3. Handling Clients Money Flashcards
What processes do regulated firms need to put in place when handling Clients’ Money?
Preserve the security of clients’ money which does not belong to the company.
RICS regulated firms that operate a client account must:-
* Set clear segregation of duties for employees.
* A Principal oversees the client money accounting functionsand cannot override controls
* Competent and knowledgeable staff are to process clients’ money with cover provided for long term absence.
* Accounting systems and data must be secure.
* Client money must be kept separate and clearly identifiable with the word ‘client’ included in the bank account name.
* Clients must always have access to funds.
* We must agree the terms and advise the client on bank details.
* The account must not be overdrawn.
* We must maintain client ledgers and provide a running balance.
What are the different types of client money accounts?
- General accounts hold money for more than one client.
- Discrete accounts reference a single named client.
What is the ‘Clients’ Money Protection Scheme’?
- This is a money protection scheme operated by the RICS.
- It contains provision for any member of the public to be reimbursed their direct loss of funds when using an RICS regulated firm.
- This is provided through an RICS insurance policy.
- This scheme provides protection, as a last resort, in instances where an RICS Regulated firm is unable to repay a client’s money, up to the limits and exceptions set out in the scheme rules.
What is the purpose of the joint names on a client account?
- For the purpose of dual authorisation.
Who does interest earned on a client account belong to?
It gets credited to the client
Do a company have to earn interest on client’s money that they hold?
No
What does the RICS require when a firm handles clients’ money?
Regulated firms that hold clients’ money must pay a regulatory review fee on an annual basis (fee table can be downloaded from RICS website)
What is the purpose of a client holding account?
To preserve the security of clients’ money entrusted to regulated firms against:
- Insolvency of the firm
- Misappropriation by any party
- Death of a sole practitioner
What is the difference between a general and a discrete client account?
- General client account - holds money belonging to more than one client
- Discrete client account - holds money belonging to a single client
If you hold client’s money, how do you set up an appropriate account?
- Must be held in bank account separate from all other monies
- Account title must include the word ‘client’
- Firms must advise clients in writing of account details and agree terms of account handling
- A ‘Principal’ (i.e. director/partner of the firm) or appropriately qualified individual is appointed to oversee client accounting functions
- Written consent must be obtained if the firm is to retain any interest accrued
- Details of money paid into and out, including a running balance, must be made available
- A central list of client accounts must be maintained, including opening and closing dates
- Clients’ money must be banked within 3 working days
- Fees received in advance for professional work not yet billed must be paid into a client account pending completion of the work
Who does interest earned on a client account belong to?
Belongs to the client unless written consent states otherwise
What is the maximum length of time you should keep a client’s money before placing it in an appropriate account?
3 working days
What is the Clients’ Money Protection Scheme?
- Free to use RICS service (paid for by firms as part of their yearly regulatory review fee) that allows members of the public to be reimbursed for any direct loss of funds (i.e. clients’ money held by a regulated firm that has been misappropriated)
- The scheme is one of last resort - the firm is primarily responsible for making good the loss and the scheme only comes into operation when the firm are unable to make payment
What are the current monetary limits on the Clients’ Money Protection Scheme?
Current limit is £50,000 per claimant up to an overall limit for all claims under the scheme of £5,300,000 in any one calendar year
Within what timeframe must claims be made under the Clients’ Money Protection Scheme?
Claims must be made within 6 months of discovery of loss
