Conduct Ethics - Client money Flashcards
What does the RICS Publish regarding client money?
- Professional statement: Client money handling (1st ed Oct 2019) (4 x £20 notes on cover)
- RICS Client Money Protection Scheme for Surveying Services or Property Agents (“the Scheme”)
- RICS Client Money Protection Scheme Rules (“the Rules”)
Scheme Rules take precedent in event of any ambiguity/conflict.
Any reg-firm holding client money Must register with one of the Scheme options.
Name the key parts of the professional statement of client money handling
- Holding clients’ money
- Information to clients
- Receipts of client money
- Payments from client account
- Accounting records and control
- Compliance
Explain the RICS’ definition for Client Money
As per Professional statement Client money handling (2019)
Money in form of any currency (cash/cheque/electronic transfer) that:
- RICS regulated firm holds-for or receives on behalf of another person, includ sthe regulate firm as a stakeholder, and:
- is not immediately due and payable to the firm for its own account.
It excludes fees paid in advance for professional work agreed to be performed, unless the fees are for work undertaken as a property agent as defined by the Rules of RICS Money Protection Scheme for Property Agents.
Explain the process for setting up a client account.
- Set up account that is in the client’s name
- Agree the terms and advise clients on the bank details (name of account and bank full name and address)
- Generate a client ledger
- Clients must always have access to the funds
- Agree whether client needs to instruct all payments or can proceed under management agreement
- Clients’ money must be kept separate and clearly identifiable
- interest on the account must be agreed with the client as to who keeps
- You must maintain a running balance/ledger of any transactions
- The account must never be overdrawn (supplement deficit with office account if necessary)
- Once services are complete the account must be closed with balances reimbursed (or donated to charity if unidentified recipient after 3 years (indemnity and record must be kept))
What is a client money account?
Account in the name of the RICS-regulated firm, a wholly owned subsidiary company of the firm, or an appropriately contracted third-party transaction provider, holding client money that belongs to:
- a single client of the firm (“discrete client money account”)
- more than one client of the firm (“general money account”)
What is a client ledger?
Record of all payments and receipts in chronological order with a running balance showing the amount of money held by the firm on behalf of its clients.
How does the RICS regulate its firms/members on client money
- Professional Statement: Client money handling (2019)
- Rules of Conduct:
- Rule 1 / 1.10 = Firms keep client money safe and have appropriate accounting controls
- Rule 1 / 1.11 = Members do not misuse client money and comply with the controls intended to keep it safe.
- Rule 1 / 1.13 = Members and firms do not facilitate any financial crime including money laundering, tax evasion, bribery or corruption. Firms have processes in place to prevent directors, partners or employees doing so.
What can you tell me about the RICS’ Client Money Protection Scheme?
Version 1 - effective April 2019
- Used as a last resort for RICS regulated firms for when they cannot repay clients money
Can pay out up to:
- Up to £50k per claim
- Scheme as a whole can pay out £10.3m per year.
Purpose of the Scheme are:
- To allow firms to offer client money protection as per the Rules, and
- To compensate clients of an RICS firm who is unable to repay a client’s money
What are the key objectives of the RICS’ professional statement on handling client’s money?
- client money is kept safe
- client money accounts are used for appropriate purposes only and
- RICS-regulated firms have the appropriate controls and procedures to safeguard
client money.
Applies to all members and regulated firms in the UK.
What are the key requirements for Firms in the professional statement for client’s money
2.2.1 - Holding clients’ money
2.2.2 - Information to clients
2.2.3 - Receipts of client money
2.2.4 - Payments from client account
2.2.5 - Accounting records and control
2.2.6 - Compliance
How would a sole practitioner deal with a period of incapacity, absence, death or extended period away?
Rules of Conduct Obligations for firms requires professional work to continue during any periods of incapacity death, inability to work or absence. Locum agreement as part of Client Money handling professional statement.
What other forms does the RICS provide regarding business continuity?
Power of Attorney; form held in Client Money professional statement section
What are the key requirements for Members in the professional statement for client’s money
- 2.3 - RICS members Must
- ensure compliance with all anti-money laundering legislation, rules and regulations for
all receipts of client money - ensure compliance with the mandatory requirements of the latest edition of the RICS
professional statement Countering bribery and corruption, money laundering and
terrorist financing - follow all procedures for handling client money at the firm where they work
- not override any controls in place to protect client money
- make appropriate disclosures to a senior member of the firm or a regulator immediately if they become aware of any risk of or actual misappropriation of client money and to keep a written record of that disclosure.
Give me examples of Client Money
- a payment on account of costs generally
- rents and service charges
- interest credited to a client account (unless the firm retains interest by agreement)
- arbitration fees
- client money held but due to be paid to contractors
- auction sale proceeds where the firm is acting as an agent not as a principal
- commission received on the placement of insurance for members of the designated
professional body scheme for general insurance distribution activity where the client
has not given the RICS member or RICS-regulated firm informed consent to retain
the commission.
Give me examples of Office Money
Office money includes but is not limited to:
- interest on general client accounts that by agreement with the client does not
accrue to the client – the bank or building society should be instructed to credit
such interest to the office account - payments received for fees due to the RICS member or RICS-regulated firm against
a bill or written notification of costs incurred, which has been given or sent - disbursements already paid or disbursements incurred but not yet paid by the RICS
member or RICS-regulated firm - money paid in advance in respect of an agreed fee for surveying services (but not
property agent work in England).
