#3343 - Conduct Crib Sheet - Business Law and Practice

Conduct

1. Conflicts of Interest

   1. Principal 4 must act in the best interests of the client

   2. Outcome 3.5 cannot act if there is a conflict or a significant risk of a client conflict

      1. Both clients have to be current clients

      2. IB 3.2 decline to act for clients whose interests are in direct conflict

      3. IB 3.3 decline to act for clients where need to negotiate matters of substance

      4. No conflict with a former client BUT SEE CONFIDENTIALITY

   3. Outcome 3.6 Can act for two or more clients if they have a substantially common interest in relation to the matter or a particular aspect of it

      1. (a) Explained issues & risks of acting to the clients & have a reasonable belief that they understand the risks?

      2. (b) Clients given informed consent in writing?

      3. (c) Satisfied that it is reasonable to act?

      4. (d) The benefits of acting outweigh the risk?

         1. IB 3.5 Question whether it would be appropriate to act for all parties or whether it would be in their best interests to be separately represented

      5. IB 3.12 it will be unreasonable to act if clients have unequal bargaining power

   4. Outcome 3.7 Can act for two or more clients if they are competing for the same objecting

      1. (a) Explained issues & risks of acting to the clients & have a reasonable belief that they understand the risks?

      2. (b) Clients given informed consent in writing?

      3. (c) No other client conflict in relation to the matter?

      4. (d) Unless the clients specifically agree, no individual acts for, or is responsible for the supervision of work done for, more than one of the clients in that matter

      5. (e) The benefits of acting outweigh the risk?

         1. IB 3.5 Question whether it would be appropriate to act for all parties or whether it would be in their best interests to be separately represented

      6. IB 3.6 only acting for clients who are sophisticated users of legal services

   5. IB 3.9 cannot advise a client to invest in a business in which you have an interest

   6. IB 3.13 Cannot act for two buyers competing for same residential property
      

2. Confidentiality

   1. Principal 4 must act in the best interests of the client

   2. Outcome 4.1 must keep the affairs of clients & former clients confidential

   3. Outcome 4.2 must disclose to a client all material information that you personally know

      1. Information will be material if it might impact upon a client’s decision making process in the current matter

   4. Outcome 4.3 the duty of confidentiality overrides the duty of disclosure

      1. IB 4.5 Do not act for a client where you hold confidential information of another client which is material to the first client unless the confidential information can be protected

   5. Outcome 4.4 Where you want to act for A, where A has an interest adverse to B and B is a former client, even if you hold confidential information for B that is material for A, you can still act for A if the information can be protected by safeguards PROVIDED

      1. You reasonably believe that A understands that you are going to act for them but you are not going to tell them the information related to B

      2. A must give informed consent

      3. Either

         1. B gives informed consent that you will be acting for A & agrees safeguards for the information

         2. If consent is not possible, then you put in effective safeguards (If B says no to consent then CANNOT act for A)

      4. It is reasonable in the circumstances to act for A

   6. IB 4.4 cannot act where you hold information which is adverse to another client

      1. Is it material?
         

3. Money Laundering

   1. What to look out for:

      1. Transaction aborted for no apparent reason before the firm has even been given details of the sellers or their solicitors & nonetheless the client has been very quick to pay money into the firm’s client account

      2. Money being paid out to a third party, domiciled in a different country from the parties to the transaction, for no apparent reason

      3. Firm offered an unreasonably large payment for virtually no work

      4. Payment of large sums in cash with no valid or apparent reason

      5. Client seem to want to instruct trainee directly without going to supervisor

   2. Due diligence – identity checks 15.2.3 Legal Foundations Textbook

   3. Three offences

      1. 328(1) POCA 2002 entering into or becoming concerned in an arrangement which you know or suspect facilitates the acquisition, retention, use or control or criminal property

         1. SUBJECTIVE TEST

         2. Must not proceed with transaction as

            1. 14 years imprisonment

         3. Defences

            1. Overseas

            2. Simple litigation

            3. Authorised disclosure & consent to complete transaction by firm’s MLO

               1. Will only occur if SOCA allows it, or does not apply to MLO within 7 days of notification to it

      2. 330 POCA 2002 Failing to make an authorised disclosure if you know or suspect or have reasonable grounds to suspect that a person is engaged in money laundering, the information comes to you in the course of a business in the ‘regulated sector’ and the information may assist in identifying the money launderer or the location of any laundered property

         1. OBJECTIVE TEST

         2. Must make an authorised disclosure which means a disclosure to the firms’ MLO

            1. Guilty of an offence under 330 if do not do so

      3. 333A-E POCA 2002 tipping off the client

         1. avoid all contact if possible
            

4. FSMA

   1. Rule 1.05 Do not give any advise unless you have the necessary competence & skill

      1. APPLY TO FACTS

         1. As a trainee you hare highly unlikely to have the necessary competence & skill to give advice, therefore refer the request to a solicitor in the department

   2. Can only advice client if doing so will not breach s. 19 FSMA 2000

      1. Prohibits a solicitor from carrying out a regulated activity unless authorised to do so by the FSA or exempt

         1. 23 FSMA carrying out a regulated activity without authorisation is an offence with up to 2 years in prison

      2. To constitute a regulated activity, the advice-giving would have to:

         1. 22(1) FSMA Be carried on by way of a business

         2. Involve a specified investment: 22(2) & (5) FSMA & RAO 2001

            1. Company stocks & shares

            2. Debentures & loan stocks & bonds

            3. Government securities

            4. Unit trusts & OEICs

            5. Insurance contracts

            6. Mortgages & home reversion plans

         3. Constitute a specified investment activity: 22(2) FSMA & RAO 2001

            1. Advising

            2. Dealing as an agent

            3. Arranging

            4. Managing

            5. Safeguarding

         4. Art 4(3) RAO 2001 Not be excluded from counting as a regulated activity:

            1. Introducing

               1. Not connected to authorised third party

               2. No pecuniary award

               3. No advice from you on merit of investment

            2. Authorised third party

            3. Execution only

               1. Letter to client confirming acting on an execution only basis

            4. Acting as a trustee or a PR

            5. Necessary exclusion

               1. Acting in the course of the business & a necessary part of other services

            6. Takeover exclusion

               1. Over 50% of the voting shares &

               2. Body corporate, partnership, individual or connected individuals

   3. 327 FSMA Is the activity exempt?

      1. Work must be a regulated activity

      2. Work must be incidental to the client’s matter

      3. Work must be incidental to the firm’s work overall?

      4. Firm must not be authorised by the FSA for...