Conflict of Interest

Question 1

What is a conflict of interest?

Answer 1

Arises when a member or firm’s independence and impartiality is threatened due to the existence of a conflict between two parties.

Question 2

What forms of conflict of interest are there?

Answer 2

Party Conflict - acting on both sides of a transaction.

Own Interest Conflict - relating to a personal interest.

Confidential Information Conflict - relating to work between two parties which is confidential.

Question 3

How do you undertake a conflict of interest check?

Answer 3

I use my firm’s internal system, which is a database to check the client name and the address of the property against all known jobs.

Question 4

What are the basic steps involved when you identify a conflict?

Answer 4

Follow the guidance set out in the RICS Global Professional Statement on Conflicts of Interest, 1st edition, January 2018:
1. Conflict avoidance - consider whether the conflict is irresolvable with your impartially comprised and should be avoided or whether it can be properly managed maintaining transparency and openness.

2. Written advice to both parties – decide whether you want to accept the instruction from Client A and Client B:
   - Disclose the nature of the conflict, the circumstance and set out proposals for how the firm proposed to deal with conflict (e.g. information barrier)
   - Be as clear as possible and ensure both parties make their own decision (inform them to see independent advice if needed)
   - Request written confirmation from both clients that your firm can act in accordance with the provisions of the procedure proposed, with informed consent given.
3. Conflict management - set up information in accordance with provisions agreed with the clients (information barrier).

Question 5

If you are conflicted, can you still undertake an instruction if you’ve got informed consent?

Answer 5

Depends whether you would be able to act impartially, whether you believe that you undertaking the instruction would be in the best interest of all those who are or may be affected and whether its prohibited by law.

Question 6

What would you do if you had a personal conflict of interest and how would you manage this?

Answer 6

• Ensure that all parties were aware and provided informed consent.
• I would refer the instruction internally and ensure that the appropriate information barriers were setup.

Question 7

What is the RICS guidance on conflicts of interest and what does it state?

Answer 7

• RICS Global Professional Statement on Conflicts of Interest 2017 effective 1st January 2018.
• A member must not advice or represent a client where doing so would involve a conflict of interest or a significant risk of a conflict of interest, other than where all those who are, or may be affected have provided their informed consent.

Question 8

RICS Global Professional Statement on Conflicts of Interest 2017 effective 1st January 2018 requires all firms to have?

Answer 8

• Must have effective systems and controls in place appropriate to the size and complexity of their business, to ensure full compliance.
• Firms must keep records to show their compliance with the statement.

Question 9

How do you use an information barrier?

Answer 9

• The barrier must be robust enough to offer no chance of information passing between the two parties
• You must take reasonable steps to operate an effective barrier
• The surveyors acting on the two sides must be different and they must be physically separated, preferable in different buildings or on different floors with different support teams
• All information regarding the instruction should be securely stored
• Keep a clear audit trail of the conflict check process and all written and oral communication and the firm’s compliance officer must oversee all actions

Question 10

What should you do if a personal interest / own interest conflict arises?

Answer 10

• Must not let it interfere with or influence your professional judgement.
• Full transparency is required.
• Facts must be declared in writing before the instruction is accepted.

Question 11

Have you seen an example of a conflict of interest in your firm?

Answer 11

Give example.

Question 12

Give me some examples of how a conflict of interest may arise.

Answer 12

• Any financial interest
• A personal interest
• Commercial relationships
• Acting on both sides of a transaction

Question 13

How do you manage a conflict of interest?

Answer 13

• Transparency with all parties involved.

- Information barrier - both physical & electronic.

Question 14

What is informed consent?

Answer 14

• Informed consent may only be sought where the RICS members or regulated firm is satisfied that proceeding despite a conflict of interest is in the interests of all of those who are or may be affected and is not prohibited by law.
• This can only be given in writing by the party is the person explaining the position to them is entirely transparent about any material factors and sure that the party affected understands what they are doing.
• Surveyors should only seek informed consent if satisfied that all relevant parties are best served by doing so.

Question 15

If you have declared a conflict of interest to your client and they state that they are happy for you to continue working on the project, what else do you need from them?

Answer 15

• ‘Informed Consent’ RICS provide a template.

Question 16

How do you best handle a conflict of interest?

Answer 16

With transparency and openness.

Question 17

What is dual agency?

Answer 17

• Where an agent has a contractual agency relationship with both the seller and the buyer at the same time.
• This practice must not be undertaken in any circumstances.

Question 18

What is the additional guidance on conflicts of interest?

Answer 18

• RICS Professional statement conflicts of interest – UK commercial property market investment agency 2017
• Additional mandatory professional statement relates only to UK commercial investment agency work where a specific risk has been identified.

Question 19

What are the regulations relating to incremental advice?

Answer 19

• This where an agent is approached by another party to provide advice, to include valuation, building surveying or planning, related to a purchase or disposal that is incremental to an existing instruction.
• An example is where an agent is acting for the seller in relation to a disposal but is approached by the buyer, or its lender, to provide a valuation.
• RICS members must only provide such incremental advice if consent is given and an information barrier is put in place before providing incremental advice to the prospective buyer.

Question 20

What is a personal interest / own interest conflict?

Answer 20

Arises when acting for a family member, a close business associate or someone with whom you have a financial / personal interest / benefit (known as a ‘connected person’).