The purpose behind this offence is to ensure that information about suspected money
laundering is passed to the authorities promptly so that a proper investigation can be
carried out.
A person commits an offence under s 330 POCA 2002 if:
(a) he knows or suspects, or has reasonable grounds to know or suspect, that a person is
engaged in money laundering;
(b) the information comes to him in the course of a business in the regulated sector;
(c) the information may assist in identifying the money launderer or the location of any
laundered property; and
(d) he does not make a disclosure as soon as is practicable.

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6.6.1 Objective test

The wording of this offence incorporates the ‘know or suspect’ test. However, in s 330 there is
the addition of the wording ‘or has reasonable grounds to know or suspect’. This means that
a solicitor will commit this offence even where the solicitor genuinely did not know or suspect
that a person was engaged in money laundering. The court will consider, based on the
information available to the solicitor at the time, whether the solicitor shou/d have known (or
at least suspected) that money laundering was occurring. Accordingly, turning a blind eye to a
transaction will not provide the solicitor with a defence.
The justification for the objective test is that those working in the regulated sector are
expected to maintain greater vigilance and employ higher standards of care.

6.6.2 Regulated sector

Firms will be within the ‘regulated sector’ if they undertake relevant business (POCA 2002, Sch
9) and this extends to those providing legal services. Most firms of solicitors will fall within the
regulated sector for at least some of the work which they carry out. The definition of ‘regulated
sector’ is closely aligned to the definition given in the Money Laundering Regulations (see
Chapter 5).

6.6.3 The information

The information obtained by the solicitor must be of some use to the authorities. Accordingly,
the solicitor must be able to identify, or believe the information may assist in identifying:
(a) the money launderer; or
(b) the location of the laundered property.
If the solicitor is genuinely unable to provide this information, the solicitor will not
breach s 330.
The solicitor cannot blindly assume that the information will be of no use to the authorities.
When considering whether the solicitor has breached s 330, the court will consider whether
it would have been reasonable to expect the solicitor to believe that the information would
assist in identifying the offender or locating the laundered property.

6.6.4 Disclosure
A failure to make the required disclosure is part of the offence. To meet the requirements
of s 330 the disclosure must be made to the firm’s nominated officer or the NCA as soon
as practically possible. The disclosure must comprise the reasons behind the solicitor’s
knowledge or suspicions of money laundering and, as far as is possible, the identity of the
money launderer and the whereabouts of the laundered property. If the disclosure is made,
the solicitor will not commit the s 330 offence.
A solicitor will not commit this offence where the solicitor intended to make a disclosure but
has a reasonable excuse for not doing so. There is no guidance on what would constitute a
reasonable excuse; however, the courts are likely to take a stringent view.

6.6.5 Training defence

A further defence under s 330 concerns the training provided to an individual. Firms
undertaking ‘relevant business’ are obliged to provide anti-money laundering training to their
employees. The employee will not commit an offence if they do not know or suspect that a
client is engaged in money laundering, but there were reasonable grounds to suspect that the
client was engaged in money laundering, and the employee has not received proper training.

6.6.6 Legal professional privilege defence

A solicitor is under a duty at common law to keep confidential certain information given
to him from a client. This is referred to as legal professional privilege. Communications

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will be protected from disclosure if they fall within ‘advice privilege’ or ‘litigation privilege’.
Advice privilege applies to communications between a solicitor, acting in that capacity,
and a client, if they are both confidential and for the purpose of seeking legal advice from
a legal professional or providing it to a client. Litigation privilege protects confidential
communications made after litigation has started, or is reasonably in prospect, between a
solicitor and client or solicitor and third party for the sole or dominant purpose of litigation.
However, legal professional privilege cannot be relied upon where the communication takes
place with the purpose of carrying out an offence.
POCA 2002 mirrors the common law position, in that a solicitor is not obliged under s 330
_to disclose any information that comes to the solicitor as a professional legal adviser in
privileged circumstances, eg in connection with giving or seeking legal advice, or in relation to
legal proceedings, whether contemplated or actual. However, this exemption does not apply
where the information is communicated with the intention of furthering a criminal purpose (eg
money laundering).
A solicitor will not come within this defence if the information came to them in other
circumstances, for example through transactional or conveyancing work.

6.6.7 Overseas defence

A solicitor will not breach s 330 for failing to disclose where the solicitor believes that the
money laundering is taking place outside of the UK, and money laundering is not unlawful in
that country. The Secretary of State has the power to override this defence, but at the time of
writing has not taken any steps to do so.

6.6.8 Penalties
A person convicted of an offence under s 330 may receive a maximum sentence of five years’
imprisonment.

6.7 Section 331 Failure to disclose (nominated officers)

Under s 331 a nominated officer will commit an offence if they know or suspect, or have
reasonable grounds to know or suspect, money laundering, as a consequence of their role
as person nominated to receive disclosures under s 330, and fail to make the necessary
disclosure to the NCA as soon as practical.
The nominated officer will have a defence if they have a reasonable excuse for not disclosing
the information.

6.8 Section 333A Tipping off

‘Tipping off’ refers to alerting someone suspected of money laundering (or an associate) to
the fact that an investigation has started or is anticipated.

6.8.1 The offences

There are two aspects of tipping off that must be avoided under s 333A.
Both offences are intended to ensure that information is not leaked to the money launderer or
another third party before the authorities have had the opportunity to investigate the matter
and consider whether any enforcement action is necessary.
Under both offences there is no requirement to show that the tipping off was intended to alert
the money launderer or intended to prejudice any investigation.

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6.8.1.1 Disclosing a disclosure

Rather tortuously it is an offence under s 333A(1) to disclose to any person that a relevant
disclosure (on money laundering) has been made if that disclosure is likely to prejudice any
investigation that follows such a report. The information on which the disclosure is made must
have come to the person in the course of a business in the regulated sector.
A relevant disclosure includes one made to the firm’s nominated officer or the NCA. For
example, this offence would apply where a solicitor informs their client that an authorised
disclosure (see 6.3.4) has been made, with the intention of the client taking steps to frustrate
any action taken by the law enforcement authorities.

© Example
Wilkie instructs his solicitor to sell his house. The solicitor suspects that the house was
purchased with the proceeds of tax evasion and so makes an authorised disclosure to the
firm’s nominated officer. The transaction cannot proceed at least until the solicitor obtains
the consent of the firm’s nominated officer or the NCA (see 6.3.4.2). Wilkie demands
to know why his house sale is not making progress. A junior member of staff receives
Wilkie’s call and, having checked the file, informs Wilkie that the delay is due to an
authorised disclosure having been made. In these circumstances the member of staff may
breach s 333A unless they can rely on one of the defences (see 6.8.2).

6.8.1.2 Disclosing an investigation

Section 333A(3) contains a more general offence. The offence is committed where a disclosure
is made to any person that an investigation into money laundering is being carried out,
or is being contemplated, and that disclosure is likely to prejudice the money laundering
investigation. Again, the information on which the disclosure is made must have come to the
person in the course of a business in the regulated sector.

6.8.2 Defences

It is a defence under s 333A if the person who made the disclosure did not know or suspect
that the disclosure would prejudice an investigation into money laundering (s 333D(3) and (4)).
The ambit of this defence is unclear. It may cover the situation where, for example, a solicitor
informs a client about an investigation believing that the client will fully cooperate with the
authorities.
It is a defence under s 333A if the disclosure is made by an adviser to their client for the
purposes of dissuading the client from engaging in the alleged money laundering (333D(2)),
although this exception should be treated with caution.

6.8.3 Penalties

Both tipping off offences carry a maximum penalty of an unlimited fine, and/or a maximum
prison sentence of two years.

6.9 Prejudicing an investigation

Under s 342 a person will commit an offence if they know or suspect that a money laundering
investigation has or is about to be commenced and they make a material disclosure to any
other person which is likely to prejudice the investigation or interferes with relevant material.
This is similar to the tipping off offence but extends to non-regulated individuals.

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6.10 Confidentiality
Itwill be evident from the above that POCA 2002 often requires a solicitor to provide
information about their clients in order avoid committing an offence. However, as a matter of
professional conduct a solicitor owes a client the duty of confidentiality.
Under a duty under Paragraph 6.3 SRA Code of Conduct for Solicitors, RELs and RFLs a
solicitor is required to keep confidential the affairs of clients (including former clients) unless
disclosure is required or permitted by law or the client consents. When making a disclosure
under s 338, the legislation expressly provides that such a disclosure will not breach this
duty and so is required/permitted by law. Nevertheless a solicitor should be mindful of the
importance of the duty of confidentiality, and seek advice when uncertain as to whether to
report confidential information.

6.11 The role of the SRA

The SRA has a supervisory role under the legislation. Indeed, the SRA regards anti-money
laundering to be one of the most important aspects of its function.
However, the SRA also has a regulatory function. A solicitor who is shown to have a direct
involvement in money laundering will be in breach of SRA Principle 4 which requires solicitors
to act with honesty. Similarly, the commission of any of the other offences is likely to breach
SRA Principle 1 (the duty to uphold the rule of law and the administration of justice).
Consequently, a solicitor who falls foul of the POCA 2002 is also likely to face disciplinary
proceedings and, given the nature of the misconduct, significant sanctions.

6.12 Warning signs

A solicitor can become caught up in money laundering in a number of ways. At one end of the
spectrum there will be a very small number of solicitors who are knowingly and deliberately
complicit in the criminal activity. At the other end of the spectrum are those who have
been completely duped and for whom no amount of vigilance could have prevented their
involvement. But in between are the majority who need to be alert to the warning signs or ‘red
flags’, ask appropriate questions and keep their relationship with their clients under constant
review in order to avoid becoming unwittingly or carelessly involved.
It goes without saying that the SRA expects solicitors and firms to comply with all money
laundering legislation. However, the SRA also requires solicitors and firms to be able to spot
the warning signs or indicators of money laundering and to act appropriately, for example by
reporting the matter to the firm’s nominated officer or the NCA. The SRA includes a number of
indicators in its Warning Notice: Money Laundering and Terrorist Financing:

(a) The client

A number of aspects of the personality or nature of the client may be indicators. For
example, the client who is secretive, obstructive or evasive, avoids personal contact,
refuses to provide information or documentation or has criminal associations.
(b) Funding
Where the solicitor is carrying out some form of transaction for the client, an unusual
source of funding may be an indicator. For example, large cash payment, unexplained
payments from a third party, loans from non-institutional lenders or the use of multiple
accounts or foreign accounts.

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(c) The transaction

A transaction with unusual features may be an indicator. For example, the transaction is
loss making, repetitive instructions, unexplained urgency, there is no obvious commercial
purpose, or litigation which is settled too easily or quickly.
(d) Unusual instructions
Indicators here may be instructions which are unusual for the firm’s business. For example,
instructions which are outside the solicitor’s/firm’s area of expertise or normal business,
the client is not local to the firm and there is no explanation as to why the firm has been
chosen, the client is willing to pay high fees, or the client appears unconcerned about the
transaction.
(e) Geographical concerns
For example, the unexplained movement of monies between other jurisdictions or
connections with suspect jurisdictions.

Summary
The key offences under the Proceeds of Crime Act 2002 are:
e Entering into, or becoming concerned in, an arrangement which a person knows or
suspects facilitates the retention, use or control of the proceeds of crime (s 328).
¢ Acquiring, using or possessing the proceeds of crime (s 329).
¢ Concealing, disguising, converting or transferring the proceeds of crime, or removing the
proceeds of crime from the jurisdiction of England and Wales (s 327).
¢ Failing to disclose information about money laundering to the appropriate authorities
(s 330).
¢ Failure on the part of a firm’s nominated officer to disclose information about money
laundering to the appropriate authorities (s 331).
¢ ‘Tipping off’ an individual that an investigation into money laundering is underway
(s 333A).
¢ Prejudicing an investigation into money laundering (s 342).

Sample questions

Question 1
A solicitor is instructed on the purchase of company shares. The solicitor discovers that a
colleague in the firm has been instructed by the same client in respect of an investigation
by the French tax authorities into certain of the client's business activities in France which
are alleged to amount to tax fraud. The solicitor makes an authorised disclosure to the
firm's nominated officer. The nominated officer does not go on to make a suspicious activity
report to the National Crime Agency. Forty-eight hours later, having heard nothing from the
nominated officer, the solicitor buys the shares on the client's behalf.

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Is the solicitor likely to have committed the offence of ‘arranging’ under s 328 Proceeds
of Crime Act 2002?
A Yes, because a suspicious activity report has not been made to the National Crime
Agency.
B Yes, because the solicitor did not have appropriate consent to proceed with the
purchase of the shares.
C No, because the solicitor made an authorised disclosure to the firm’s nominated officer.
D No, because the client has not yet been convicted of any criminal offence.
E No, because any criminal conduct took place outside the UK.

Answer

Option B is the best answer. An authorised disclosure was required to prevent falling foul
of s 528 despite the fact that the alleged criminal activity took place outside the UK (fraud
is a criminal offence in France) and despite the lack of a conviction (suspicion is all that is
required). However, the making of an authorised disclosure is not a sufficient defence in itself.
Having made the disclosure the solicitor will still have committed the offence by proceeding
with the purchase without consent. The duty to make a suspicious activity report lies with the
nominated officer and a failure to make the report has no relevance to the solicitor’s liability
under s 328.

Question 2
A junior solicitor, who works for a firm in Newcastle, is instructed on the purchase of a
residential property by a client who lives in Southampton. The client provides the solicitor
with the purchase price of the property in cash. The client then pulls out of the purchase
and asks the solicitor to return the purchase money to the client by cheque.
Which of the following best describes how the solicitor should respond?
A Inform their head of department about the client's request.
B_ Do nothing.
C_ Tell the firm’s nominated officer that there is a suspicion of money laundering.
D Make a full file note of the client's request.
E Send the cheque.

Answer
Option C is correct. There are reasonable grounds for suspecting that the client is engaged
in money laundering (geographical distance between solicitor and client and the use of
cash). The solicitor will commit the failure to disclose offence under s 330 if they do not make
a relevant disclosure. The solicitor should therefore inform the firm's nominated officer giving
details of their suspicions. Option B is wrong as doing nothing is not an option in this case.
Neither option A nor D is the best answer because, while making a file note and informing
the head of department are good ideas they will not save the solicitor from committing the
offence. Finally, option E is wrong. By sending the cheque the solicitor is likely to commit other
offences (eg arranging under s 328).

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Question 3
A partner in a firm is acting for a client in the purchase of a business. The firm receives a
telephone call from the client's wife. The partner, who is in a meeting, asks a junior solicitor
to take the call. In doing so the partner says that the client has given permission for any
information about the purchase to be discussed with his wife. .
The solicitor takes the call. The client’s wife asks for an update on the progress of the
purchase. On checking the file, the solicitor tells the client's wife that the client provided
the money for the purchase in cash and the partner has concerns that the client may have
obtained some of the money as a result of tax fraud and that consequently the purchase is
on hold whilst the firm considers making a suspicious activity report to the National Crime
Agency.
Which of the following best explains whether the solicitor has committed a ‘tipping off
offence under s 333A Proceeds of Crime Act 2002?
A_ An offence has not been committed because the disclosure was authorised by the
partner.
B An offence has not been committed because the solicitor did not intend to prejudice an
investigation.
C_ An offence has not been committed because the disclosure was not made to the client.
D_ An offence has been committed because there is strong evidence that the client has
been engaged in money laundering.
E An offence has been committed because the disclosure is likely to prejudice any
investigation into money laundering.

Answer
Option E is correct. A key element of the offence is that the disclosure is likely to prejudice
an investigation. Making the disclosure to the client’s wife is highly likely to prejudice the
investigation. However, the solicitor does not need to have intended this outcome (option B
therefore is wrong). A tipping off offence under s 333A(3) does not depend on the strength of
evidence of money laundering (option D is wrong); even the contemplation of an investigation
is sufficient. Tipping off offences can be committed where a disclosure is made to any person,
meaning that option C is wrong. Finally, option A is wrong as there is no scope for the tipping
off to be authorised, and in any event the partner authorised the conversation taking place,
not its content.

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La
71 Introduction 90
7.2 The retainer 90
7.3 Professional conduct 90
r 7.4 Private funding 91
7.5 Fixed fees 91
7.6 Business agreements 92
7.7 Funding civil litigation 93

SQE1 syllabus
This chapter will enable you to achieve the SQE1 Assessment Specification in relation
to Functioning Legal Knowledge concerned with Legal Services:
¢ Funding options for legal services.
¢ Private funding.
¢ Conditional fee arrangements.
¢ Damages-based agreements.
e Fixed fees.
¢ Third party funding.
¢ Legal expenses insurance.
Note that for SQE1, candidates are not usually required to recall specific case
names or cite statutory or regulatory authorities. Cases are provided for illustrative
purposes only.

Learning outcomes
By the end of this chapter you will be able to apply relevant core legal principles
and rules appropriately and effectively, at the level of a competent newly qualified
solicitor in practice, to realistic client-based and ethical problems and situations in the
following areas:
¢ Professional conduct considerations in relation to funding.
¢ Types of funding.
¢ Availability of funding options.

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| Introduction
For any client one of the most important aspects of legal services is the question of how they
will be paid for. The costs involved in the case and how to finance them will be at the forefront
of the client’s mind and the issue must be addressed at the earliest opportunity.
For some clients the question will be, ‘can | afford to pay?’; for others the question will be,
‘can | afford not to?’. When, perhaps, liberty, reputation or a child’s future is at stake, the
importance of the matter to the client may outweigh the monetary cost. In past years those
who needed access to justice, but could not afford to pay for a solicitor, could turn to public
funding to have their costs paid (see Chapter 8). However, whilst this still remains an option
for some, the ambit of public funding is now severely restricted.
In recent years pragmatism has required law firms to open up to a variety of methods of
paying for legal services. A solicitor must understand the funding options available in order
to be able to play their part in agreeing upon the method which both addresses the client's
requirements and meets the business needs of the firm.
This chapter looks at:
e the retainer
¢ professional conduct
* private funding
e fixed fees
¢ business agreements
¢ funding civil litigation

7.2 The retainer

The retainer is the contractual relationship which exists between solicitor and client. One
important aspect of the contract which must be agreed at the outset is the fees and charges
the solicitor will levy for acting for the client and the manner in which those fees and charges
will be met.
Although, as in any contractual relationship, the parties are generally free to agree terms,
certain restrictions are placed upon the fees a solicitor may charge, and also upon how the
solicitor will be remunerated, by the Solicitors Regulation Authority (SRA) and the general law.
These restrictions vary depending upon what type of work the solicitor has agreed to carry out
for the client.
This chapter deals with the funding options available to clients. For a discussion of fees, bills
and challenging a solicitor’s charges (see Ethics and Professional Conduct).

7.3 Professional conduct

A solicitor may charge a client for work done on a number of different bases. Whichever
method of charging the client and solicitor agree, the solicitor must always comply with their
overarching professional conduct obligations.
Paragraph 8.7 of the SRA Code of Conduct for Solicitors, RELs and RFLs provides that a
solicitor must provide clients with 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 a matter and any costs incurred. The term ‘costs’ is
defined in the SRA Glossary as meaning the solicitor’s fees and disbursements.

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In addition, the SRA Transparency Rules (see Ethics and Professional Conduct) require that,
in relation to certain types of legal services, particular costs information must be provided.
That information includes the circumstances in which clients may have to make any payments
themselves for the services provided by the solicitor, including from any damages received.
The rules of professional conduct are not solely concerned with costs information; they also
extend to the level of charges. A solicitor must act in the best interests of the client (SRA
Principle 7) and act with integrity (SRA Principle 5). Overcharging for work done would breach
both these Principles. Similarly, overcharging may breach Paragraph 1.2 of the SRA Code
_of Conduct for Solicitors, RELs and RFLs which provides that a solicitor must not abuse their
position by taking unfair advantage of the client.
Ultimately, of course, the client has the right to challenge a solicitor’s bill. In most cases this
may involve asking the court to assess the costs. The court will reduce the bill if the amount
charged is unreasonable. This is an obvious restraint on the amount that a solicitor can
charge. Where a costs officer (when assessing a solicitor’s bill in a non-contentious matter)
reduces the amount of the costs by more than 50%, they must inform the Solicitors Regulation
Authority. (See Ethics and Professional Conduct.)
A range of funding options are discussed below. Under the SRA Code of Conduct for
Solicitors, RELs and RFLs there is no obligation to offer alternative funding options or to agree
to act for a client under any of them. However, a solicitor should make the client aware of the
funding options and, if necessary, direct the client to take separate advice on their availability.
For example, a solicitor may not carry out legal aid work (see Chapter 8), but if the solicitor
thinks that the client may be eligible the solicitor must advise the client accordingly and, if
necessary, direct the client elsewhere.
Paragraph 3.4 of the SRA Code of Conduct for Solicitors, RELs and RFLs requires a solicitor
to consider and take into account the client's attributes, needs and circumstances. This
requirement will apply when selecting and agreeing the appropriate funding option for the
client's case.

7.4 Private funding

A client may choose to fund their solicitor’s fees privately or simply have no other alternative.
This is the traditional method of funding and it remains appropriate for many clients.
The solicitor’s fees are calculated according to the time spent on the case at a given hourly
charging rate (disbursements and expenses are charged separately). The client will be
informed at the start of the matter which fee earners will be working on the client's file, and
the fee earners’ respective charge-out rates. The ultimate cost to the client is open-ended
because it will depend on how long it takes to conclude the case and how much work the
solicitor has to undertake on the client’s behalf. Nevertheless, the solicitor must still give the
client the best possible information on the likely overall cost of a matter (see 7.3).
With this type of funding the client is personally responsible for solicitor’s fees and
disbursements irrespective of the outcome of the case.

7.5 Fixed fees

A solicitor may agree with the client to complete the work for a fixed fee, or for a fixed fee
plus VAT and disbursements. In a sense this is a type of private funding because the client
is, again, personally responsible for paying the solicitor’s charges, but with a fixed fee the
amount to be charged is established and known at the outset.

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Fixed fees are common in some types of work, such as conveyancing transactions. However,
particularly given the restrictions on the availability of legal aid in civil cases (see Chapter 8),
it is not unusual nowadays for a client to conduct the case themselves, only instructing a
solicitor to carry out a specific step in the proceedings, such as drafting a document or
attending a hearing, often on a fixed fee basis.
It is vital that the solicitor obtains all the relevant information in order to set a fixed fee at a
reasonable but remunerative level. A fixed fee cannot be altered at a later date (unless the
client agrees) if the work turns out to be more expensive than the solicitor first expected.
Inventors Friend Ltd v Leathes Prior (a firm) [2011] EWHC 711
A firm of solicitors agreed a fixed fee to briefly review and comment on the terms of a
document. The fee was agreed before the solicitor involved had seen the actual document.
The client later sued the firm for negligence.
Cranston J commented: ‘When solicitors undertake work at a specific fee, they are generally
speaking obliged to complete it exercising the ordinary standard of care, even if it has
become unremunerative.’

7.6 Business agreements

The Solicitors Act 1974 permits a solicitor to enter into specific types of retainer with the client
in relation to both contentious business and non-contentious business.
Contentious business is defined as ‘business done, whether as a solicitor or an advocate, in
or for the purposes of proceedings begun before a court or an arbitrator, not being business
which falls within the definition of non-contentious business or common form probate business’
(s 87 Solicitors Act 1974). Accordingly, contentious business is work done in relation to
proceedings. However, contentious business starts only once proceedings have been issued.
Somewhat unhelpfully, non-contentious business is defined as ‘any business done as a solicitor
which is not contentious business’ (s 87 Solicitors Act 1974). This includes obvious examples
such as conveyancing or commercial drafting work.

7.6.1 Non-contentious business agreements

A solicitor and client may enter into a non-contentious business agreement in respect of the
solicitor’s remuneration for any non-contentious work. Under this agreement the solicitor may
be remunerated by a gross sum, commission, a percentage, a salary or otherwise.
To be enforceable, the agreement must comply with s 57 Solicitors Act 1974. For example, the
agreement must:

(a) be in writing;
(b) be signed by the client;
(c) contain all the terms of the agreement (including whether disbursements and VAT are
included in the agreed remuneration).
Where the relevant provisions have been complied with, the client will be unable to apply to
have the bill assessed by the court. However, the court may set the agreement aside if the
amount charged by the solicitor is unfair or unreasonable.

7.6.2 Contentious business agreements

A solicitor may enter into a contentious business agreement in respect of their remuneration
for contentious work completed on behalf of the client (ss 59-63 Solicitors Act 1974).
The agreement may provide for the solicitor to be remunerated by reference to a gross sum,
an hourly rate, a salary or otherwise. However, the solicitor may not be remunerated by a
contingency fee.

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In order to be enforceable, the agreement must comply with certain requirements, including:
(a) the agreement must state it is a contentious business agreement;
(b) the agreement must be in writing;
(c) the agreement must be signed by the client; and
(d) the agreement must contain all the terms.
Where the contentious business agreement is enforceable, the client will be unable to apply
to court for an assessment of costs (except where the agreement provides that the solicitor
is to be remunerated by reference to an hourly rate). However, the court may set aside the
agreement if it is unfair or unreasonable.

7.7 Funding civil litigation

It is entirely possible for a client in a civil litigation case to agree to pay their solicitor’s fees
on, say, the basis of a traditional hourly charging rate irrespective of the outcome of the case.
However, the nature of civil litigation is such that there are a number of other funding options
open to the client.

7.7.1 Solicitor and client costs and costs between the parties
In litigation the distinction must be drawn between solicitor and client costs (ie the fees that
the client has agreed to pay to their own solicitor) and costs that may be awarded between
the parties at the end of the case. A solicitor must explain this distinction to the client at the
outset of the case.
If the client loses the case, the client will usually have to pay their own solicitor’s costs and, in
addition, their opponent's costs. The general rule is that the unsuccessful party will be ordered
to pay the costs of the successful party. The amount to be paid will be agreed or assessed by
the court.
If the client wins the case, the client will still be responsible for their own solicitor’s costs.
Usually the opponent will be ordered to pay costs. Again, this will be an agreed amount
or a sum assessed by the court. If the costs recovered are, as is usual, less than the costs
paid, the client will have to bear the loss. Similarly, the client may recover no costs at all (for
example, because the opponent is bankrupt) in which case the client will have to pay their
own solicitor’s costs in full.

1 Variable fees

A solicitor is permitted, in certain circumstances, to charge a fee which varies according to the
outcome of the matter.
For many years, fees dependant on the outcome of the case were outlawed because it
was feared that they would compromise the solicitor’s impartiality and create a conflict
between solicitor and client. However, eventually this view was relaxed and now such fees
are permitted in limited situations. Two types of fees arrangements are permitted, namely
conditional fee agreements and damages-based agreements.

Te done' Conditional fee agreements

A conditional fee agreement (CFA) is defined by s 58(2)(a) Courts and Legal Services Act
1990 as:
an agreement with a person providing advocacy or litigation services which provides
for his fees and expenses, or any part of them, to be payable only in specified
circumstances.

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The ‘specified circumstances’ are whether or not the client succeeds with a claim or,
alternatively, successfully defends a claim.
Although often referred to as a ‘no win, no fee’ agreement, the essence of a CFA is that the
client pays a different amount for the legal services received depending on the outcome of
the case. Under a CFA the solicitor receives no payment, or less than normal payment, if the
case is lost, but receives normal, or higher than normal, payment if the client is successful.
The usual justification for CFAs is that they provide access to justice for those for whom it
would otherwise be denied. However, there is no requirement that the client must be unable
to fund the case by other means.
lf a claim is successful, the solicitor will receive an enhanced fee to reflect that success. The
higher fee payable (the success fee) must be expressed as a percentage increase of the
fee that would be payable if there was no CFA. Normally the fee payable is based on the
solicitor’s usual hourly charging rates. For example, if a solicitor would normally charge £200
an hour, a 10% success fee would mean an additional £20 per hour. The fee is not based on
the solicitor receiving any proportion of money recovered by the client.
From the solicitor’s point of view it is essential that the CFA complies with all formal
requirements. If the CFA is judged to be invalid, the solicitor will not be able to recover any
fees under it. A CFA is enforceable only if it meets the requirements of ss 58 and 58A Courts
and Legal Services Act 1990. These provide that a CFA:
(a) may be entered into in relation to any civil litigation matter, except family proceedings;
(b) must be in writing; and
(c) must state the percentage by which the amount of the fee that would be payable if it
were not a CFA is to be increased.
The success fee cannot exceed 100% of the solicitor’s normal charges. In personal injury cases
there is an additional cap of 25% of the general damages recovered.
If the client wins the case and the opponent is ordered to pay the client’s costs, these cannot
include the success fee. That will be payable by the client.
Under the wording of the legislation it is possible for disbursements to be included as part of
the agreement. However, most firms exclude disbursements simply because they do not want
to run the risk of being left out of pocket. Therefore if the client loses the case, whilst they will
not usually have to pay their own solicitor’s fees, they will be liable for disbursements, such as
counsel's fees or the costs of an expert witness. In addition the client will also be ordered to
pay the opponent's costs, including disbursements. The client may not be in a position to pay
these disbursements and/or may be concerned by the fact that they will not know until the end
of the litigation whether they are liable to their opponent for costs and, if so, for how much.

o Example
Imran is a solicitor. Imran is approached by Selina in relation to a contract dispute. Imran
agrees to take on the case under a conditional fee agreement. Imran’s usual charging
rate is £200 per hour. Imran proposes a ‘no win, no fee’ conditional fee agreement with a
success fee of 40%. This means that Imran‘s hourly charge out rate will be £280 per hour if
Selina wins her claim. Selina agrees.
Scenario 1

The judge finds in Selina’s favour and she is awarded damages of £20,000. Imran’‘s bill
totals £3,000 but the success fee increases this to £4,200. The ‘usual’ fees of £3,000 and
any disbursements would be recoverable from Selina’s opponent but Selina is responsible
for any shortfall and also the success fee of £1,200, which would be paid from her
damages.

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Scenario 2

Selina loses the case and she is ordered to pay her opponent's costs and disbursements.
In addition, Selina must pay her own solicitor’s disbursements but she is not liable for the
bill of £3,000 (nor the success fee).
Faced with the prospect of having to pay their own disbursements and their opponent's costs,
a client may benefit from purchasing after-the-event insurance (ATE) (see 7.7.3.2). This type of
legal expenses insurance policy provides cover for the other side’s costs and the client’s own
disbursements in the event of losing the case.
~ Whilst ATE insurance will cover the client's disbursements in the event that the client loses,
in practice the client will be paying for those disbursements on an ongoing basis during the
course of the litigation. To assist in these circumstances some banks and many ATE insurers
offer loans to fund disbursements. Counsel may be willing to enter into a CFA with the solicitor
(or sometimes with the client) in respect of their fees. However, such an arrangement cannot
be entered into with an expert witness, because an expert’s evidence must be impartial and
therefore should not be capable of being influenced by the outcome of the case.
In entering into a CFA, a solicitor takes a financial risk. A solicitor should always conduct a risk
assessment before entering into a CFA taking account of such factors as:
(a) the chances of the client succeeding on liability;
(b) the likely amount of the damages;
(c) the length of time it will take for the case to reach trial;
(d) the number of hours the solicitor is likely to have to spend on the case.
The risk assessment should also inform the success fee. It should not be set arbitrarily or
automatically set at the highest level. The solicitor should advise the client on how the risk
assessment is reflected in the success fee or, at the very least, be able to demonstrate that
they gave very clear advice on how the success fee was arrived at.
© Herbert v HH Law Ltd [2019] EWCA Civ 527
In this case it was held that a client could not be said to have given informed consent to a
100% success fee applied as standard without any account being taken of the individual risks
in the client's case.
Sir Terence Etherton MR commented ‘in the context of a conditional fee agreement, the
amount of a success fee is traditionally related to litigation risk, as reasonably perceived
by the solicitor or counsel at the time the agreement was made. Across the broad range of
litigation, it would be unusual for it not to be.’
CFAs have become increasingly popular, partly filling the void created by the removal of legal
aid for most civil cases. A CFA provides the client with the security of knowing that they will
not receive a large bill from their solicitor at the end of the case. For the solicitor there is the
opportunity to receive higher fees, but there is also the risk of receiving nothing at all if the
case is lost.

BY Eva} Damages-based agreements

A damages-based agreement (DBA) is an agreement in which the solicitor agrees to receive
payment for their services only if the client is successful in their claim; and the amount of the
solicitor’s fee is linked to the level of compensation/damages obtained.
A DBA is defined by s 58AA(3)(a) Courts and Legal Services Act 1990 as:
an agreement between a person providing advocacy services, litigation services or
claims management services and the recipient of those services which provides that—

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(i) the recipient is to make a payment to the person providing the services if the recipient
obtains a specified financial benefit in connection with the matter in relation to which the
services are provided, and
(ii) the amount of that payment is to be determined by reference to the amount of the
financial benefit obtained.
Therefore under a DBA if the client receives a financial benefit' (usually in the form of damages
paid by the opponent) the solicitor’s fee is an agreed percentage of the compensation
received. For example, if the client recovers £100,000 and the DBA is set at 10% then the client
pays the solicitor a fee of £10,000. This is known as a ‘contingency fee’ because the payment
is contingent upon success. If the client loses the case, the solicitor does not receive a fee.
There is some uncertainty as to whether it is open to a defendant to enter into a DBA. Given
the link between the fee and damages recovered, it would seem that such agreements
are only available to claimants, or can perhaps.extend to defendants with a substantial
counterclaim.
Under a DBA, if the client wins the case the solicitor receives the agreed percentage of the
damages recovered. The amount paid by the client will be net of any costs payable by the
opponent. So, any costs to be paid by the opponent will be set off against the contingency
fee and the client will only have to pay the balance. If the client loses the case, the effect
mirrors that of a CFA, in that the client will not be responsible for their own solicitor’s fees,
but may still be liable for the disbursements as well as, usually, having to pay the opponent's
costs. Therefore, as with a CFA, it may also be appropriate to combine a DBA with ATE
insurance cover (see 7.7.2.1 and 7.7.3.2).

o Example
A firm of solicitors is instructed by Alpha Ltd in a contract dispute. The firm enters into a DBA
with Alpha Ltd which is set at 20%. At trial, Alpha Ltd wins their claim and recover damages
of £100,000 from the defendant, together with £15,000 towards Alpha Ltd's costs.

Under the DBA, Alpha Ltd will owe the firm £20,000 by way of a contingency fee to cover
their legal fees. However, £15,000 will be covered by their opponent, leaving a shortfall of
£5000 for which the client remains responsible. This will be deducted from the damages
so that Alpha Ltd will actually receive £95,000 in total.
A DBA is subject to a cap on the level of the solicitor’s fee. The DBA must not provide for
a payment above an amount which, including VAT, is equal to 50% of the sums ultimately
recovered by the client. The cap is inclusive of counsel's fees, but not other disbursements for
which the client will remain liable. The cap does not apply to appeal proceedings.
A lower cap is set in personal injury cases, namely 25% of general damages received for pain,
suffering, and loss of amenity and damages for pecuniary loss (other than future pecuniary
loss). The cap for employment cases is 35%. Again the cap does not apply to appeals.
To be enforceable a DBA must meet the requirements of s 58AA(4) Courts and Legal Services
Act 1990 and the Damages-Based Agreements Regulations 2013 (S| 2013/609). In essence
this means that the agreement must be in writing and specify the proceedings to which the
agreement relates, the circumstances in which the fee is payable and the reason for setting
the fee at the level agreed. If the DBA is adjudged unenforceable, the client will not have to
pay the solicitor anything.
There is some uncertainty as to the precise requirements of the legislation which has led to a
reluctance amongst some solicitors to enter into DBAs rather than risk the DBA being adjudged
unenforceable and losing out on their fees. Some clarification was provided in the following case:
Lexlaw Ltd v Zuberi [2020] EWHC 1855 (Ch)
In this case the client was bringing a claim against two banks for the mis-selling of financial
products. The firm agreed to act for the client under a DBA which provided that the firm would

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be paid 10% of the damages received. The DBA also provided that in the event of the client
terminating the agreement before the conclusion of the case, the client would pay for the work
done to date.
The firm worked on the case for some considerable time. Then over a short period of time,
in rapid succession, the banks indicated that they would be making an improved offer of
settlement, the client terminated the retainer with the firm and the case was settled on the
basis that the client would receive damages of £1 million.
The firm then sought their fee of £125,000, but the client refused to pay anything. The client
_ argued that the clause requiring payment in the event of early termination of the agreement
breached s 58AA Courts and Legal Services Act 1990 and that, as a consequence, the DBA
was void and unenforceable.
The court held that s 58AA could not be interpreted as preventing a firm being paid in
the event of early termination of the agreement by the client. HHJ Parfitt said that if legal
representatives were not to be entitled to be fairly remunerated for the work done the
consequence would be:
that those representatives would be reluctant to enter into damages-based
agreements and that would be contrary to the purpose of making such agreements
lawful so as to facilitate access to justice. This would have the knock-on consequence
of creating less choice ... for clients wanting to bring general civil litigation claims ...
again contrary to the purpose of the expansion of damages-based agreements into
general civil litigation.
As a means of funding DBAs have not proved to be particularly popular. From the solicitor’s
perspective DBAs are often not commercially attractive simply because the level of damages
awarded in civil litigation means that often the fees received do not even cover basic costs. In
addition, entering into a DBA represents a considerable risk. The nature of a DBA is such that
it is only a viable option where the solicitor is confident not only that the client will succeed,
but also that the opponent will pay both the damages and costs from which the solicitor’s fees
will be taken.
From the client’s perspective a DBA may provide access to justice at relatively little risk.
However, the client may still feel aggrieved when the solicitor ‘takes’ a significant slice of the
damages in fees having apparently done little work (for example, if the case is settled early
in the proceedings). In some cases this may result in the client seeking to avoid paying the full
amount by raising objections with the court based on proportionality.

1 Comparison of CFAs and DBAs

e The enhanced rate is calculated by reference to an uplift in the solicitor’s usual hourly
charging rate in CFAs, but is linked to the damages received in DBAs.
* The success fee is limited to 100% of the usual hourly rate in CFAs; but the contingency fee
cannot exceed 50% of the damages in DBAs.
¢ In both arrangements, the client is not required to pay their solicitor’s fee if the case does
not succeed, or pays a lesser amount depending upon the agreement.
¢ Neither CFAs nor DBAs cover the client's own disbursements, or the opponent's costs,
which must be dealt with separately.
¢ Both must be in writing.
* The availability and terms of these funding arrangements will reflect the infinite variety of
cases and the inherent difficulties of predicting the outcome of litigation.

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7.7.3 Legal expenses insurance

1 heea| Before-the-event insurance (BTE)
A client may have an insurance policy which will cover payment of their solicitor’s fees (often
called before-the-event insurance). It is possible to obtain a policy specifically for the purpose
of covering legal expenses. However, such insurance is commonly purchased as part of
household or motor insurance policies. Therefore, at the outset ‘of the matter, a solicitor should
establish whether the client already has legal expenses insurance in place. According to Lord
Phillios MR (delivering the judgment of the Court) in Sarwar v Alam [2001] EWCA Civ 1401:
In our judgment, proper modern practice dictates that a solicitor should normally
invite a client to bring to the first interview any relevant motor insurance policy, any
household insurance policy and any stand-alone before-the-event insurance policy
belonging to the client and/or any spouse or partner living in the same household as
the client.
An insurance policy is unlikely to cover legal expenses in every type of case, and so the
precise terms of the individual policy must be examined. Typically, motor insurance will cover
aspects of the vehicle ownership and household insurance will cover expenses involved with
one or more of the following: ownership of the property, employment, personal injury, sale
of goods and supply of services. Even where the subject matter is covered, the policy may
exclude or limit certain costs.
As with any insurance, in order to take advantage of the terms of the policy the insurer must
first accept the claim. The insurer may not accept the claim if, for example, the case does not
have a good prospect of success (generally more than 50%) or the case concerns issues that
arose before the policy was taken out.
An issue which can arise with legal expense insurance is that the insurer will usually wish the
case to be conducted by a firm on its own panel of solicitors. However, at least from the point
of the start of proceedings the client is entitled to instruct a solicitor of their own choosing.
In a litigation matter the solicitor should also establish whether any insurance policy covers the
client's liability for another party's costs. If not, it may be possible for the client to purchase
after-the-event insurance to cover such liability.

1 JO2 After-the-event insurance (ATE)

ATE covers the legal expenses incurred in making or defending a case. It is available for most
types of civil litigation with the exception of family law. As the name suggests the insurance is
taken out after the dispute has arisen.
The cover provided by the policy will be specific to the case and the client’s needs. Whilst
it is possible to obtain ATE to cover the client’s own legal fees, ATE usually covers liability
for disbursements and the opponent's costs. ATE is often coupled with a CFA (see 7.7.2.1)
which does not protect the client from liability for the opponent's costs in the event of losing
the case.
The client will have to find an insurer willing to take on the risk. ATE will only be offered where
the insurer is confident in the success of the case (for most insurers this means a 60% chance
of success).
Given the fact that, by definition, a dispute has already arisen ATE may be expensive to
obtain. The premium payable will depend on the strength of the client's case and the level
of cover required. It may be possible to arrange a ‘staged’ premium, whereby additional
instalments are paid if the case continues beyond certain defined stages. The client will bear
the cost of taking out ATE themselves as the premium is not recoverable from the other side by
way of costs.

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Figure 7. 1 Comparison flowchart

FUNDING

Legal Expenses Private Conditional Fee Damages-Based

Insurance Funding Agreement Agreement

* Check if client covered by

before-the-event insurance. Client wins claim
* If yes, is the level of cover * Opponent pays client's * Opponent pays client's costs.
sufficient? Advise client of costs. * Client pays percentage of
©xcess. * Client pays success fee damages (contingency fee) to
¢ If no, consider after-the- (based on solicitor’s usual own solicitor.
event insurance to cover hourly charging rate). ¢ Maximum contingency fee is
disbursements and ¢ Maximum success fee is 50% of the damages.
opponent's costs. 100% of basic fee. ¢ The court will assess
* Is it available and/or proportionality.
affordable?

Client loses claim

*Client contractually liable for
* Client does not pay own fees.
own costs.
¢ But client may be liable for:
*lf client wins, opponent may e own disbursements
be ordered to pay (most of) e opponent's costs.
client's costs.
° After-the-event insurance may
*lf client loses, must pay own
be taken out to cover these.
and opponent's costs.

A solicitor who recommends or arranges ATE for a client will be carrying out insurance
distribution activities. The solicitor must take account of the restrictions imposed by the
Financial Services and Markets Act 2000 (see Chapter 4).

7.7.4 Third party funding

As the name suggests third party funding (also known as ‘litigation funding’ or ‘litigation
finance’) describes the situation where someone, with no other connection to the case, agrees
to fund the costs of litigation. For some clients the source of funding may be a trade union
or professional organisation which in certain circumstances will agree to be responsible for
payment of the legal costs of their members. However, for most clients third party funding will
involve a specialist litigation funding company which will agree to fund the costs of litigation in
return for a fee payable from money received by the litigant at the end of the case.
Historically, the commercial funding of litigation was outlawed on public policy grounds,
essentially on the basis that a third party would seek to manipulate the litigation, inflate
damages and thereby taint the judicial process. However, in recent years, commercial funding
has become accepted such that a third party funding agreement will be valid in the absence of
some kind of impropriety or wrongdoing. For example, in the case which is said to have paved
the way for the introduction of third party funding, Arkin v Borchard Lines Ltd [2005] EWCA Civ
655, the court affirmed ‘the commercial funder who is financing part of the costs of the litigation
in a manner which facilitates access-to justice and which is not otherwise objectionable’.
Third party funding is primarily used by commercial claimants. It is not unknown for individual
claimants, but as a matter of policy commercial funders do not fund personal injury and

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consumer cases. Commercial funders take their fee from the money recovered at the end of
the case and so third party funding is not usually available to defendants. However, some
commercial funders are willing to provide funding for defendants who have a substantial
counterclaim.
A commercial funder will only take on a case where there is a good chance of success. Most
funders interpret this as meaning that the chance of success must be at least 60%. The size of
the likely award is also important in that it must be sufficient to cover the funder’'s fee. As a
matter of policy and commercial pragmatism funders do not take on cases where the litigant
would be left with less than 50% of the amount recovered after deduction of the funder’s fee.
The funder will also be influenced by such factors as the strength or any counterclaim, the
likely timescale of the litigation and the ability of the opponent to pay.
Third party funding is aimed at covering the client's own costs and disbursements. However,
exactly what is covered will depend on the terms of the funding agreement. It is common,
for example, for the funder to only cover part of the solicitor’s fees with the remainder being
covered by the client or via a CFA (see 7.7.2.1) or DBA (see 7.7.2.2).
If the case is successful the funder will receive their fee from the amount recovered by the
client. How the fee is calculated depends on the terms of the funding. agreement. Various
methods of calculation are employed, for example, the fee may be a percentage of the
amount recovered or a multiple of the amount spent on legal fees.
One issue which can arise in relation to third party funding is liability for the opponent's costs
in the event that the client loses the case. The Arkin case (above) placed a limit or cap on the
liability of the commercial funder. However, in Chapelgate Credit Opportunity Master Fund
Ltd v Money and others [2020] EWCA Civ 246 it was held that costs are in the discretion of the
court with the result that the funder was ordered to pay all the opponent's costs from the date
of the funding agreement. Commercial funders will factor in this potential liability to their fees
and/or their willingness to offer funding in the first place.
Any solicitor acting for a client under third party funding must have regard to their
professional conduct responsibilities. Minimising the influence which the funder has over
the conduct of the case will reduce the risk of a conflict of interest arising (see Ethics and
Professional Conduct). Similarly the solicitor must be wary of breaching client confidentiality
(see Ethics and Professional Conduct) when asked to provide the funder with information
and/or documentation relating to the case.

Summary
The main funding options are:
e Private funding - the client pays for the work done based on the solicitor’s hourly
charging rate.
e Fixed fees - the client pays a set amount for work done.
¢ Conditional fee arrangements - if client wins the solicitor receives an enhanced fee
calculated as a percentage of the solicitor’s usual charging rate. If the client loses the
solicitor receives a lower fee or no fee.
¢ Damages-based agreement - if the client wins the solicitor receives a percentage of the
damages received. If the client loses the solicitor receives no fee.
¢ Before-the-event insurance - the solicitor’s fees are covered by an existing policy (eg a
household insurance policy).

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 Funding Options

After-the-event insurance - a policy usually taken out to cover the client’s own
disbursements and liability for the opponent's costs in the event of the client losing.
* Third party funding - a third party (usually a commercial funder) agrees to fund the
litigation.

Sample questions

Question 1
A solicitor agrees to act for a client on a ‘no win, no fee’ conditional fee agreement with a
success fee of 25%.
Which of the following describes the costs position?
A If the client wins, the solicitor’s fee will be calculated at 25% of the damages received.
B_ If the client wins, the opponent will pay the success fee.
C If the client wins, the client will pay nothing in respect of their own costs.
D_ If the client loses, the client will have to pay disbursements.
E If the client loses, the solicitor’s fee will be calculated at their usual charging rate.

Answer
Option D is correct. This is a ‘no win, no fee’ CFA, so if the client loses they will not have to
pay anything in fees, but will still be liable for disbursements (and the opponent's costs).
In a CFA the success fee is calculated as a percentage of the usual charging rate, not a
percentage of the damages received. If the client wins they will have to pay the success fee
as it cannot be recovered from the opponent.

Question 2
A junior solicitor is approached by a wealthy individual in relation to a personal injury
claim. The solicitor’s assessment of the case is that there is a good chance of obtaining
substantial damages. The solicitor tells the prospective client that the firm has a strict policy
of not acting on the basis of contingency fees. Nevertheless, the prospective client requests
that the case be dealt with under a damages-based agreement (DBA).
Which of the following best explains whether the solicitor should agree or refuse to act
under a DBA?
A Refuse, because that is the firm’s policy.
B Refuse, because the client can afford to pay privately for the solicitor’s costs.
C Agree, because the client has the right to decide how their legal costs are funded.
D Agree, because to do so is in the client's best interests.
E Agree, because the risk to the firm is low.

Answer
Option A is correct. It is for the client to decide how their costs are funded, but that does not
impose an obligation on the part of a firm to act for a client on a particular basis. Therefore
a firm may refuse to act under a DBA as a matter of policy. A junior solicitor should adhere to
the firm’s policy even if the risk to the firm in an individual case is low. If it is in the client's best
interests to have a DBA the client should be referred to another firm.

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Question 3
A solicitor agrees to carry out a conveyancing transaction for a client at a fixed fee of £500
plus VAT and disbursements. A month into the transaction, it becomes clear that the solicitor
will have to undertake much more work than was originally envisaged.
Which of the following best describes what the solicitor can do?
A Tell the client that the solicitor can no longer act for the client.
Start charging the client on the basis of the solicitor’s hourly charging rate.
Ask the client to agree to an increase in the solicitor’s fees.
Write to the client providing the best possible information on the revised overall costs.
Carry out no further work on the transaction pending the client agreeing to an increase
@mio
oO
in fees.

Answer
Option C is correct. A fixed fee cannot be changed at a later date if it transpires that the case
is more expensive than originally thought (save with the client's agreement). Although it is not
a step to be undertaken lightly, all that the solicitor can do is to ask the client to agree to an
increase. If the client refuses, the solicitor must complete the work for the fee agreed.

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8.1 Introduction 104

8.2 The solicitor and the Legal Aid Agency 104
8.3 Civil legal aid 105
8.4 Criminal legal aid 108

SQE1 syllabus
This chapter will enable you to achieve the SQE1 Assessment Specification in relation
to Functioning Legal Knowiedge concerned with Legal Services:
¢ Funding options for legal services.
* — Eligibility for civil legal aid.
¢ — Eligibility for criminal legal aid.
Note that for SQE1, candidates are not usually required to recall specific case
names or cite statutory or regulatory authorities. Cases are provided for illustrative
purposes only.

Learning outcomes
By the end of this chapter you will be able to apply relevant core legal principles
and rules appropriately and effectively, at the level of a competent newly qualified
solicitor in practice, to realistic client-based and ethical problems and situations in the
following areas:
¢ Civil and criminal legal aid.
¢ The scope of legal aid.
e Individual client eligibility.
¢ Means tests.
¢ Merits tests.
e The statutory charge.

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8.1 Introduction
Legal aid is the means by which those who are eligible can have some or all of their legal
fees paid from public funds. Legal aid in both civil and criminal cases is primarily governed by
the Legal Aid, Sentencing and Punishment of Offenders Act 2012, although much of the detail
appears in a range of statutory instruments. The legal aid scheme is administered by the
Legal Aid Agency, an executive agency of the Ministry of Justice.
This chapter looks at:
e the solicitor and the Legal Aid Agency
¢ civil legal aid
* criminal legal aid

8.2 The solicitor and the Legal Aid Agency

To carry out legal aid work, a firm of solicitors must have a contract with the Legal Aid Agency
which covers the type of work relevant to the client’s case, eg criminal defence work, care
proceedings, immigration and so on. Firms which have been awarded a contract are subject
to an annual audit by the Legal Aid Agency to ensure that their files are being run properly
and that the firm’s case management systems are working correctly.
Even if a firm has a relevant contract with the Legal Aid Agency, this does not oblige the firm
to accept instructions from the client and/or act for the client under the legal aid scheme
(save under the duty solicitor scheme - see 8.4.2). Just as with any other client, the firm is
still entitled to take a view of the case overall and, if it is considered to be unremunerative,
decline to act. If instructions are declined, it may be appropriate to advise the client to seek
legal advice elsewhere.
If a solicitor does not undertake legal aid work themselves, but is of the view that the client
may be entitled to legal aid, the solicitor should inform the client accordingly at the outset of
the case and, if necessary, tell the client to seek other advice.
© David Truex, Solicitor (a firm) v Kitchin [2007] EWCA Civ 618
In this case the Court of Appeal held that a solicitor must from the outset of a case consider
whether a client might be eligible for legal aid. The Court observed that if the financial
position of the client had been considered properly, and considered in the context of whether
they might be eligible for legal aid, the result would have been advice to go to a different firm
offering legal aid at a very early stage. The solicitor had failed to give this advice and, as a
result, the firm was denied its fees.
Acting for a client who is in receipt of legal aid places additional duties on the solicitor. For
example, the solicitor must inform the court and the other parties that the client has the benefit
of legal aid. Whilst the solicitor will still owe the usual professional conduct duties to the client,
the solicitor will also have separate duties to the Legal Aid Agency. For example, the solicitor
must inform the Legal Aid Agency if the client acts unreasonably (eg refuses a reasonable
offer of settlement) or has given inaccurate or misleading information to the Legal Aid Agency.
This duty to the Legal Aid Agency overrides the solicitor’s duty of confidentiality to the client
(see Ethics and Professional Conduct).
At the end of the case the solicitor will claim their costs from the Legal Aid Agency. There are
set levels of remuneration for legal aid work which are usually lower than the amount which a
solicitor would charge a privately paying client in an equivalent case.

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Civil legal aid

In the past those of modest means who could demonstrate that their case had merit were
entitled to have their legal fees paid through the legal aid scheme. In recent years however,
civil legal aid has been severely curtailed and is now only available in limited circumstances.
The civil legal aid scheme is hugely detailed and complex. This manual can only provide
a broad and general overview of the basic scheme. It should be noted that certain types
of cases (such as immigration cases and family cases) fall under subject-specific rules and
_ regulations which are beyond the scope of this manual.

8.3.1 Forms of civil services

The legislation refers to solicitors providing ‘forms of civil services’, in other words types of
legal aid work. Civil legal aid falls into two categories: controlled work and licensed work.
Broadly, with controlled work it is for the solicitor to determine the client's eligibility, whereas
licensed work is authorised by the Legal Aid Agency on a case by case basis.
Within these two categories there are three forms of civil services available (there are more
forms of civil services available in family cases). The application of each form is based
broadly on how litigious the case becomes. Between them these forms of civil services can
cover a range of legal work, from basic advice to advocacy before the court.

8.3.11 Legal Help

This covers the solicitor giving basic advice and limited steps following on from that advice.
This might involve drafting a letter or obtaining information from a third party. It does not
extend to issuing court proceedings. Legal Help is controlled work.

S582 Help at Court

This type of funding covers advice and assistance, including advocacy. The work which the
solicitor carries out must be in relation to a particular hearing rather than representation in
the case generally. A typical case in which Help at Court would be used is where a client is
subject to possession proceedings to which there is no defence, but the client needs help in
putting arguments to the court with the aim of postponing or delaying eviction. Help at Court
is controlled work.

65.1.0 Legal Representation

Legal Representation is available to a client who is a party to proceedings or who is
contemplating starting proceedings. It can cover the conduct of the client's case, if necessary,
up to and including representation before the court.
Legal Representation is licensed work. This means that in most cases an application must be
made to the Legal Aid Agency. If the application is successful the Legal Aid Agency will issue
a legal aid certificate.
Legal Representation can be granted on an investigative or full basis. Investigative
representation covers the solicitor’s work in assessing the strength of the case. Full
representation covers the issuing and conduct of the proceedings, including advocacy at the
final hearing. In practice the Legal Aid Agency will usually place limitations on the legal aid
certificate which restricts the scope of the representation which can be given and/or sets a
maximum amount that it will pay for legal fees. If the case requires more work, the solicitor
must apply for an amendment to the certificate and/or an increase of the costs limitation.
Legal Representation can be obtained on an emergency basis where the client is in urgent
need of legal advice and assistance. This might be appropriate, for example, if the client is
facing imminent homelessness or under threat of domestic violence.

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8.3.2 The scope of legal aid

For legal aid to even arise as a possible funding option the case must be of a type which falls
within the overall scope of the civil legal aid scheme. Legal aid is only available for a case if
it is of a type specified under Sch 1, Pt 1 Legal Aid, Sentencing and Punishment of Offenders
Act 2012.
Legal aid is not available for large areas of legal work. For example, with limited exceptions,
negligence claims for personal injury, divorce and family disputes about children are
excluded. Legal aid is not available for matters arising out of the carrying on of a business,
including claims brought or defended by sole traders. In addition legal aid will not usually be
available for cases that could be financed by a Conditional Fee Arrangement (see 7.7.2).
Cases where legal aid remains available include those where the client faces homelessness,
family cases where the client is the victim of domestic abuse, cases in which the client has
been subject to discrimination, immigration cases and care proceedings.
Even if a case falls outside the scope of legal aid, it may still be possible to obtain funding if
the circumstances are ‘exceptional’. Legal aid will be granted in any case where the Legal Aid
Agency is satisfied that refusal would be a breach of the client’s human rights. That is a high
threshold and so the number of successful applications for exceptional case funding remains
relatively small. Nevertheless it remains an option where the interests of justice require.
Where a case falls within the scope of legal aid or is suitable for exceptional case funding it
is still necessary to demonstrate that the client is eligible based on the merits of the case and
the client's financial circumstances.

8.3.3 Merits test

The legislation sets out a number of merits tests to be applied depending on the form of civil
services required and the nature of the case. Although the details vary, the tests all involve an
assessment of the client’s prospects of success and the application of a cost-benefit criteria.
Legal Help and Help at Court are subject to the ‘sufficient benefit test’. Legal aid will only be
available is there is a sufficient benefit to the client, having regard to the circumstances of the
case, including the client's personal circumstances, to justify the work being carried out.
Legal Representation is dependant of the client's prospects of success. Broadly, Legal
Representation will not be granted if those prospects are assessed at less than 50%. In
addition the client must satisfy a general merits test or a specific merits test depending on the
type of case. For example, if the case involves a monetary claim the merits test will involve
a balancing of the damages that are likely to be received against the likely costs involved
in the case. In a non-monetary case the test is whether the benefits to be gained justify the
likely cost such that a reasonable privately paying client would be prepared to proceed (the
‘reasonable privately paying client test’).
Legal representation will also be refused if the Legal Aid Agency takes the view that other
funding is available to the client (for example legal expense insurance) or if the case is
suitable for a Conditional Fee Arrangement (see 7.7.2).

8.3.4 Means test

A client will only qualify for legal aid if their capital and income (combined with the resources
of any partner) does not exceed certain limits. The client is required to produce full details of
their financial circumstances in order to enable the means test to be carried out.
The capital limit for civil legal aid is £8,000 (£3,000 for immigration cases). If the client has
capital of more than £8,000, they do not qualify for legal aid and there is no need to consider
the client’s income position.

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A client in receipt of one of a number of welfare benefits (income support, income-based job
seeker's allowance, income-related employment and support allowance, guarantee credit
element of pension credit or universal credit) automatically qualifies for legal aid on the basis
of income, but their capital must still be assessed.
For other clients the income test first considers the client's gross income. If the client's gross
monthly income exceeds £2,657 the client does not qualify for legal aid (the figure is slightly
higher if the client has five or more children). If the client’s gross monthly income is £2,567 or less
the assessment goes on to make certain deductions (to reflect the client's family circumstances
and their basic living expenses) to arrive at a figure for the client's disposable income. The client
will only qualify for legal aid if their monthly disposable income is less than £733.
Even where the client's capital and income is below these limits, the means assessment may
reveal that the client can afford to pay something towards their legal costs. For licensed work
(for example, legal representation) if the client's monthly disposable income is above £315 or
their capital above £3,000 legal aid will be offered to the client on the basis that they make a
contribution towards their legal fees. If the contribution is from income it will take the form of
monthly payments.

© Example
Nilu applies for legal aid in the form of Legal Representation. Nilu has capital of £4,000
and her gross income is £1,500 (Nilu’s monthly disposable income is £300).
Nilu’s capital is less than £8,000. Nilu’s gross income is below the £2,567 monthly limit and
her disposable income is below the £733 limit. Therefore, provided that she satisfies the
merits test, Nilu is eligible for legal aid on the basis of both capital and income. However,
as Nilu’s capital exceeds £3,000 legal aid will be offered to her on the basis that she
makes a capital contribution to her legal fees.

8.3.5 The statutory charge

Legal aid does not necessarily amount to free legal representation for the client. In broad
terms, if the client benefits financially from the case, any money or property the client receives
can be used in repayment of the solicitor’s fees. This is the so-called statutory charge.
For the statutory charge to arise the client must have been wholly or partly successful in the
proceedings, or obtained an out-of-court settlement which resulted in the client gaining or
keeping money or property. Usually (but not invariably) the client must have been in receipt of
Legal Representation.
In all cases the Legal Aid Agency will attempt to recoup the money it has paid on the client's
behalf. In order to do so, it will first claim any money paid pursuant to a costs order made
in the client’s favour. Secondly, if a shortfall remains, the Legal Aid Agency will retain any
contribution paid by the client under the terms of the offer of legal aid. Thirdly, if there is still a
deficit any money recovered or preserved in the proceedings will be applied to make up the
shortfall.
To facilitate collection of the statutory charge, the solicitor is required to pass any money
payable to the client under a court order or out-of-court settlement to the Legal Aid Agency.
Usually the statutory charge is payable immediately. However, if the property recovered is
the client’s home the Legal Aid Agency may agree to postpone enforcement of the statutory
charge. If enforcement is postponed the statutory charge will be protected by registration
against title to the property (and simple interest applied) so that the fees will be recouped
when the property is eventually sold.
Given the obvious financial implications of the statutory charge it is vital that the client fully
understands how it operates and is reminded of it throughout the case. The client should also
be advised periodically as to the costs incurred to date.

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8.4 Criminal legal aid

Public funding is also available for the cost of a defendant's legal representation in criminal
cases before both the magistrates’ court and the crown court. Criminal legal aid is more
widely available than civil legal aid. Nevertheless there are strict eligibility criteria set out in a
number of statutory instruments.

8.4.1 Advice at the police station

Anyone attending at the police station (whether under arrest, or attending voluntarily) is
entitled to free legal advice, irrespective of their means. The solicitor will claim for the work
done under the Police Station Advice and Assistance Scheme. The solicitor will receive a
single fixed fee regardless of the nature of the case or the time actually spent.

8.4.2 The duty solicitor scheme

Some solicitors are members of the duty solicitor scheme. A duty solicitor will be on a
rota to attend a magistrates’ court on given days. The duty solicitor is available to advise
any defendant who does not have their own solicitor but who requires legal advice and/
or representation. The duty solicitor will claim their costs in attending court from under the
Advocacy Assistance (Court Duty Solicitor) Scheme.
The scheme operates in a similar way in respect of police stations. The duty solicitor will be
called out to attend the police station to advise anyone who has been arrested and does not
have their own solicitor.
A solicitor advising/acting under the duty solicitor scheme cannot refuse instructions on the
basis that to do so would be unremunerative.

8.4.3 Application for legal aid

A client who has been charged with a criminal offence and who wishes to seek public funding
for their legal fees in respect of the resultant proceedings must make an application for
criminal legal aid. Legal aid will only be granted if the client is able to demonstrate that both
the merits of the case and their own financial means are such as to justify public funding. The
client will therefore have to satisfy two tests.

8.4.3.1 The interests of justice test

This test assesses the merits of the case. The client must demonstrate that it is in the interests
of justice for them to receive public funding to cover the cost of their legal representation.
A number of factors are taken into account in deciding whether a client can satisfy the
interests of justice test (Sch 3, para 5(2) Access to Justice Act 1999):
(a) whether the individual would, if any matter arising in the proceedings is decided
against them, be likely to lose their liberty or livelihood or suffer serious damage to their
reputation;
(b) whether the determination of any matter arising in the proceedings may involve
consideration of a substantial question of law;
(c) whether the individual may be unable to understand the proceedings or to state their
own case;
(d) whether the proceedings may involve the tracing, interviewing or expert cross-examination
of witnesses on behalf of the individual; and
(e) whether it is in the interests of another person that the individual be represented.

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Additionally, there is a catch-all provision under which it is open to the client to demonstrate
that there is ‘some other reason’ making it in the interests of justice for them to receive
legal aid.
Each of these factors must be considered and weighed. One or more may be applicable to a
varying extent depending on the particular facts of the client’s case. Broadly, the more serious
the consequences for the client or the more complex the proceedings, the more likely it is that
the client will be able to satisfy the test.
The test is automatically met if the client is under 18 years of age and in the case of crown
court trials.
The interests of justice test is considered in more detail in Criminal Practice.

8.4.3.2 Means test

Clients who are under 18 or who receive one of a number of welfare benefits (income
support, income-based jobseeker’s allowance, guaranteed state pension credit, income-based
employment and support allowance or universal credit) are entitled to criminal legal aid
without needing to satisfy the means test.
All other clients will need to submit full details of their financial circumstances. Initially a
rudimentary assessment will be carried out by taking the client’s gross annual income and
dividing it by a set figure according to whether the client has a partner and/or children. This
produces a figure for the client’s ‘adjusted income’. For magistrates’ court cases the level
of adjusted income will either put the client at one end of the spectrum by determining that
the client is eligible or not, or put the client into the middle ground which necessitates a full
means test being carried out. For crown court trials, those at the higher end of the spectrum
will also be subject to a full means test.

Adjusted income Magistrates’ court Crown court trial

£12,475 or less Eligible Eligible

£12,475 - £22,325 Full means test Full means test

£22,325 and above Not eligible Full means test

The full means test is more sophisticated as it takes account of the client's family
circumstances and involves the deduction of some essential expenses from the client's income,
such as mortgage repayments or rent, to produce a figure for the client's disposable income.
For cases before the magistrates’ court the purpose of the means test is to determine whether
the client is eligible for legal aid or not: to be entitled to legal aid the client must have an
annual disposable income of £3,398 or less. For crown court trials, if a client has a disposable
income between £3,389 and £37,500, the means test may determine that the client can afford
to make some contribution towards their legal fees, whether from income or capital, and legal
aid will be offered to the client on that basis.

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8.4.3.3 Representation order

The result of a successful application for criminal legal aid is that a representation order will
be issued and sent to the solicitor. This is in effect confirmation that the solicitor may start
incurring legal costs on the client's behalf which will be covered under the legal aid scheme.
Depending on the terms of the representation order it will cover the costs of conducting the
case for the client. If appropriate, the terms of the representation order can be extended, for
example to cover the costs of an appeal.

Summary
* The legal aid scheme enables those who qualify to have their legal fees paid from
public funds.
¢ Only firms with a relevant contract with the Legal Aid Agency can carry out legal
aid work.
¢ The solicitor has an ongoing relationship with the Legal Aid Agency throughout the client's
case and owes certain duties to the Legal Aid Agency.
¢ The main forms of civil services are Legal Help, Help at Court and Legal Representation.
¢ Civil legal aid is only available for a limited range of cases.
¢ To qualify for civil legal aid the client must satisfy tests as to their own means and the
merits of the case.
¢ The statutory charge operates so that the client may have to repay their legal fees from
money or property received or preserved in the proceedings.
* Criminal legal aid is available for advice at the police station, under the duty solicitor
scheme and by application for a representation order.
¢ To qualify for a representation order the client must satisfy the interests of justice test and
the means test.

Sample questions

Question 1
A solicitor is instructed by a client in a claim for damages. The client is in receipt of income
support and has capital of £1,000. The solicitor is confident that the case has a good
chance of success and satisfies the merits test. The client submits an application for legal
aid in the form of Legal Representation.
Which of the following describes the costs position if the application is successful?
A The client will be asked to make a monthly contribution towards their legal fees.
The client is entitled to free legal representation.
The client may have to repay some of their legal fees.
The solicitor can choose to charge for the work done at any hourly rate.
w The solicitor can insist that the client pay money on account of costs.
moO

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Answer
Option C is correct. If the client is awarded damages in the case, the effect of the statutory
charge is that the client may have to repay some of their legal fees. Therefore the
representation is not free (option B therefore is wrong). The client's means are not such as
would require them to make a contribution towards their legal fees (option A is wrong). The
solicitor will be remunerated at set levels (option D is wrong). Finally, option E is wrong as
the solicitor must look to the Legal Aid Agency for payment of their fees and so the solicitor
cannot ask the client to pay money on account.

Question 2
A solicitor is instructed by a client who is the defendant in possession proceedings. If the
claimant succeeds in the case the client will be evicted and become homeless. However,
the solicitor is confident that the client has a good defence and would win the case. The
client has no capital and is in receipt of universal credit.
Is the client likely to be eligible for legal aid in respect of the proceedings?
A_ No, because civil legal aid is only available to claimants.
B_ No, because the case falls outside the scope of legal aid.
C No, because a reasonable privately paying client would not be prepared to proceed
with the case.
D_ Yes, because a client in receipt of universal credit automatically qualifies for legal aid.
E Yes, because the client satisfies both the means and the merits test.

Answer
Option E is correct. Legal aid is available to both claimants and defendants; accordingly,
option A is wrong. A case in which the client is faced with homelessness is within the scope of
legal aid; option B is wrong. The ‘reasonable privately paying client’ test would be satisfied
given the threat of homelessness and the client has a good chance of success; option C
therefore is wrong. Option D is wrong, as a client in receipt of universal credit does not
automatically qualify for legal aid - they must still satisfy the merits test and the capital element
of the means test. On these facts the client satisfies both the merits test (as above) and means
tests (the client is in receipt of universal credit and has capital of less than £8,000).

Question 3
A solicitor is instructed by a client who is the defendant in criminal proceedings. The client
is charged with stealing from their employer. The case will be dealt with by way of a crown
court trial. The client has no capital and is not in receipt of any welfare benefits.
Which of the following best describes the position with regard to the client's eligibility
for legal aid in respect of the trial?
A Legal aid will not be granted if the risk of the client receiving a custodial sentence
is low.
B Legal aid will only be granted if a reasonable privately paying client would proceed
with the case.
C Legal aid will be granted if the client's annual adjusted income is £10,000.
D Legal aid will be granted because the client has no capital.
E Legal aid is unlikely to be granted unless a conviction for stealing from an employer
would result in serious damage to the client's reputation.

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Answer

Option C is correct. To be eligible for criminal legal aid the client must satisfy both the
interests of justice test and the means test. In a crown court trial the interests of justice test
is automatically satisfied, so option E is wrong. The client has no capital, but their income is
relevant for the means test (option D is wrong). An adjusted income figure below the limit
of £12,475 satisfies the means test and therefore legal aid will be granted. The reasonable
privately paying client test is relevant for civil legal aid (option B is therefore wrong).

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 Index

A Cc
acquisition, use or possession, 81 chartered accountants, 7
adequate and appropriate insurance, 21 chartered legal executives, 6
advice privilege, 83 CILEx Regulation, 6
after-the-event insurance, 98-9 civil legal aid, 105
age, and discrimination, 27 forms of civil services, 105
alternative business structures, 15 help at court, 105
arranging, 46, 77 legal help, 105
authorised disclosure defence, 78 Legal Representation, 105, 106
disclosure after prohibited act, 80 means test, 106-7
disclosure during prohibited act, 79-80 merits test, 106
disclosure prior to act taking place, 79 scope of legal aid, 106
making as disclosure, 78-9 statutory charge, 107
reasonable excuse for client account, and money laundering, 63
non-disclosure, 80 client due diligence, 66
criminal property, 78 enhanced due diligence, 69-70
‘know or suspect,’ 77-8 ongoing monitoring, 70
litigation proceedings, 78 requirement for, 66-7
overseas defence, 80 simplified due diligence, 69
penalties, 80 standard due diligence, 67-9
authorisation, 16 client information, 22
of individuals, 17 commercial unregulated organisation,
admission, 17-18 solicitors in, 20
practising certificates, 18-19 companies, 15
licensed bodies, 16 company and trusts, and money laundering, 63
authorised disclosure defence, 78 comparator, direct discrimination, 28
disclosure after the prohibited act, 80 compensation, 34
disclosure during the prohibited concealing offence, 81
act, 79-80 conciliation, 34
disclosure prior to the act taking place, 79 conditional fee agreement (CFA), 93-5, 97, 99
making as disclosure, 78-9 confidentiality, 85
reasonable excuse for non-disclosure, 80 consumer credit activities, 52-3
authorised firms, Indemnity Insurance Rules, 21 contentious business arrangements, 92-3
authorised third persons, 47-8 contracts of insurance, 53
authority, of financial services, 44 costs lawyers, 6
Council for Licensed Conveyancers, 6
criminal conduct, 17-18
Criminal Finances Act 2017, 71
Bar Standards Board, 6, 7 criminal legal aid, 108
barristers, 6, 35 advice at police station, 108
before-the-event insurance, 98 application for legal aid, 108
beneficial owner, 67-8 , interests of justice test, 108-9
business arrangements, funding options, 9 means test, 109
contentious, 92-3 representation order, 110
non-contentious, 92 duty solicitor scheme, 108
business test, 45 criminal property, 78
Index

D protected characteristics, 27
age,27
damages, and claims, 33 disability, 27-8
damages-based agreement (DBA), 95-7, 99 gender reassignment, 28
direct discrimination, 28 marriage/civil partnerships, 28
comparator, 28 pregnancy and maternity, 28
less favourable treatment, 28-9 race, 27
protected characteristics, 29 religion and belief, 27
disability discrimination, 27-8, 30 sex, 27
disclosure sexual orientation, 27
of disclosure, 84 solicitors as employers
failure to, 81, 83 claims, 34-5
disclosure, 82 making adjustments, 34
information, 82 occupational requirements, 34
legal professional privilege unlawful acts, 33
defence, 82-3 vicarious liability, 34
objective test, 82 solicitors as service providers
overseas defence, 83 claims, 33
penalties, 83 making adjustments, 32
raining defence, 82 unlawful behaviour, 31-2
regulated sector, 82 vicarious liability, 32
of investigation, 84 Equality and Human Rights Commission
see authorised disclosure defence (EHRC), 26
discrimination see Equality Act 2010 exclusions, financial services, 47
diversity, 37 authorised third persons, 47-8
duty to make adjustments, 31 execution-only client, 48
auxiliary aid provision, 31 introducing, 47
physical features, 31 ‘professional/necessary’ exclusion, 48
provision, criterion or practice, 31 takeover exclusion, 48-9
solicitors trustees or personal representatives, 48
as employers, 34 execution-only client, 48
as service providers, 32 exemption for professional firms, financial
services, 50
E ‘incidental,’ 50-1
no other regulated activities, 51
Employment Tribunal, 34-5
not prohibited, 51
enhanced due diligence, 69-70
‘pecuniary or other advantage,’ 50
equality, 37
permitted regulated activities only, 51
Equality Act 2010, 26
barristers, 35
F
discrimination under, 26
duty to make adjustments, 31 Financial Action Task Force, 64
physical features, 31 Financial Conduct Authority, 7, 20, 43
provision, criterion or practice, 31 financial promotion prohibition, 45
provision of auxiliary aid, 31 Financial Promotions Order 2005
overlap with professional conduct, 36 exemption for exempt professional
positive action, 35 firms, 54
prohibited conduct non-real time promotions, 55
direct discrimination, 28-9 real-time promotions, 55
disability discrimination, 30 exemptions, 54
harassment, 30-1 introducers, 55
indirect discrimination, 29-30 one-off promotions, 55
victimisation, 30 prohibition, 54

114
 Index

financial services, 42-3, 55-7 before-the-event insurance, 98

authority, 44 business arrangements, 92
financial promotion prohibition, 45 contentious, 92-3
general prohibition, 44 non-contentious, 92
consumer credit activities, 52-3 conditional fee agreement, 93-5, 97, 99
exemption for professional firms, 50 damages-based agreement, 95-7, 99
‘incidental,’ 50-1 fixed fees, 91-2
no other regulated activities, 51 funding civil litigation, 93
not prohibited, 51 legal expense insurance, 98-9
‘pecuniary or other advantage,’ 50 solicitor and client costs and costs
permitted regulated activities only, 51 between parties, 93
Financial Conduct Authority, 43 third party funding, 99
Financial Promotions Order 2005 variable fees, 93-7, 99
exemption for exempt professional private funding, 91, 99
firms, 54-5 professional conduct, 90-1
exemptions, 54 retainer, 90
introducers, 55
one-off promotions, 55 G
prohibition, 54
general framework, 44 gender reassignment, and discrimination, 28
insurance distribution, 53-4
Prudential Regulation Authority, 44 H
regulated activity, 44, 45
harassment, 30-1
business test, 45
exclusions, 47-9
specified investment activities, 46-7, 49
specified investments, 45 inclusion, 37
source materials, 43 indirect discrimination, 29-30
SRA Financial Services (Conduct of in-house solicitors, 19
Business) Rules, 52 Insolvency Practitioners Association, 7
best execution, 52 Institute of Chartered Accountants in England
commission, 52 and Wales, 7
execution-only clients, 52 insurance distribution, 53-4
insurance distribution activities, 52 Intellectual Property Regulation Board, 6
status disclosure, 52
transactions, 52 K
firm-based authorisation, SRA, 14
effect of, 16 ‘know or suspect,’ 77-8, 82
eligible businesses, 14
licensed bodies, 15 L
recognised body, 15
Law Society, 12
recognised sole practice, 14-15
legal aid, 104
process, 16
civil legal aid, 105
fixed fees, 91-2
forms of civil services, 105
freelance solicitors, 19, 21
means test, 106-7
funding civil litigation, 93 merits test, 106
legal expense insurance, 98-9 scope of legal aid, 106
solicitor and client costs and costs between statutory charge, 107
parties, 93 criminal legal aid, 108
third party funding, 99 advice at police station, 108
variable fees, 93-7, 99 application for legal aid, 108-10
funding options, 90 duty solicitor scheme, 108
after-the-event insurance, 98-9 solicitor and Legal Aid Agency, 104

115
Index

Legal Aid Agency, 104 N

legal service body, 15
National Crime Agency, 79
legal services
non-commercial organisations, 19-20, 21
definition of, 2
non-contentious business arrangements, 92
regulation of, 2
non-real time financial promotions, 55
reserved legal activities, 3
non-real-time communication, 54
authorisation, 4
notarial activities, 4
definition, 3-4
notaries, 6
Legal Services Board, 5, 13
less favourable treatment, 28-9
licensable body, 15 O
licensed bodies, 15, 16 oaths, administration of, 4
licensed conveyancers, 6 offences, overview of, 76-7
limited liability partnerships, 15 Office of the Immigration Services
litigation, conduct of, 3 Commissioner, 7
litigation privilege, 83 ongoing monitoring, 70
London Interbank Offered Rate overseas defence, 80
(LIBOR), 43-4
)
M
partnerships, 15
marriage/civil partnerships, and patent attorneys, 6
discrimination, 28 penalties, 80
money laundering, 62 politically exposed person (PEP), 69-70
client account, 63 positive action, 35
client due diligence, 66 positive discrimination, 36
enhanced due diligence, 69-70 practising certificates, 18-19
ongoing monitoring, 70 pregnancy and maternity, and discrimination, 28
requirement for, 66-7 private funding, 91, 99
simplified due diligence, 69 probate activities, 4
standard due diligence, 67-9 Proceeds of Crime Act 2002, 76
company and trusts, 63 acquisition, use or possession, 81
Criminal Finances Act 2017, 71 arranging, 77
internal controls, 66 authorised disclosure defence, 78
Money Laundering, Terrorist Financing criminal property, 78
and Transfer of Funds ‘know or suspect,’ 77-8
(Information on the Payer) litigation proceedings, 78
Regulations 2017 overseas defence, 80
application of, 64-5 penalties, 80
purpose of, 64 concealing, 81
policies, controls and procedures, 65 confidentiality, 85
real estate, 63 failure to disclose, 81
record keeping, 70 disclosure, 82
relevance and significance for information, 82
solicitors, 62-4 legal professional privilege
risk assessment, 65 defence, 82-3
sham litigation, 64 objective test, 82
stages of, 62-3 overseas defence, 83
training, 70 penalties, 83
Money Laundering Compliance Officer raining defence, 82
(MLCO), 66 regulated sector, 82
Money Laundering Reporting Officer failure to disclose (nominated officers), 83
(MLRO), 79 offences, overview of, 76-7

116
 Index

prejudicing an investigation, 84 ‘professional/necessary’

SRA, role of, 85 exclusion, 48
tipping off, 83 takeover exclusion, 48-9
defences, 84 trustees or personal
offences, 83 representatives, 48
penalties, 84 specified investment activities, 46, 49
warning signs, 85-6 advising, 46-7
professional conduct, 90-1 arranging, 46
professional indemnity insurance dealing as agent, 46
adequate and appropriate insurance, 21 management, 46
nature of, 20 safeguarding, 46
SRA Indemnity Insurance Rules, 20-1 specified investments, 45
‘professional/necessary’ exclusion, 48 regulated providers, 5
prohibited conduct, under Equality Act 2010 barristers, 6
direct discrimination, 28 chartered accountants, 7
comparator, 28 chartered legal executives, 6
less favourable treatment, 28-9 costs lawyers, 6
protected characteristics, 29 licensed conveyancers, 6
disability discrimination, 30 notaries, 6
harassment, 30-1 patent attorneys, 6
indirect discrimination, 29-30 regulatory overlap, 7
victimisation, 30 solicitors, 5
protected characteristics, 27 trade mark attorneys, 6
age, 27 regulatory overlap, 7
direct discrimination, 29 religion and belief, and discrimination, 27
disability, 27-8 reserved instrument activities, 4
gender reassignment, 28 reserved legal activities, 3
marriage/civil partnerships, 28 authorisation, 4
pregnancy and maternity, 28 definition, 3-4
race, 27 retainer, 90
religion and belief, 27 right of audience, exercise of, 3
sex, 27 risk-based regulation, SRA as, 13-14
sexual orientation, 27
Prudential Regulation Authority, 44 Ss
sex, and discrimination, 27
sexual orientation, and discrimination, 27
race, and discrimination, 27 sham litigation, 64
real estate, and money laundering, 63 simplified due diligence, 69
real-time communication, 54 sole practitioner, 14-15
real-time financial promotions, 55 solicitors, 5
recognised body, 15 as employers
authorisation, 16 claims, 34-5
companies, 15 making adjustments, 34
limited liability partnerships, 15 occupational requirements, 34
partnerships, 15 unlawful acts, 33
recognised sole practice, 14-15 vicarious liability, 34
record keeping, and money laundering, 70 and Legal Aid Agency, 104
regulated activity, and financial services, 44, 45 and money laundering, 62-4
business test, 45 as service providers
exclusions, 47 claims, 33
authorised third persons, 47-8 making adjustments, 32
execution-only client, 48 unlawful behaviour, 31-2
introducing, 47 vicarious liability, 32

117
Index

Solicitors Regulation Authority (SRA), 4, 12 commission, 52

authorisation of individuals, 17 execution-only clients, 52
admission, 17-18 insurance distribution activities, 52
practising certificates, 18-19 status disclosure, 52
client information, 22 transactions, 52
firm-based authorisation, 14 SRA Indemnity Insurance Rules, 20-1
effect of, 16 standard due diligence, 67-9
eligible businesses, 14-15 suspicious activity report, 79
process, 16
professional indemnity insurance
1
adequate and appropriate
takeover exclusion, 48-9
insurance, 21
tipping off, money laundering, 83
nature of, 20
defences, 84
SRA Indemnity Insurance Rules, 20-1
offences, 83-4
risk-based regulation, 13-14
penalties, 84
role in money laundering, 85
trade mark attorneys, 6
solicitors working outside authorised firms
training, and money laundering, 70
commercial unregulated organisation,
trustees or personal representatives, 48
solicitors in, 20
freelance solicitors, 19
in-house solicitors, 19 U
non-commercial organisations, 19-20 unqualified person, 17
source materials, financial services, 43 unregulated providers, 7
specified investment activities, 46, 49 unwanted conduct, 30-1
advising, 46-7
arranging, 46
dealing as agent, 46
V
management, 46 victimisation, 30
safeguarding, 46
specified investments, 45 W
SRA Financial Services (Conduct of Business)
Rules, 52 warning signs, money laundering, 85-6
best execution, 52

118
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The University of Law SQE1 manuals provide clarity, Titles in this series:
authority and value. The manuals succinctly set out the * Business Law and Practice
principles and rules in each area of law and practice that * Constitutional and Administrative
form part of the SRA’s Solicitors Qualifying Examination. Law and EU Law
Each title is complemented by various worked examples * Contract
and sample assessment questions to aid the reader's * Criminal Law
understanding of examinable topics. * Criminal Practice
¢ Dispute Resolution
Published and updated regularly, these user-friendly ¢ Ethics and Professional Conduct
guides are designed to help the reader successfully
¢ Land Law
prepare for the SQE1 exams.
¢ Legal Services
Legal Services provides a comprehensive review of the * Legal System of England and
sector and a thorough examination of the regulatory and wae
statutory controls placed on those delivering legal services | * Property Practice
to the public. * Solicitors Accounts —
¢ Tort
Jacqueline Kempton practised as a solicitor in London ¢ Trusts
and Kent. She is now an Associate Professor at The °- Wills aind the Admuiniserceian
University of Law in London. | of Estates

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