Conflicts of Interest Flashcards
Where would you refer to in order to find guidance on conflicts of interest?
- RICS Professional Statement on Conflicts of Interest
Define Conflict of Interest
Is anything that imposes or might be perceived to impose an individual or firm’s ability to act impartially and in the best interest of the client
Define Party Conflict
Duty of a RICS member to act in the interest of a client or other party in a professional assignment conflicts with a duty owed to another client or party in relation to the same or a related professional assignment
For example, a Party Conflict will arise where
a duty owed to a client or other party conflicts (or entails significant risk of conflict) with:
- the duty owed to a court or tribunal when acting as an expert witness
- acting as an adjudicator / arbitrator where you need to act impartially
One way to avoid a party conflict is to agree with a client at the instruction stage restrictions on the scope of services taken on
Define Own Interest Conflict
The duty of a RICS member to act in the interest of a client in a professional assignment conflicts with the interests of that same RICS member/ firms or any individual within the regulated firm
Personal interests may include financial interests, personal relationships, appointments to public office, management appointments, commercial interests or employment relationships.
Define Confidential Information Conflict
The duty of a RICS member to provide material information to one client and the duty of that RICS member to another client to keep that same information confidential is jeopardised
Duty of confidentiality is owed to past, current, future and potential clients; the duty to the client is continuous and ongoing
Define Information Barrier
Physical & / or electronic separation of individuals or groups within the same firm that prevents confidential information passing between them
Define Informed Consent
Consent given willingly by a party who may be affected by a “conflict of interest”, that the party having demonstrated to the RICS member working for the firm understands:
A. There is / or a significant risk of a conflict of interest
B. Facts are known by the RICS member
C. What that conflict of interest is or may be
D. That the conflict of interest may affect their ability to advise or act fully in the interest of a client
Firm Must:
- Record Keeping (maintain records, observe systems & controls, make available for inspection by RICS) - records to be maintained in case of a complaint
- If you cannot get “informed consent” then you should not proceed
- If you do get IC, you still need to be sure the party affected fully understands the implications
- Discuss with the affected parties the matters set out in the IC and what precautions should be undertaken in the professional assignment to manage the COI
Just because the affected parties are willing to give informed consent it doesnt mean the member / firm must proceed - there must be professional judgement as to whether it is the correct thing to do and be sure they will not cause professional embarrassment to the regulated firm / RICS member
What should you do if you face a conflict of interest?
- Openness
- Transparency
- Informed consent
- Offer to step down
- Discuss how to manage a conflict
- Cannot accept instruction if no agreement is made on how to manage the conflict
What are our responsibilities in relation to conflicts of interest?
- A RICS member or regulated firm must not advise or represent a client where doing so would involve a conflict of interest or a potential conflict of interest
Informed Consent may be sought only where the RICS
member or regulated firm is satisfied that proceeding
despite a Conflict of Interest is:
- in the interests of all those who are or may be affected
- is not prohibited by law
and that the COI will not prevent the member or regulated firm from providing competent and diligent advice to those that may be affected
In relation to COI, every RICS member working independently or within a non-regulated firm or within a regulated firm must:
- identify and manage COI in accordance with the RICS PS
- keep records of the decisions made in relation to whether to accept individual professional assignments, the obtaining of informed consent, and measures taken to avoid a conflict of interest from arising
In relation to confidential information, every RICS member working independently or within a non-regulated firm or within a regulated firm must:
- maintain confidential information unless disclosure is required or permitted by law, or the RICS member or regulated firm m concerned can demonstrate that
the relevant party consented to the disclosure before it was made. - Every RICS member working independently or within
a non-regulated firm or within a regulated firm must
provide to every client all the information that is material to that client’s professional assignment of which that RlCS member has knowledge
What systems must a firm have in place in relation to conflicts of interest?
- Every RICS regulated firm must have in place
effective systems and controls appropriate to the size and complexity of their business to enable them to ensure that the firm and its employees are able to manage their compliance with this professional statement.
What are the 3 types of conflict of interest?
- Party Conflict
- Own Interest Conflict
- Confidential Information Conflict
When did the RICS Professional Statement on Conflict of Interests become effective?
January 2018
How might a conflict of interest arise within a firm?
- In multi disciplinary companies (information barrier)
- If two related firms act for two clients in the same transaction with competing interests
What are some examples of conflicts where informed consent would not be enough and you should not proceed
- a RICS member taking professional assignments that conflict each other
- in a professional assignment that is contentious
- where the potential appointment is subject to a specific statutory or regulatory regime
What are some key considerations when implementing an information barrier?
- That the information barrier is not the only solution to a COI and informed consent is still obtained
- Information barriers should be kept in place for previous clients
- Ensure it works in practice (not just in theory)
- Vital for the RICS member to satisfy themselves that the information barrier is effective and not to just delegate the responsibility to others in the firm
- Consider the organisational structure / all members of the firm who might have access to the information
How would you deal with a conflict of interest between competing bidders?
- The RICS PS does not prevent a regulated firm from acting for two or more clients who are bidding for the same asset
- Legally and under the definition of COI it does amount to a conflict of interest, but professional firms do commonly act for multiple bidders and the conflict of interest can be resolved by
1) each bidding client giving informed consent (names of clients kept confidential from one another)
2) ensure that no individual within the firm is representing both clients
3) Ensure information barriers in place
Are you able to pass on confidential client information on to a third party (e.g. lawyers or insurers)?
- You are able to do so but it must be included in the Terms of Engagement and agreed with the client
What should you do if a conflict occurs?
Make client and parties aware of the potential conflict of interest immediately
Ensure Informed Consent is obtained and plan of action to manage conflict
Offer to step down
What is a Information Barrier?
An ethical barrier that prevents communication between parties where a conflict of interest may exist.
Tell me about a time you have come across a conflict of interest?
Within my company there are multiple disciplines who may bid for the same project. There are clear rules set around no information sharing to` improve chances of bidding
What is informed consent and when are they required?
Where a party may be affected by a conflict but instructs the party to carry out the work
Clients must issue an informed consent
How would you assess if there may be a conflict of interest?
Review the professional statement on COI
Speak with director to ensure there are no conflicts
Can you tell me what is in the Conflict of Interest (1st Edition guidance note?
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