Legal Services (LGS): essential SQE1 knowledgeLegal Services is examined in FLK1 and represents 12–16% of the 180-question paper, approximately 22–29 questions. It covers four principal areas:The regu…
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Overview
Legal Services (LGS): essential SQE1 knowledge
Legal Services is examined in FLK1 and represents 12–16% of the 180-question paper, approximately 22–29 questions. It covers four principal areas:
The regulatory role of the SRA
Money laundering
Financial services
Funding options for legal services
Ethics and Professional Conduct are assessed pervasively across FLK1 and FLK2. They are therefore essential to Legal Services questions, although technically identified as a separate, cross-cutting component of the blueprint. Official SRA FLK1 specification and SQE1 blueprint
The usual SQE question asks what a solicitor or firm should do next, whether conduct is permitted, whether authorisation is required, whether a disclosure must be made, or which funding arrangement is appropriate.
1. Regulation of legal services
Candidates should understand the principal regulatory framework, including:
Legal Services Act 2007
Solicitors Act 1974
Administration of Justice Act 1985
SRA Principles
SRA Code of Conduct for Solicitors, RELs and RFLs
SRA Code of Conduct for Firms
SRA Authorisation Rules
SRA Transparency Rules
SRA Indemnity Insurance Rules
SRA Enforcement Strategy
The purpose of regulation is to protect:
Clients
The public
The administration of justice
The rule of law
Confidence in legal services
2. Regulatory organisations
Candidates should distinguish the functions of:
Organisation
Principal function
Legal Services Board
Oversight regulator for approved legal-services regulators
Solicitors Regulation Authority
Regulates solicitors and authorised firms
Law Society
Professional representative body for solicitors
Legal Ombudsman
Deals principally with complaints about service
Solicitors Disciplinary Tribunal
Adjudicates serious disciplinary allegations
Legal Services Consumer Panel
Represents consumer interests
Compensation Fund
May compensate eligible victims of dishonesty or failure to account
A common distinction is:
Poor service → Legal Ombudsman
Professional misconduct or regulatory breach → SRA
The same conduct can sometimes involve both a service complaint and a regulatory issue.
3. Reserved legal activities
Candidates should know the six reserved legal activities:
Exercise of a right of audience
Conduct of litigation
Reserved instrument activities
Probate activities
Notarial activities
Administration of oaths
Essential distinctions include:
Giving legal advice is not generally reserved
Conducting litigation is reserved
A person may assist with litigation without personally conducting it
Reserved work must be performed through an appropriately authorised or exempt person
Immigration advice is separately regulated
Not every legal-service provider is regulated by the SRA
Questions may ask whether a particular individual or organisation requires authorisation to perform the proposed work.
4. Authorised firms and individuals
Candidates should understand:
Individual practising certificates
SRA-authorised bodies
Recognised bodies
Licensed bodies or alternative business structures
Managers and owners of authorised firms
Compliance officers
Restrictions on practising through unauthorised businesses
Supervision of legal work
Responsibility for non-solicitor staff
COLP and COFA
An authorised firm normally requires:
COLP: Compliance Officer for Legal Practice
COFA: Compliance Officer for Finance and Administration
Their responsibilities include:
Taking reasonable steps to secure compliance
Recording regulatory breaches
Reporting serious breaches to the SRA
Ensuring proper financial and accounting controls
Appointment of a COLP or COFA does not remove the regulatory responsibilities of managers or individual solicitors.
5. SRA Principles
Candidates should be able to apply all seven SRA Principles. A solicitor must act:
In a way that upholds the constitutional principle of the rule of law and the proper administration of justice
In a way that upholds public trust and confidence in the solicitors’ profession and in legal services
With independence
With honesty
With integrity
In a way that encourages equality, diversity and inclusion
In the best interests of each client
Where principles conflict, those protecting the wider public interest, particularly the rule of law and public confidence, may take precedence over the interests of an individual client.
6. Honesty and integrity
These concepts overlap but are not identical:
Honesty concerns truthfulness and freedom from deception.
Integrity concerns adherence to the ethical standards expected of the profession.
Candidates should recognise misconduct involving:
Misleading clients
Misleading the court
False documents or statements
Concealing material facts
Improper use of client money
Taking unfair advantage
Dishonest assistance
Reckless representations
Personal financial arrangements with clients
A solicitor must not mislead the court, another party or a third person, whether through an express statement, omission or involvement in the client’s deception.
7. Independence
Solicitors must exercise independent professional judgment.
Threats to independence may arise from:
Employer pressure
Client pressure
Financial interests
Personal relationships
Introducers
Third-party funders
Lenders
Commercial arrangements
Gifts or benefits
The client gives instructions and determines objectives, but the solicitor controls professional and legal judgment and must refuse unlawful or unethical instructions.
8. Best interests and competent service
Candidates should know the duties to:
Act in the client’s best interests
Provide competent and timely service
Maintain professional knowledge and skills
Ensure staff are competent and properly supervised
Give information the client can understand
Explain material risks and options
Keep the client informed
Avoid unnecessary costs or delay
Consider the client’s attributes and needs
Make reasonable adjustments where appropriate
Acting in the client’s best interests never permits misleading the court, facilitating illegality or breaching another overriding obligation.
9. Client identification
A solicitor must be clear about:
Who the client is
Who has authority to give instructions
Whether the client has legal capacity
Whether an intermediary is properly authorised
Whether instructions reflect the client’s own wishes
Who will pay the legal costs
Whether third-party payment creates a conflict or confidentiality risk
Special care is needed where:
A family member gives instructions
A company officer instructs on behalf of a company
A litigation friend is required
Capacity is uncertain
A vulnerable person may be under pressure
10. Client care and costs information
At the beginning of a matter, the client should receive clear information about:
Scope of the work
Objectives
Responsibilities of solicitor and client
Who will conduct the work
Supervision
Likely timescale
Basis of charging
Costs estimate
Disbursements
VAT
Potential liability for another party’s costs
Available funding options
Complaints procedure
Right to complain to the Legal Ombudsman
Costs information must be:
Clear
Accurate
Understandable
Updated when circumstances materially change
The solicitor must not make misleading or unrealistically low estimates merely to obtain instructions.
11. Complaints handling
Authorised firms must maintain an effective complaints procedure.
Candidates should know:
Clients must be informed how to complain
Complaints should be handled promptly, fairly and without charge
The firm should provide a written response
The client should be told about recourse to the Legal Ombudsman
The firm must not prevent a legitimate complaint
Service complaints and conduct complaints may follow different routes
A complaint may reveal a reportable regulatory breach
12. Equality, diversity and inclusion
Candidates should understand:
Equality Act 2010
Direct discrimination
Indirect discrimination
Harassment
Victimisation
Disability discrimination
Duty to make reasonable adjustments
Protected characteristics
SRA Principle 6
This applies to:
Clients
Employees
Recruitment
Barristers and experts
Suppliers
Access to legal services
Workplace conduct
A solicitor must not allow a client’s discriminatory preferences to determine professional decisions, such as selecting counsel based on race or sex.
13. Confidentiality
Candidates should know the general duty to keep current and former clients’ affairs confidential.
Confidentiality covers:
Information obtained from the client
Information obtained from third parties
The fact that a person sought advice
Documents and electronic records
Information concerning former clients
Disclosure may be permitted or required where:
The client gives informed consent
Disclosure is required by law
A court orders disclosure
Anti-money-laundering legislation requires a report
A carefully limited public-interest exception applies
Disclosure is reasonably necessary to defend the solicitor against an allegation
Confidentiality must be distinguished from legal professional privilege, which belongs to the client and carries stronger protection.
14. Legal professional privilege
Candidates should distinguish:
Legal advice privilege
Protects confidential communications between lawyer and client made for the purpose of giving or receiving legal advice.
Litigation privilege
Protects confidential communications between lawyer, client or third party made for the dominant purpose of existing or reasonably contemplated adversarial litigation.
Important principles:
Privilege belongs to the client
Only the client can ordinarily waive it
It survives the end of the retainer and generally the client’s death
It does not protect communications made to further crime or fraud
Inadvertent disclosure does not always amount to waiver
A solicitor must not improperly exploit another party’s privileged material
15. Conflicts of interest
Candidates should identify two broad categories:
Own-interest conflict
Client conflict
Own-interest conflict
A solicitor must not act where their own interests conflict, or significantly risk conflicting, with the client’s interests.
Examples include:
Financial interest in the transaction
Personal relationship with a party
Accepting a substantial loan from a client
Advising on the solicitor’s own negligence
Receiving a secret commission
Personal benefit from the client’s decision
There is no general exception allowing a solicitor to act despite an own-interest conflict merely because the client consents.
Client conflict
A solicitor generally must not act for two or more clients whose interests conflict or carry a significant risk of conflict.
Limited exceptions may apply where:
Clients have a substantially common interest, or
Clients are competing for the same objective
The conditions include:
Informed consent given or evidenced in writing
Effective safeguards protecting confidential information
Reasonable belief that acting for all clients is appropriate
No wider reason why the solicitor should not act
16. Confidential information and former clients
A solicitor must not act against a current or former client where:
The solicitor possesses confidential information material to the new matter, and
There is a real risk of disclosure
Acting may sometimes be possible where:
The former client gives informed consent, or
Effective information barriers provide adequate protection
A merely informal promise between colleagues is unlikely to constitute an adequate information barrier.
17. Duties to the court
A solicitor must:
Uphold the proper administration of justice
Not mislead the court
Not tamper with evidence
Not influence witnesses improperly
Comply with court orders
Draw the court’s attention to relevant law where required
Correct a misleading statement
Preserve independence in litigation
Not abuse the litigation process
Not make allegations without proper foundation
If a client admits guilt privately but pleads not guilty, the solicitor may continue to act provided the solicitor does not positively assert a false case or mislead the court.
If a client insists on misleading the court and will not permit correction, the solicitor will normally have to cease acting, subject to professional rules governing withdrawal.
18. Undertakings
An undertaking is a professional commitment that the recipient is entitled to rely upon.
Candidates should know:
Undertakings must be clear and capable of performance
A solicitor should not give an undertaking without authority
The solicitor must ensure timely performance
An undertaking should not depend on matters outside the solicitor’s control unless appropriately qualified
Breach may result in professional discipline and court enforcement
Leaving a firm does not erase the regulatory importance of an undertaking
Firms must have proper systems for recording and monitoring undertakings
19. Referrals, introductions and fee-sharing
Candidates should understand:
Introducer arrangements
Referral fees
Fee-sharing
Transparency requirements
Client consent
Independence
Best interests
Confidentiality
Prohibition on improper commissions
Restrictions applying to personal injury referrals
Need to account to the client for financial benefits where appropriate
The client should be informed of relevant financial or commercial arrangements affecting the recommendation.
A solicitor must not allow an introducer to control:
Legal advice
Choice of service
Client relationship
Handling of client money
Professional judgment
20. Publicity and transparency
Publicity must not be:
Misleading
Inaccurate
Unsolicited in a prohibited manner
Likely to undermine public confidence
Candidates should understand that firms may have to publish information concerning:
Prices for specified services
Scope of included work
Likely disbursements
Qualifications and experience
Complaints procedure
Regulatory status
SRA digital badge
21. Professional indemnity insurance and compensation
Authorised firms generally require qualifying professional indemnity insurance.
Candidates should distinguish:
Professional indemnity insurance: generally responds to civil liability for professional negligence.
SRA Compensation Fund: discretionary protection, particularly where money has been lost through dishonesty or failure to account.
They are not interchangeable and neither automatically compensates every loss.
22. Reporting obligations
Solicitors and firms may have to report serious breaches to the SRA.
Candidates should recognise factors indicating seriousness:
Dishonesty
Intentional or reckless conduct
Harm to clients
Misuse of client money
Pattern of misconduct
Failure of systems or supervision
Risk to the public
Attempted concealment
Failure to cooperate with the regulator
A person should not retaliate against someone who makes a protected or proper regulatory report.
23. Anti-money-laundering framework
This is a major Legal Services topic.
Candidates should understand the principal legislation:
Proceeds of Crime Act 2002
Terrorism Act 2000
Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017
Criminal Finances Act 2017
Sanctions and Anti-Money Laundering Act 2018
Current UK financial-sanctions regime
Candidates must identify:
Whether work is within the regulated sector
Who the client and beneficial owner are
Whether due diligence is sufficient
Whether there is knowledge or suspicion of money laundering
Whether an internal or external report is required
Whether proceeding would constitute an offence
Whether consent or a defence is required
Whether communication would constitute tipping off
24. Money laundering and criminal property
Money laundering can involve:
Concealing criminal property
Disguising criminal property
Converting criminal property
Transferring criminal property
Removing it from the jurisdiction
Entering into an arrangement facilitating its acquisition, retention, use or control
Acquiring, using or possessing criminal property
Candidates should understand that:
Criminal property may result from any criminal conduct
The amount may be small
The solicitor need not have participated in the original offence
Legal fees may themselves constitute criminal property
Tax evasion proceeds can constitute criminal property
Suspicion requires less than proof but more than a vague possibility
25. Customer due diligence
CDD normally requires:
Identifying the client
Verifying identity using reliable, independent sources
Identifying the beneficial owner
Understanding ownership and control
Understanding the purpose and intended nature of the relationship
Ongoing monitoring
Scrutiny of transactions
Updating information where necessary
CDD is required in circumstances including:
Establishing a business relationship
Carrying out certain occasional transactions
Suspicion of money laundering or terrorist financing
Doubt about previously obtained identification information
CDD is not merely obtaining a passport. The solicitor must understand who controls the client and why the transaction is taking place.
26. Beneficial ownership
For a company or other entity, candidates should be able to identify the natural person who ultimately:
Owns the entity
Controls it
Benefits from it
Exercises control through other means
If no beneficial owner can be identified after reasonable steps, senior managing officials may need to be recorded, but the inability to identify ownership may itself increase risk.
27. Enhanced and simplified due diligence
Enhanced due diligence
May be required for:
High-risk matters
Politically exposed persons
High-risk countries
Unusual or complex transactions
Remote relationships creating additional risk
Transactions lacking an apparent lawful or economic purpose
Other circumstances presenting increased risk
Possible measures include:
Additional identity evidence
Source-of-funds enquiries
Source-of-wealth enquiries
Senior management approval
Enhanced ongoing monitoring
Simplified due diligence
May be appropriate only where:
The relationship genuinely presents a lower risk
The decision is supported by a documented risk assessment
No suspicion or other disqualifying factor exists
It does not mean that all due-diligence obligations disappear.
28. Source of funds and source of wealth
Candidates must distinguish:
Source of funds: where the money for the particular transaction came from.
Source of wealth: how the client accumulated their overall wealth.
A bank statement showing that money is in an account does not necessarily establish its underlying source.
29. Politically exposed persons
A PEP relationship requires enhanced risk management, but a PEP is not presumed to be involved in crime.
Relevant measures may include:
Senior management approval
Establishing source of wealth and source of funds
Enhanced ongoing monitoring
Risk-sensitive treatment of family members and known close associates
The approach must be proportionate and based on risk.
30. Suspicious activity reports
Where a solicitor knows or suspects money laundering in the regulated sector, the normal sequence is:
Do not ignore the suspicion.
Make an internal report to the firm’s Money Laundering Reporting Officer or nominated officer.
The nominated officer determines whether an external report to the National Crime Agency is required.
Consider whether a defence against money-laundering liability is needed before proceeding.
Avoid tipping off the client or prejudicing an investigation.
The exact response depends on whether the solicitor is working within the regulated sector and whether one of the statutory exceptions applies.
31. Failure-to-disclose offences
Within the regulated sector, offences may arise where a person:
Knows or suspects money laundering, or has reasonable grounds for doing so
Receives the information through regulated work
Fails to make the required disclosure
Potential protections include:
Appropriate disclosure
Reasonable excuse
Lack of adequate training in certain employment circumstances
Privileged circumstances, where applicable
Candidates must be careful not to assume that all communications with a solicitor are protected.
32. Legal professional privilege and AML
The privileged-circumstances protection may apply to information received in connection with:
Giving legal advice
Existing or contemplated legal proceedings
However, it does not apply where communications are made with the intention of furthering a criminal purpose.
Distinguish carefully:
Advice about the legal consequences of past conduct
Assistance designed to carry out or conceal continuing criminal conduct
33. Tipping off and prejudicing an investigation
A solicitor must not disclose information likely to prejudice an investigation where the statutory elements are satisfied.
However:
Ordinary professional questions are not automatically tipping off
A solicitor may sometimes explain that regulatory obligations prevent further action
The solicitor should not reveal that a suspicious activity report has been made
Careful wording and internal guidance are essential
34. AML systems and controls
Relevant firms must have risk-sensitive policies concerning:
Practice-wide risk assessment
Client and matter risk assessment
Customer due diligence
Record keeping
Internal controls
Staff screening
Training
Internal reporting
Appointment of responsible officers
Ongoing monitoring
Sanctions compliance
Failing to maintain appropriate systems may itself be a regulatory or criminal matter.
35. Financial sanctions
Candidates should distinguish financial sanctions from ordinary AML controls.
A firm may need to:
Identify whether a client or beneficial owner is a designated person
Freeze relevant assets
Avoid making funds or economic resources available
Report to the Office of Financial Sanctions Implementation
Obtain a licence before carrying out otherwise prohibited activity
Sanctions obligations can apply even where there is no suspicion of money laundering.
36. Financial services regulation
Candidates should understand the general prohibition under the Financial Services and Markets Act 2000:
A person must not carry on a regulated activity in the UK unless:
Authorised, or
Exempt
The central questions are:
Is there a specified investment?
Is the solicitor conducting a specified activity?
Is the activity carried on by way of business?
Does an exemption apply?
Can the firm rely on the professional-firms regime?
37. Specified investments and activities
Common specified investments include:
Shares
Debentures
Government securities
Units in collective investment schemes
Insurance contracts
Certain mortgages
Options and futures
Common specified activities include:
Advising on investments
Arranging deals
Dealing as agent or principal
Managing investments
Safeguarding and administering investments
The question normally concerns whether legal work has crossed into a regulated financial activity.
38. Exempt professional firms
An SRA-authorised firm may carry out certain incidental financial-services activities under the professional-firms regime, subject to conditions.
Candidates should consider whether:
The activity arises from or complements a professional service
The activity is incidental to the firm’s legal work
The firm accounts to the client for commission or benefit
The activity is not prohibited by the relevant rules
The firm remains within the scope of its authorisation
A firm cannot rely on the exemption to operate a separate investment business disguised as legal work.
39. Insurance distribution
Legal work may involve insurance, including:
After-the-event insurance
Legal-expenses insurance
Defective-title insurance
Life policies
Transaction-related insurance
Candidates should recognise that advising on or arranging insurance may constitute regulated insurance-distribution activity, requiring authorisation or reliance on an appropriate exemption.
40. Funding legal services
Candidates should compare:
Private retainer
Fixed fee
Conditional fee agreement
Damages-based agreement
Civil legal aid
Third-party funding
Before-the-event insurance
After-the-event insurance
Trade-union or membership-body funding
The correct answer depends on:
Merits
Value
Client’s means
Recoverability of costs
Adverse-costs exposure
Type of proceedings
Availability of insurance
Regulatory validity of the proposed agreement
41. Private retainers and fixed fees
Private retainer
The client pays according to the agreed basis, commonly:
Hourly rates
Staged fees
Agreed estimates
Capped fees
Fixed fee
The client pays a specified amount for an identified scope of work.
Candidates should consider:
What work is included
What happens if the scope changes
Treatment of VAT and disbursements
Whether the fee remains fair and transparent
Consequences of early termination
42. Conditional fee agreements
A CFA commonly provides that:
The solicitor receives no or reduced fees if the case is lost
The solicitor receives normal fees and possibly a success fee if the case succeeds
Candidates should know:
A CFA must satisfy statutory requirements
It is prohibited in certain proceedings
Success fees are generally not recoverable from the opponent
In most personal-injury claims, the success fee payable from damages is subject to a statutory cap
The client may still face disbursements and adverse costs
After-the-event insurance may address some of these risks
The client must receive clear information about financial consequences
43. Damages-based agreements
Under a DBA, the representative’s payment depends on obtaining a specified financial benefit, normally calculated as a percentage of damages.
Candidates should know:
Formal statutory requirements apply
Percentage caps vary by type of claim
Certain proceedings are excluded
The client must understand how payment is calculated
The agreement must address termination and expenses
A DBA differs from a CFA success fee
44. Legal aid
For assessments taking place before 1 September 2026, the current FLK1 wording includes eligibility for criminal and civil legal aid under Legal Services.
For assessments from 1 September 2026, criminal legal aid is removed from FLK1 Legal Services because it is tested under Criminal Law and Practice in FLK2. Civil legal aid remains within Legal Services. SRA September 2026 changes
For civil legal aid, candidates should understand:
Scope: whether the type of case is covered
Means: whether the client qualifies financially
Merits: whether the case justifies public funding
Exceptional case funding
Possible client contributions
Statutory charge against recovered or preserved property
Availability of limited initial advice and full representation
Not all serious or meritorious civil claims fall within the statutory scope.
45. Third-party funding and insurance
Third-party funding
A commercial funder finances litigation in return for an agreed return if the claim succeeds.
Risks include:
Funder control
Conflicts of interest
Confidentiality and privilege
Termination rights
Liability for adverse costs
Security for costs
Whether the arrangement is enforceable
The solicitor’s duties remain owed to the client, not the funder.
Before-the-event insurance
Already exists before the dispute and may cover legal expenses.
After-the-event insurance
Purchased after the dispute arises and may cover:
Opponent’s costs
Own disbursements
Other defined litigation risks
The solicitor should check existing insurance before recommending a new funding arrangement.
Highest-priority areas for revision
For examination purposes, the strongest priority should be given to:
SRA Principles and conflicts between them
Duties to the court
Confidentiality and legal professional privilege
Own-interest and client conflicts
Client care, costs and complaints
Reserved legal activities and SRA authorisation
AML customer due diligence
Beneficial ownership and source of funds
Suspicious activity reporting
Tipping off and privileged circumstances
Financial sanctions
Regulated financial activities and professional-firm exemptions
CFAs, DBAs, legal aid and insurance
Referrals, commissions and independence
Undertakings and reporting serious breaches
Best method for answering LGS questions
Apply this sequence:
Who is the solicitor’s client?
Which regulatory duty or statutory regime applies?
Is there a conflict, confidentiality issue or threat to independence?
Does a duty to the court, regulator or public override the client’s wishes?
Is disclosure permitted, prohibited or required?
Does the firm need authorisation or an exemption?
Is an internal report required before external action?
What must the client be told?
Can the solicitor continue acting?
Which answer protects the client while preserving the rule of law and professional integrity?
Blueprint caution
The attached official document contains FLK2 sample questions, whereas Legal Services is principally an FLK1 subject. It is useful for understanding the SQE single-best-answer format but does not define the Legal Services syllabus. The authoritative source is the official SRA FLK1 assessment specification.