Legal and regulatory framework, ethics and professional conduct
What the exam tests
The legal and regulatory domain tests the professional and statutory framework around advice: fiduciary duties, the STEP Code of Professional Conduct, anti-money-laundering, confidentiality, conflicts, capacity and data protection. Answers should identify the duty, the source and the practical step.
Core framework
Trustees and personal representatives act as fiduciaries: they must act in good faith, for proper purposes, avoid unauthorised conflicts and not make secret profits. The STEP Code of Professional Conduct sets principles including integrity, competence, confidentiality, client focus and professional behaviour; it is supported by practice rules but is not a substitute for statute. Under the Money Laundering Regulations 2017, firms must perform risk-based customer due diligence, identify beneficial owners and monitor transactions. POCA 2002 requires suspicious activity reports (SARs); tipping off is a criminal offence. Capacity is governed by the Mental Capacity Act 2005, with the presumption of capacity and best-interests decisions.
Confidentiality and conflicts
Confidentiality is subject to legal exceptions: client consent, court order, statutory disclosure and the prevention of crime. A conflict may be managed by separate representation, information barriers or declining the retainer; acting for both sides of a trust dispute is rarely permissible.
Worked example
A trustee asks you to transfer £200,000 to a new overseas company with no apparent connection to the trust. The instruction is unusual and the destination is high risk. You should not simply execute it. You identify the beneficial owner, ask for the trust deed and purpose, and if suspicion remains, make an internal report and a SAR without telling the trustee. Confidentiality does not require you to commit or facilitate a criminal offence.
Traps
Treating the STEP Code as legislation; assuming confidentiality is absolute; and continuing to act where a conflict is material. Do not confuse client due diligence with a one-off identity check; it is ongoing.