QUESTION OF ETHICS

Q One of the basic conditions in the Solicitors Financial Services (Scope) Rules 2001 is that the firm must account to its client for any pecuniary reward or other advantage which it receives from a third party.

Does this mean that we either have to pay over all commission to the client or opt in to authorisation so that we can keep the commission?

A No.

The phrase to 'account to' has a meaning similar to that of Rule 10 of the Solicitors' Practice Rules 1990.

A firm may retain commission only where it has obtained the informed consent of the client to keep it.

This requires the firm to give full details about the amount of the commission and make it clear to the client that it is the client's money and ask for permission to keep it or to offset it against fees.

If solicitors comply with this requirement then they will have satisfied the basic condition in rule 4 of the Scope rules and do not have to opt into authorisation with the FSA.

Solicitors should note that the FSA has expressed the view that it will not be sufficient simply to seek the client's consent in a standard client care letter or by telling the client that the commission has been received with a request to retain it.

The basic condition differs from Rule 10 in one significant respect: the 20 de minimis provision of Rule 10 does not apply to the basic condition in the Scope rules and the requirement to account to clients applies to all monies received, however small the sum involved.

l Question of ethics is compiled by the Law Society'sprofessional ethics guidance team.

Send questions forpublication to Austin O'Malley, the Law Society, Ipsley Court, Berrington Close, Redditch B98 0TD; DX 19114 Redditch; tel: 020 7242 1222.