SQE1 · Subject page 7 · 7 min read

SQE1 FLK1 subject notes: the SRA's regulatory role, the SRA Principles and Code of Conduct, the Solicitors Disciplinary Tribunal, reserved legal activities, indemnity insurance, the Equality Act 2010, money laundering, financial services regulation, and funding options for legal services.

What this subject covers

The SRA specification covers the regulatory role of the SRA (principles and risk-based regulation, the Solicitors Disciplinary Tribunal, reserved legal activities, professional indemnity insurance and other regulated providers); overriding legal obligations (the Equality Act 2010, money laundering and financial services); and funding options for legal services (private retainers, conditional fee arrangements, damages-based agreements, fixed fees, legal aid, third party funding and legal expenses insurance). Ethics and professional conduct is tested pervasively across both FLK papers, so the SRA Principles and Code of Conduct summarised here matter in every subject.

Key principles

Regulation of legal services

• The Legal Services Act 2007 set up the Legal Services Board, which oversees approved regulators such as the SRA (solicitors), the Bar Standards Board and CILEx Regulation. The Legal Ombudsman deals with complaints about service.
• Reserved legal activities (s 12 and Sch 2): exercising rights of audience, conducting litigation, reserved instrument activities (such as transfers of land), probate activities, notarial activities and administering oaths. Other work, such as general legal advice and will writing, is unreserved.
• Professional indemnity insurance: firms must hold qualifying insurance under the SRA Indemnity Insurance Rules.
• SRA enforcement: the SRA can issue warnings, rebukes, fines within its powers and impose conditions on practising certificates. The Solicitors Disciplinary Tribunal can also suspend or strike a solicitor off the roll and impose unlimited fines; it applies the civil standard of proof. Dishonesty normally leads to striking off (SRA v Sharma).

The SRA Principles

Solicitors must act:

1. in a way that upholds the constitutional principle of the rule of law and the proper administration of justice;
2. in a way that upholds public trust and confidence in the profession;
3. with independence;
4. with honesty;
5. with integrity;
6. in a way that encourages equality, diversity and inclusion;
7. in the best interests of each client.

Where Principles conflict, those safeguarding the wider public interest (such as the rule of law and public confidence) take precedence over the client's interests. Integrity is wider than honesty (Wingate v SRA).

The Code of Conduct for Solicitors: highlights

• Maintaining trust and acting fairly (1.1 to 1.4): no unfair discrimination; no taking unfair advantage of clients or others, including unrepresented opponents; perform all undertakings; do not mislead anyone, by act or omission.
• Dispute resolution and proceedings (2.1 to 2.7): do not misuse or tamper with evidence or influence its substance; no benefits to witnesses dependent on their evidence or the outcome; only properly arguable assertions; do not waste the court's time; draw the court's attention to relevant cases, statutes and procedural irregularities.
• Service and competence (3.1 to 3.6): act only on instructions from the client or someone properly authorised; provide a competent and timely service; maintain competence; take account of the client's attributes, needs and circumstances; supervise properly.
• Client money and assets (4.1 to 4.3): safeguard money and assets entrusted to you.
• Business requirements (5.1 to 5.6): clients must be told of any referral arrangement or fee sharing relevant to their matter, a fee sharing agreement must be in writing, and none of this may affect your independence; referral fees in personal injury cases are prohibited (Legal Aid, Sentencing and Punishment of Offenders Act 2012, s 56).
• Conflict, confidentiality and disclosure (6.1 to 6.5):
• no acting where there is an own interest conflict or significant risk of one (6.1);
• no acting where there is a client conflict, unless the clients have a substantially common interest or are competing for the same objective, all give informed consent, given or evidenced in writing, effective safeguards are in place and acting is reasonable (6.2);
• keep current and former clients' affairs confidential (6.3), a duty that survives the end of the retainer and the client's death;
• tell the client all material information, except where disclosure is prohibited by law, the client agrees otherwise, serious harm would result, or the information is in a privileged document disclosed by mistake (6.4);
• do not act against a current or former client whose confidential information is material unless effective measures prevent disclosure or that client consents (6.5).
• Cooperation and accountability (7.1 to 7.12): report promptly to the SRA facts you reasonably believe are capable of amounting to a serious breach, which may be done through the firm's COLP or COFA.
• Client identification, complaints and information (8.1 to 8.11): identify clients; tell them in writing at the start of the right to complain to the firm and to the Legal Ombudsman (which normally expects the firm to have eight weeks first); deal with complaints promptly, fairly and free of charge; give the best possible information about likely costs at the start and as the matter progresses; no unsolicited approaches to members of the public.

Overriding legal obligations

• Equality Act 2010: service providers must not discriminate and must make reasonable adjustments for disabled people, without charging for them (ss 20, 29).
• Money laundering: the principal offences are concealing, arranging and acquiring criminal property (Proceeds of Crime Act 2002, ss 327 to 329); a defence is an authorised disclosure with appropriate consent, which is deemed given if the NCA does not refuse within seven working days (s 335), with a 31-day moratorium if it refuses. In the regulated sector, failing to report a suspicion to the nominated officer is an offence (s 330), subject to a privilege exception for legal advisers; tipping off is an offence (s 333A). Ordinary conduct of litigation is not an "arrangement" (Bowman v Fels). Under the Money Laundering Regulations 2017 firms must carry out customer due diligence (identify and verify the client and beneficial owners, reg 28), enhanced due diligence for high-risk cases and politically exposed persons (regs 33, 35), and have a nominated officer.
• Financial services: carrying on a regulated activity in relation to a specified investment (such as shares) without authorisation or exemption breaches the general prohibition (Financial Services and Markets Act 2000, s 19). Solicitors' firms usually rely on the Part 20 exemption (s 327): the activity must be incidental to legal services, any commission must be accounted for to the client, and the activity must not be one the FCA has prohibited. The SRA Financial Services (Scope) Rules and Conduct of Business Rules apply.

Funding legal services

• Private retainer: hourly rates or fixed fees, with clear costs information.
• Conditional fee agreements (Courts and Legal Services Act 1990, s 58): a success fee of up to 100% of base costs, paid by the client, not the opponent, since 2013. In personal injury cases the success fee is capped at 25% of general damages and past losses.
• Damages-based agreements: the lawyer takes a percentage of damages, capped (including VAT) at 25% in personal injury (excluding future losses), 35% in employment matters and 50% otherwise.
• Legal aid: civil legal aid is limited in scope after LASPO 2012 and is means and merits tested. Criminal legal aid for the magistrates' court needs the interests of justice test and a means test; different means rules, with possible contributions, apply in the Crown Court.
• Third party funding and legal expenses insurance: before-the-event insurance often comes with household or motor policies; once proceedings are needed the insured may choose her own lawyer (Insurance Companies (Legal Expenses Insurance) Regulations 1990, reg 6). After-the-event insurance covers the risk of paying the other side's costs.

Worked example

Una, a conveyancing solicitor, acts for a new client buying a flat for cash. He is an overseas government minister, his source of funds is unclear, and he offers her a "thank you" of 2,000 pounds if the deal completes by Friday.

1. Due diligence: he is a politically exposed person, so enhanced due diligence is needed: senior management approval, establishing his source of wealth and funds, and closer monitoring.
2. Suspicion: if Una suspects the money is criminal property she must report to the nominated officer and not proceed without consent; she must not reveal the report to the client.
3. The offer: accepting a personal payment linked to completing quickly would create an own interest conflict and threaten her independence (Principle 3; Code 6.1). Any fee must go through the firm and be properly agreed.
4. Information: he must be told in writing of the firm's complaints procedure and his right to complain to the Legal Ombudsman, and given clear costs information at the start.

Scope follows the SRA's SQE1 Functioning Legal Knowledge Assessment Specification (FLK1, Legal Services, and the pervasive Ethics and Professional Conduct content). The notes are our own summary, not SRA material. Law of England and Wales as at 1 September 2026 (the SRA assesses the law as it stands four calendar months before the first assessment in a window).