QLTT Head III Professional Conduct and Accounts. Example Test

Transcription

1 QLTT Head III Professional Conduct and Accounts Example Test

2 - Part 1 - Accounts USE BOOKLET 1 Question 1 In respect of the following transactions made in the course of operating a solicitor s practice you must identify and note the accounts in which the appropriate double entries should be made Where relevant, it is important that your entries clearly reflect whether office or client money is involved. It would further assist the partners if you could present any legitimate alternative treatments available under the Rules where possible. You may assume that unless stated otherwise, cheques received by the practice have been made out to the firm. a) The firm is acting on behalf of Alf, who is buying a house. Alf has sent the firm a cheque for 30,470. The cheque is for the deposit of 30,000 and the firm s fee for the work of 400 plus VAT of 70. (10 Marks) b) A client of the firm, Bet, owes the firm 329, including VAT of 49 for a fee note previously rendered following her house purchase. During the transaction Bet became entitled to a sum in lieu of interest on money held by the firm. The firm calculated the sum in lieu of interest due to Bet to be 27. c) The firm received notification from its bankers that a receipt for 3,000 from its client Craig had been returned by its bankers marked Refer to drawer. On the strength of the original receipt the firm had spent 400 of the apparently available funds on his instructions. (6 Marks) d) The firm received a dividend cheque from a company in respect of some shares owned by its client Deirdre. The cheque is for 250 and is payable to Deirdre. The cheque was sent by the book keeper to the client upon receipt. (3 Marks) e) The firm received a cheque of 7,000 from its client, Eddie. This money is to be used to pay Counsel s fees in Eddie s forthcoming trial. BPP PROFESSIONAL EDUCATION 1

3 f) The firm has received from the purchaser of a property being sold by its client, Francesca, a 44,000 deposit to be held as stakeholder. g) The firm paid 141, including VAT of 21, to Gordon (a company formation agent) for forming a company on behalf of the firm. The cost may be charged to a client in the future. In the meantime, the company is to be held by the corporate department. (3 Marks) h) The firm used Petty cash to pay 235 for local search fees in connection with the affairs of a client, Hilda. i) A bank statement from the firm s bankers showed that the Designated deposit account of client Idris had 28 interest added to it. j) The firm is acting in the sale of a property on behalf of Janice. The firm was already holding a 10,000 deposit as stakeholder on behalf of the purchaser. Completion took place today and 90,000 was received from the purchaser. The firm has not been instructed as to what Janice wishes the firm to do with the money now held for her. (4 Marks) BPP PROFESSIONAL EDUCATION 2

4 Question 2 Multiple choice questions a) A solicitor holds 25,000 of client money for Kevin in the client current bank account. Which of the following statements are correct? The Solicitors Accounts Rules require the solicitor to pay a sum in lieu of interest if: A B C The money is held for two days The money is held for less than one week The money is held for less than one week and it is fair and reasonable to pay interest D The amount calculated as due exceeds 20 E All of the above statements are incorrect b) A client gives a solicitor 1,600, to be held in a separate designated deposit account. Which of the following statements is correct? The solicitor must account for interest: A After 8 weeks have elapsed B Once the amount of interest exceeds 20 C From the moment the account is opened D Once the money has been held for 4 weeks E None of the above statements is correct (1 Marks) c) Which of the following statements is correct? In a private practice, the duty to remedy a breach of the Solicitors Accounts Rules rests with: A B C D E The person causing the breach only The client partner in respect of his or her own client only The accounts department All the principals in the practice The Law Society (1 Mark) Total 40 Marks BPP PROFESSIONAL EDUCATION 3

5 - Part 2 - Professional Conduct USE BOOKLET 2 Question 1 You are a solicitor in the litigation and dispute resolution department of Price Prior. A new client, Luca Morales ( LM ), comes to see you for advice relating to his former solicitors, Stanley & Co. LM s concerns are outlined below. You are required to identify, giving reasons, the professional conduct issues which arise. (a) (b) (c) (d) (e) In May 2005, LM instructed Stanley & Co to act for him in an immigration matter. At his initial interview LM was attended by Marcus Whyte, a solicitor employed by the firm on a part-time basis. LM provided original documents to Marcus Whyte including his birth certificate, Brazilian passport and military service papers. LM was anxious about leaving these originals with the firm but Marcus Whyte assured him You have my personal guarantee that your documents will be safe with us. (5 marks) At Marcus Whyte s request, LM paid 1,000 in cash on account of costs. As far as LM is concerned, no work has ever been done on the matter. LM has heard nothing from the firm since June 2005; Marcus Whyte will not take LM s calls or respond to his numerous letters. (6 marks) Stanley & Co appears to be staffed entirely by caseworkers and paralegals with no obvious person in charge. The senior partner (who is the only partner) is never in the office. (4 marks) An immigration advisory service known as Immigration Experts operates next door to the firm. LM heard Marcus Whyte referring clients to our specialist immigration sister company next door. (5 marks) On 15 November 2005, LM wrote to the senior partner at Stanley & Co stating his intention to instruct new solicitors and requesting the return of his papers and the money held on account. The senior partner responded on 22 November 2005 stating We hold no money in our client account on your behalf and can find no papers relating to the matter you describe. Marcus Whyte has now left this firm. (5 marks) (f) In light of the above, outline the remedies available to Luca. (5 marks) (Total 30 marks) BPP PROFESSIONAL EDUCATION 4

6 Question 2 You are a solicitor in the Property and Private Client department of Price Prior. The firm is regulated by the Law Society but is not authorised by the FSA to conduct mainstream investment business. You are required to consider whether your firm is able to provide the services requested below without breaching the general prohibition in section 19 Financial Services and Markets Act 2000 ( FSMA ), either because no regulated activities are undertaken or because any regulated activities are exempt from FSMA. You should also include in your answer any services you consider that your firm could provide within the Solicitors Financial Services (Scope) Rules. Explain your answers fully and give reasons for your answers. You have acted for the Fox family for many years. Conrad and Cressida Fox founded Fox Frames Limited, a highly successful picture framing business. Their youngest son, Ashley Fox, aged 25, has just inherited 250,000 from a family trust. Being the youngest in the family, Ashley is keen to invest his money wisely and to show his parents that he can be trusted. He has found a bachelor pad in Notting Hill which is on the market for 350,000. Ashley intends to finance the purchase with a deposit of 200,000 from his trust fund, with the remainder financed by a mortgage for 150,000. Ashley asks you to complete the purchase and to recommend and arrange a suitable repayment mortgage for him. With the remaining 50,000, Ashley is considering an investment in either UK unit trusts or gilts. He asks your advice as to the most appropriate investment for him. He is inexperienced in financial matters and is relying on your expertise. (20 marks) BPP PROFESSIONAL EDUCATION 5

7 Question 3 Ashley s sister, Bella, aged 31, turns up in your office unexpectedly. You have never met Bella but you are aware that she has always been rather alternative in her lifestyle and something of a free spirit, much to the concern of her parents. For the last few months Bella has been selling handmade silver jewellery from a market stall at Camden Market. She explains that she has the opportunity to take on a 12 month lease of a small unit on Camden High Street to use as a boutique for her jewellery. Bella tells you that her turnover varies from one month to the next. You are concerned that she may not have declared income for tax purposes to the Inland Revenue. Bella gives you 5,000 in cash for the first 4 months rent on the unit and asks you to make the necessary arrangements in respect of the lease. Explain, in these circumstances, your duties under the Money Laundering Regulations 2003 and Proceeds of Crime Act (10 marks) End of Test BPP PROFESSIONAL EDUCATION 6