Qualified Lawyers Transfer Scheme (QLTS) Professional Conduct, Solicitors Accounts and Skills Syllabus

How do solicitors generally avoid needing FCA authorisation when carrying on regulated financial activities?

Most solicitors rely on the Part XX exemption of the Financial Services and Markets Act 2000 (FSMA) for 'exempt regulated activities' carried on incidentally to professional legal services and supervised by a Designated Professional Body (the Law Society/SRA). This is governed by the SRA Financial Services (Scope) Rules and (Conduct of Business) Rules. Mainstream investment business still requires FCA authorisation.

Under FSMA, what four things make an activity a regulated activity requiring authorisation (or exemption)?

A regulated activity exists where there is: (1) a specified activity (e.g. dealing, arranging, advising, managing, safeguarding), (2) carried on in relation to a specified investment (e.g. shares, debentures, insurance, regulated mortgages), (3) by way of business, (4) in the UK — unless an exclusion or exemption applies.

Define a solicitor's 'undertaking' under the SRA Code and state its key characteristic.

An undertaking is a statement, given orally or in writing, whether or not it includes the word 'undertake' or 'undertaking', to someone who reasonably relies upon it, that you or a third party will do something or cause something to be done, or refrain from doing something. Its key characteristic is that it is personally binding and enforceable against the solicitor, even if performance is outside their control.

How are undertakings enforced against solicitors, and what is the position if a third party fails to perform?

Undertakings can be enforced by the court under its inherent supervisory jurisdiction over solicitors (summary procedure), and breach is also professional misconduct enforceable by the SRA. Because the solicitor is personally liable, if performance depends on a third party who fails to perform, the solicitor remains personally bound to fulfil the undertaking or compensate.

What are the four key behaviours required of a solicitor when giving and complying with undertakings under Code para 1.3?

You must perform all undertakings within an agreed timescale or, if none, within a reasonable amount of time. You must (per related obligations): give undertakings only within your control/ability to perform, ensure their terms are clear and unambiguous, keep records, and not give undertakings you cannot fulfil.

State the core purpose and the overarching definition of 'client money' under the SRA Accounts Rules 2019.

The purpose is to keep client money safe. Client money is money held or received by a firm: (a) relating to regulated services delivered to a client; (b) on behalf of a third party (e.g. stake/settlement money); (c) as a trustee or holder of a specified office/appointment (e.g. donee under a power of attorney); or (d) in respect of fees and unpaid disbursements before delivery of a bill.

What is the fundamental rule in the SRA Accounts Rules about keeping client money separate from the firm's money?

Rule 4.1: you must keep client money separate from money belonging to the firm. Client money must be held in a client account (Rule 2). You must not use client money for your own purposes, and money in a client account must be available on demand unless agreed otherwise (Rule 2.4).

Under SRA Accounts Rule 2.2, how quickly must client money be paid into a client account?

Client money must be paid into a client account promptly. There are exceptions, e.g. where the only client money is in respect of fees and unpaid disbursements (Rule 2.1(c)) and the firm operates under that exemption, or where the client has given informed consent in writing to alternative arrangements.

What is a 'client account' under the SRA Accounts Rules and how must it be named?

A client account is an account at a bank or building society in England and Wales, in the firm's name, which includes the word 'client' in its title. It is used to hold client money separately from the firm's own funds.

What is the difference between operating the 'business' (office) account and the 'client' account?

The business (office) account holds the firm's own money — including paid professional fees, profit costs once billed, and money for the firm's own running costs. The client account holds client money. A core principle is that client money must not be mixed with business money, and movements between the two must be properly recorded.

What records must a firm keep of client money under the Accounts Rules, and how current must they be?

The firm must keep accurate, contemporaneous and chronological records (Rule 8): a client ledger account for each client (showing all receipts/payments separately for client and business money), a record of all transactions through client accounts, and a running total of balances. Records must be kept up to date and retained for at least six years.

What is a client account reconciliation, how often must it be done, and who signs it off?

At least every five weeks, the firm must obtain bank statements for all client accounts and general client accounts and reconcile them: comparing the balance on the cash book/client account with the bank statement balance, and with the total of all client ledger balances. The reconciliation must be signed off by the COFA (Compliance Officer for Finance and Administration) or a manager.

In a client account reconciliation, what relationship must hold between the cash book balance, the client ledger total and the bank statement?

After accounting for unpresented items, the totals must agree. Conceptually: $$\text{Total of client ledger balances} = \text{Cash book client balance} = \text{Reconciled bank statement balance}$$ Any discrepancy must be investigated and corrected promptly.

What does the SRA Accounts Rules require regarding interest ('a fair sum') on client money (Rule 7)?

You must account to clients for a fair sum of interest on client money held by you, on their behalf or for them. You may by written agreement come to a different arrangement with the client, provided the terms are fair and reasonable. The aim is that the client, not the firm, benefits from interest earned on their money.

What factors determine what amounts to a 'fair sum' of interest on client money?

Relevant factors include: the amount of money held; the length of time it is held; the interest rate(s) reasonably obtainable (e.g. the rate the firm could obtain on an instant access account); the firm's written interest policy; and fairness to both client and firm. De minimis thresholds may be set in the firm's policy for small/short-held sums.

When is a firm required to obtain an accountant's report under the SRA Accounts Rules (Rule 12)?

A firm that has, at any time during an accounting period, held or received client money must obtain an accountant's report within six months of the end of the period. The report must be obtained from an independent accountant who is a member of a chartered accountancy body and registered auditor (where required).

When must an accountant's report be delivered to the SRA, and when is no report required?

A report must be delivered to the SRA only if it is qualified (i.e. shows a failure to comply that puts client money at risk) — within six months of the end of the accounting period. No report is required at all if the only client money held was from the Legal Aid Agency, or if the total balance held does not exceed an average of £10,000 and a maximum of £250,000 over the period.

What is the role of the COFA (Compliance Officer for Finance and Administration)?

The COFA is the individual responsible for ensuring the firm and its managers/employees comply with the SRA Accounts Rules and for keeping accounting records. The COFA must take all reasonable steps to ensure compliance, record any breaches, and report material failures (and any serious breaches/facts the SRA would reasonably expect) to the SRA promptly.

What are the key objectives a solicitor should achieve during a client interview (the WASP / structured approach)?

A common structure is WASP: Welcome (greet, build rapport, explain the process and confidentiality), Acquire information (use open then closed questions, active listening, take instructions and facts), Supply advice/information (explain the law, options, risks, costs, funding), and Part (summarise, agree next steps/action plan, confirm follow-up). The aim is to obtain full instructions, advise clearly, and agree a course of action.

Distinguish open questions from closed questions in client interviewing and when each is used.

Open questions (e.g. 'Tell me what happened…') invite a full narrative and are used early to gather the client's account without leading them. Closed questions (e.g. 'What date was the contract signed?') seek specific facts and are used later to clarify detail, fill gaps and pin down precise information. Avoid leading questions that suggest the answer.

What is an attendance note, why is it important, and what should it record?

An attendance note is a contemporaneous written record of a meeting, telephone call or attendance with or for a client. It is important for evidence (advice given, instructions received), file continuity, costs/billing, and protection against negligence or complaints. It should record: date, time, duration, who was present, what was discussed/advised, decisions and instructions, and agreed next steps.

What are the key skills required in legal advocacy and oral submissions before a court?

Key skills include: thorough preparation and knowledge of the facts/law; clear, logical and concise structure; signposting submissions; correct modes of address and court etiquette; responding to judicial questions directly; presenting the strongest points first; citing authority correctly; and maintaining a duty of candour to the court (not misleading it). Advocacy is a reserved legal activity (right of audience).

What is a solicitor-advocate's overriding duty to the court, and how does it interact with the duty to the client?

The advocate owes an overriding duty to the court and the administration of justice (Principle 1 and Code paras 2.x). You must not mislead the court or allow it to be misled, must draw the court's attention to relevant adverse case law/legislation/procedural irregularities, and must not abuse process. This duty takes precedence over the duty to act in the client's best interests where they conflict.

What are the principal rules a solicitor must follow regarding their duties to the court (not misleading)?

Under Code section 2: do not mislead or attempt to mislead the court (or others), either by your own acts/omissions or by allowing/being complicit in another's; only make assertions or put forward statements you properly believe are properly arguable; draw the court's attention to relevant cases, legislation, and procedural irregularities you are aware of likely to have a material effect; and comply with court orders and not waste the court's time.

What are the core principles of good legal drafting?

Good legal drafting should be clear, precise and unambiguous; use plain English where possible; be logically structured with consistent defined terms; cover all foreseeable contingencies without redundancy; use the active voice and short sentences; number clauses and use consistent formatting; and be tailored to the client's specific instructions rather than relying blindly on precedents.

What is the recommended structure (the 'golden rules') for drafting a formal legal letter or document?

Identify the purpose and audience; plan the content/logical order before writing; use clear headings and short paragraphs; state the most important points first; define terms once and use them consistently; avoid legalese, archaic terms and unnecessary Latin; be accurate on facts and law; and proofread for ambiguity, grammar and internal consistency.

What hierarchy of sources should a solicitor use when conducting legal research, from primary to secondary?

Primary sources (binding/authoritative law): legislation (Acts and statutory instruments) and case law (judgments, with attention to the doctrine of precedent and court hierarchy). Secondary sources (persuasive/explanatory): practitioner texts (e.g. Halsbury's Laws), textbooks, journal articles, and commentary. Research should locate primary law, check it is in force/up to date, and verify it has not been overruled or amended.

What is the importance of 'updating' or 'noting up' in legal research, and which tools assist this?

Updating ('noting up') ensures the law relied on is current — that legislation is in force and not amended/repealed, and that a case has not been overruled, reversed, distinguished or doubted. Tools include citators on Westlaw and LexisNexis (case and legislation citators), which show subsequent judicial treatment and amendments, ensuring advice rests on good law.

Compare the Legal Ombudsman and the Solicitors Disciplinary Tribunal (SDT) in terms of function and outcomes.

The Legal Ombudsman handles service complaints from clients (poor service, delay, costs) and can order remedies up to £50,000 in compensation, fee reductions or apologies. The SDT is an independent statutory tribunal hearing serious misconduct/disciplinary cases referred (usually by the SRA); it can strike off, suspend, fine (unlimited) or reprimand solicitors. The SRA itself can impose lower-level sanctions and conditions.