## Question 1 During a corporate restructuring, a solicitor uncovers evidence that suggests a senior executive has been engaging in fraudulent activities that could potentially harm the company's financial health. The solicitor discovered this evidence while reviewing documents for a related but separate matter. Is the solicitor ethically obligated to report this evidence to the company's board of directors? - A. Yes, because the solicitor's duty to act in the best interest of the client includes reporting risks of fraud. - B. Yes, because the prevention of fraud outweighs the solicitor's duty of confidentiality to the executive. - C. No, because the information was discovered inadvertently, and reporting it would breach the solicitor's duty of confidentiality. - D. No, because the solicitor's primary duty is to the matter at hand, not to policing the client's internal affairs. - E. No, because the solicitor must first verify the accuracy of the information before reporting it.

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The correct answer is A. Solicitors have an ethical obligation to protect their client's (the company) best interests, which includes reporting internal fraudulent activities that could harm the company, even if discovered during unrelated tasks. Option B is incorrect because while preventing fraud is important, the key point is acting in the client's best interests which mandates disclosure in this case, not just the prevention of fraud itself. Option C is incorrect because the duty of confidentiality does not extend to covering up fraud; solicitors must prioritize the client's overarching interests, which in this case is the company, not the individual executive. Option D is incorrect because, while the solicitor is working on a particular matter, their overall duty to the company includes reporting evidence of fraud that could harm the company. Option E is incorrect because, although verifying information is important, the solicitor has an immediate duty to report the potential risk, and verification can follow subsequently.

## Question 2 During a client meeting, a solicitor learns the client wishes to pursue a legal matter that is likely to attract substantial media attention and may not be financially rewarding for the solicitor's firm due to the complex and protracted nature of the case. In considering actions in accordance with SRA standards and regulations, which of the following is the most appropriate course of action for the solicitor? - A. Politely decline the case citing potential negative media attention as the reason. - B. Agree to take the case but request an upfront payment that covers the potential extra costs. - C. Accept the case, focusing on the client's needs and the firm's commitment to access to justice. - D. Direct the client to another firm, suggesting they might have better resources to handle the case. - E. Advise the client on the possible negative implications for their reputation and discourage them from pursuing the case.

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The correct answer is C. As a solicitor, the solicitor is obligated to act in the best interests of the client, respecting the client's right to access justice while adhering to professional principles, including providing a proper standard of service irrespective of the financial gain to the firm or potential media attention the case could attract. Option A is incorrect because declining a case based solely on the potential for negative media attention does not align with the SRA principles, which demand integrity and a commitment to justice. Option B is incorrect because while solicitors can discuss fees, demanding an upfront payment to cover 'potential extra costs' without a clear basis could contravene the transparency and fairness expected in client financial arrangements as per the SRA Code of Conduct. Option D is incorrect because the responsibility to the client, especially within the context of access to justice, should not be circumvented by directing them elsewhere simply due to resource implications or the nature of the case. Option E is incorrect as discouraging a client from pursuing a case based on potential reputational implications alone, without considering the client's legal rights and interests, could betray a lack of commitment to the client’s best interests and fail to uphold the principle of access to justice.

## Question 3 A recent immigrant has been wrongfully dismissed from a job due to discrimination. Facing financial difficulties and unable to afford private legal representation to bring a claim against the employer, the claimant seeks to understand the options for securing legal services to proceed with an employment tribunal claim. Which form of legal support should the claimant pursue to address the situation? - A. Private funding without any legal aid. - B. Legal aid for advice and assistance only. - C. Trade union funded legal representation. - D. Conditional fee arrangement with a solicitor. - E. Crowdfunding legal expenses.

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The correct answer is D. A conditional fee arrangement with a solicitor is suitable for the claimant's situation. It allows the claimant to receive legal representation in the employment tribunal claim without upfront fees, where fees are payable only upon winning the case. This arrangement is oriented towards individuals who cannot afford traditional legal fees and need critical legal support for cases with merit. Option A is incorrect because the claimant is facing financial difficulties, making private funding without legal aid an unfeasible option for securing representation. Option B is incorrect because while legal aid for advice and assistance might provide preliminary guidance, it would not comprehensively cover the scope of representation needed to bring a claim at an employment tribunal. Option C is incorrect because the claimant's situation does not indicate membership in a trade union that could provide funded legal representation. Option E is incorrect as crowdfunding is highly uncertain and may not generate the necessary funds for comprehensive legal representation in time for the claim.

## Question 4 A family law solicitor has agreed to represent a client in divorce proceedings under a Damages-Based Agreement (DBA), where the standard fee would typically be £10,000. They agreed that if the client secures a certain amount in the financial settlement, the solicitor will receive 30% of that amount as the fee. The client's settlement after successful proceedings amounts to £50,000. What is the legally permissible maximum percentage that the solicitor can receive as the fee from the settlement under this DBA? - A. 25%. - B. 30%. - C. 35%. - D. 20%. - E. 50%.

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The correct answer is A. In the context of a Damages-Based Agreement (DBA) related to family law, the legal framework stipulates a cap of 25% of the financial settlement as the maximum fee a solicitor can claim. Therefore, even though the client and solicitor agreed on a 30% fee, the regulation caps the solicitor's fee at 25% of the £50,000 settlement, making the maximum that can legally be claimed £12,500. Option B is incorrect because 30% exceeds the legal cap for solicitors' fees under a DBA in family law matters, which is set at 25% of the financial settlement. Option C is incorrect because 35% not only exceeds the agreed percentage but also surpasses the legal maximum, making it non-compliant with the DBA regulations in family law. Option D is incorrect because, although 20% is within legal limits, it inaccurately represents the maximum percentage allowed under the DBA regulations, which is 25%. Option E is incorrect because 50% far exceeds any allowed percentage under the DBA regulations, making it an unlawfully high proportion of the financial settlement.

## Question 5 A recent law graduate employed at a mid-sized law firm stumbles upon unusual financial transactions in client accounts managed by the firm. These transactions involve significant transfers to entities in jurisdictions known for their lax financial regulations. The graduate recalls a training session on anti-money laundering (AML) protocols but is unsure of the firm's specific procedures. What is the graduate's best course of action to ensure compliance with AML regulations and protect the firm from potential legal exposure? - A. Ignore the transactions as the graduate is not directly involved in client account management. - B. Gather more information on the transactions to independently assess their legality. - C. Inform a senior partner not involved in AML compliance about the suspicious transactions. - D. Report the observations to the firm's Money Laundering Reporting Officer (MLRO) as soon as possible. - E. Directly report the transactions to the Financial Conduct Authority (FCA) without internal consultation.

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The correct answer is D. Reporting the observations to the firm's Money Laundering Reporting Officer (MLRO) is the most appropriate action. It aligns with internal procedures for managing AML risks and ensures that the suspicions are assessed properly within the legal framework. Option A is incorrect because ignoring suspicious transactions is against AML compliance obligations and can lead to legal and reputational damages for the firm. Option B is incorrect because, while being proactive is generally positive, handling the legal assessment of AML issues without proper authority or knowledge could lead to incomplete or incorrect interpretations. Option C is incorrect as the senior partner may not be versed in AML compliance procedures, which could delay or misdirect necessary investigative and reporting processes. Option E is incorrect as it bypasses the firm's internal procedures for handling AML concerns, potentially causing regulatory and procedural complications.

## Question 6 A solicitor has been approached by a close family member who wishes to set up a charitable organisation and has asked for legal advice on the matter. The solicitor specialises in commercial law and has limited experience in charity law. The family member expects a swift response and hints at a discounted or free service due to their relationship. How should the solicitor proceed with the request from the family member? - A. Proceed to offer advice on establishing the charity, relying on basic legal knowledge and general assumptions about charity law. - B. Decline to provide any advice, citing the lack of expertise in charity law as the sole reason. - C. Agree to provide advice but charge the usual fee, committing to research and learn about charity law to ensure accurate counsel. - D. Refer the family member to a colleague or another solicitor who specialises in charity law. - E. Offer a brief overview of the process based on general legal knowledge while recommending professional consultation with a charity law specialist.

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The correct answer is D. Referring the family member to a colleague or another solicitor who specialises in charity law is the most appropriate action, as it ensures that the family member receives expert legal advice while the solicitor avoids acting outside their area of competence. Option A is incorrect because offering advice based on limited knowledge and assumption poses a risk of misinformation and does not align with the SRA's Principle of providing a proper standard of service. Option B is incorrect because, despite the solicitor's lack of expertise in charity law, simply declining to assist without suggesting alternative support fails to consider the interests of the family member adequately. Option C is incorrect because, while charging the usual fee and committing to research is a diligent approach, it could lead to delays and possibly inaccurate advice if the solicitor cannot acquire the necessary expertise promptly. Option E is incorrect because providing an overview based on general knowledge without ensuring the family member understands the need for specialist advice might result in incomplete or misleading information being acted upon.

## Question 7 During a routine compliance review, a law firm discovers that a longstanding client, who regularly conducts large financial transactions through the firm's client account, has been flagged in a recent report as operating in sectors prone to money laundering activities. The client has been cooperating with all standard due diligence processes but the new information prompts the firm to reassess the risk associated with this business relationship. Given this new information, what is the most appropriate action for the law firm to take in compliance with Anti-Money Laundering (AML) regulations? - A. Immediately terminate the business relationship with the client to avoid potential AML risks. - B. Conduct enhanced due diligence, including a deeper investigation into the client's business operations and source of funds. - C. Continue with standard due diligence procedures as the client has complied with all requests for information to date. - D. Inform the authorities about the client without conducting any further internal review. - E. Request the client to provide a letter of good standing from a reputable financial institution.

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The correct answer is B. Enhanced due diligence is necessary in this situation as it involves a more thorough investigation into the client's transactions and business activities, especially when the client is flagged for operating in sectors prone to money laundering. This is in line with the AML regulations that mandate a risk-based approach to due diligence. Option A is incorrect because immediate termination of the business relationship without conducting an enhanced review could be premature and unnecessary. Option C is incorrect because relying solely on standard due diligence ignores the heightened risk presented by the new information. Option D is incorrect because reporting to the authorities should follow an internal review and not replace the need for enhanced due diligence. Option E is incorrect because a letter of good standing does not substitute for an in-depth investigation required by enhanced due diligence.

## Question 8 A newly qualified solicitor has been approached by a close family friend to advise on a sensitive matter that could potentially involve legal proceedings against a company the solicitor's firm has represented in the past, but not currently. The solicitor has no direct involvement with the previous cases handled for the said company. Following the SRA principles, what is the most appropriate action the solicitor should take before proceeding with the case? - A. Decline to represent the family friend citing a prior relationship with the opposing party. - B. Accept the case and proceed without notifying the firm or the client about the past relationship with the company. - C. Discuss the situation with a senior partner in the firm to assess whether there is a conflict of interest. - D. Proceed with the case, ensuring all interactions are documented to mitigate any perceived conflict of interest. - E. Inform the family friend to seek advice elsewhere as it is against SRA principles to handle such cases.

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The correct answer is C. Discussing the situation with a senior partner in her firm to assess whether there is a conflict of interest is the appropriate action. This aligns with the SRA principles of acting with integrity and in the best interests of the client while also ensuring that any potential conflict of interest or confidentiality issues are identified and addressed appropriately. Option A is incorrect because merely having a past relationship with an opposing party does not automatically necessitate declining to represent a new client. The correct step is to first assess the situation for any actual conflict of interest. Option B is incorrect as proceeding without notifying the firm or assessing the potential conflict of interest violates the solicitor's duty of transparency and could undermine trust. Option D is incorrect because merely documenting interactions does not address the issue of a potential conflict of interest or the need to inform the firm and potentially the client about the solicitor's past relationship with the opposing party. Option E is incorrect as it misrepresents the SRA principles. The correct approach is to assess the situation carefully, not to automatically divert the client elsewhere without a proper understanding of the potential conflict.

## Question 9 During an internal compliance review, a partner in a law firm discovers that a junior solicitor may have failed to report a series of transactions that could be indicative of money laundering activities. The partner knows the law firm has strict policies in place that are designed to comply with the Proceeds of Crime Act 2002, as well as the SRA Principles regarding the duty to report suspicious activities. What is the most appropriate next step for the partner to ensure compliance with legal obligations and adherence to SRA Principles? - A. Immediately terminate the junior solicitor's employment to distance the firm from potential legal repercussions. - B. Ignore the findings and take no action, assuming the junior solicitor had valid reasons for not reporting the activities. - C. Report the junior solicitor to the police for potential involvement in money laundering. - D. Consult the firm's nominated officer to discuss the findings and consider making a report to the National Crime Agency (NCA). - E. Advise the junior solicitor to make a retrospective report to the NCA, without involving anyone else in the firm.

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The correct answer is D. The partner should consult the firm's nominated officer to discuss the findings and consider making a report to the National Crime Agency (NCA), as this approach is consistent with procedures outlined in the Proceeds of Crime Act 2002 and adheres to SRA Principles of professional conduct and reporting obligations. Option A is incorrect because immediate termination without following proper internal review and reporting procedures does not address the potential compliance breach and might violate employment laws. Option B is incorrect because ignoring the findings disregards the legal and ethical obligations to report suspicious activities, potentially implicating the firm in money laundering activities. Option C is incorrect because reporting the junior solicitor to the police without internal review or consideration of proper reporting channels may be premature and not in line with prescribed procedures for handling suspicions of money laundering. Option E is incorrect because advising the junior solicitor to make a retrospective report, while excluding further internal action or consideration, neglects the firm's collective responsibility to ensure compliance and proper reporting.

## Question 10 You are a solicitor working on the sale of a high-value property. During the transaction process, you discover the buyer intends to pay a significant portion of the purchase price in cash. The buyer is reluctant to provide detailed information about the source of these funds, only stating that it is from personal savings accumulated over the years. You are aware that dealing with large cash transactions can pose a risk of money laundering, as per the Proceeds of Crime Act 2002 and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. In this situation, what is the most appropriate course of action to take in accordance with anti-money laundering regulations? - A. Refuse to proceed with the transaction until the buyer provides satisfactory evidence of the source of the funds. - B. Proceed with the transaction, assuming the buyer's explanation is sufficient and the risk of money laundering is low. - C. Report the transaction and the buyer's reluctance to provide information as suspicious to the National Crime Agency (NCA) immediately. - D. Accept the cash payment for the property but report the transaction as suspicious to your firm's compliance officer. - E. Advise the buyer to pay through a bank transfer instead, without reporting the initial proposal as suspicious.

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The correct answer is C. Under the Proceeds of Crime Act 2002 and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, solicitors are obliged to report any transaction that they suspect may be involved in money laundering to the National Crime Agency (NCA) as soon as possible. The buyer's reluctance to provide detailed information about a significant source of funds, combined with the intention to pay a large amount in cash, raises legitimate suspicions necessitating immediate reporting. Option A is incorrect because while refusing to proceed without satisfactory evidence is a cautious approach, it does not fulfill the legal obligation to report a suspicious transaction immediately. Option B is incorrect as it undermines the due diligence and reporting obligations imposed by anti-money laundering regulations, potentially making the solicitor complicit in money laundering activities if the funds are indeed suspicious. Option D is incorrect because while it involves reporting, doing so only to the firm's compliance officer may delay or prevent the necessary immediate notification to the NCA, which is required by law for suspicious transactions. Option E is incorrect because it suggests an alternative method of payment without addressing the need to report the suspicious circumstances around the initial proposition, thereby potentially bypassing anti-money laundering protocols.

SQE1 FLK1 Legal Services Sample Questions July 2024