Conflict of Interest Flashcards
What is a conflict of interest?
A conflict of interest arises when a member or firms independence and impartiality is threatened due to the existence of a conflict between two clients:
Examples include:
Any financial interest
A personal interest
Commercial relationships
Acting on both sides of a transaction
Yes v No
Conflict avoidance v conflict management
- Conflict avoidance is when you do not accept the instruction.
- Conflict management is when the instruction is accepted, and steps are agreed and put in place to manage the conflict, such as an information/ ethical barrier, with the written agreement of all parties.
What does the RICS Global Professional Standard on Conflicts of Interest 2017 state?
States that ‘a member must not advise 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 formal consent.’
Party conflict
same instruction for two different parties
Own Interest Conflict
personal interest
Confidential information conflict
work to two parties that is confidential
Informed Consent
Has to be given in writing by client and that the person acting is transparent and party understands all details.
Surveyors should seek informed consent if they are satisfied all parties would benefit.
Other key areas of the RICS Global Professional Standard on Conflicts of Interest 2017 include…..
- all conflicts must be managed in accordance with the statement
- firms must have appropriate and effective systems and controls in place
- firms must keep records to show their compliance
What is the three step process on managing a conflict?
STEP ONE – upon receipt of full facts, consider if your impartiality is irresolvable and you should avoid or whether it can be managed properly.
STEP TWO
If you accept the instruction you need to do three things
- Disclose the nature of the conflict to both parties, the circumstances and how the firm will deal with it such as setting up information barriers etc.
- Be clear and ensure both parties can make their own decision (inform them to seek independent advice).
- Request written confirmation from both clients of their informed consent.
STEP THREE – CONFLCIT MANAGEMENT
- Once written consent is received from both parties you can set up an info barrier agreed by both clients.
What must an information barrier include in order to be sufficient?
- Robust
- Reasonable steps to operate a barrier
- Surveyors acting on two sides must be separated preferably by two different buildings or floors
- All information securely stored
- Clear audit trail of conflict check
Dual agency
agent has a contractual agency relationship with both the seller and the buyer
must not happen!
How does your firm check for C.O.I?
On the CBRE intranet page go to my finance > job registration (this is not you accepting the instruction or agreeing TOE, this is done before any of that) – input high-level details of instruction to include property address and client (for confidentiality reasons).
The system then runs a search and pulls up any jobs with the same address.
To find out more details, you can ring the surveyor assigned to the job.
Once you have full details of the nature of any jobs which were flagged, you can make a decision as to whether they represent a COI.
What does the RICS say about C.O.I in investment agency?
RICS Professional Statement Conflicts of Interest – UK Commercial Property Market Investment Agency 2017.
Mandatory from 1st Jan 2018. Relates specifically to investment agency.
CANNOT work on both sides of an investment transactions.
Dual agency – where an agent has a contractual agency relationship with both buyer and seller – “This practice must not be undertaken in any circumstances from 1st Jan 2018 by any RICS members”
What is incremental advice?
Where agent approached by another party to provide advice (valuation, building surveying or planning etc.) related to a purchase or disposal that is incremental to an existing instruction.
Example – an agent acting for seller in relation to a disposal and is approached by the buyer or its lender to provide valuation.
RICS members only to provide incremental advice if informed consent given in writing by all parties and if so, info barrier put in place before any advice given.
