Ethics Flashcards
What are the 3 benefits of regulation for firms?
- CONFIDENCE for clients as regulated firms are monitored by RICS.
- PROFESSIONALISM firms will have to provide clear, impartial and expert advice.
- SECURITY firms have to have a recognised complaints procedure and access to free independent redress scheme
6 Principle of Bribery Act 2010
- Proportionality
- Top level commitment
- Risk assessment
- Due diligence
- Communication
- Monitoring and review
When was the RICS founded?
1868
When was the RICS given its Royal Charter?
1881
Roughly how many members?
130,000
What are the four levels of membership?
- FRICS
- MRICS
- AssocRICS
- Trainee/Student
What does the RICS stand for?
Royal Institution of Chartered Surveyors
How does one become FRICS?
Displays four of the following 5 characteristics:
- 5 or more years at MRICS
- A leadership role
- Professional/technical achievement
- Academic achievement
- Raising the profile of the RICS
How does one become FRICS?
Displays four of the following 5 characteristics:
- 5 or more years at MRICS
- A leadership role
- Professional/technical achievement
- Academic achievement
- Raising the profile of the RICS
How many members on Governing Council?
25
What does Governing Council do?
Provides management and strategic directions.
Who reports to Governing Council?
Regulatory board, management board, etc
How many specialist professional groups and what do they cover?
17 - covering land, property and construction
Every RICS professional group has what?
An elected board and is responsible for outlining standards of competence and practice.
Who is the current Chair of Governing Council?
Interim Chair - Nicholas Maclean
Who is the current CEO of the RICS?
Interim CEO - Richard Collins
Who is the current President of the RICS?
Clement Lau FRICS
Who is the current President Elect of the RICS?
Ann Gray FRICS
In the UK, how many national associations are there?
4
In the UK, how many regional boards are there?
10
What are the three main roles of the RICS?
- To maintain the highest standards of education and training
- To protect consumers through strict regulation of professional standards
- To be the leading sources of information and independent advice on land, property, construction and associated environmental issues (RICS 2015)
What are the 5 benefits of being an RICS member?
STATUS – your professional credentials provide unrivalled client confidence
RECOGNITION – promotion of your professional excellence to governments and markets
MARKET ADVANTAGE – RICS status and standards given you a competitive advantage
KNOWLEDGE – international practice standards, professional guidance, CPD and knowledge sharing
NETWORK – access to 130,000 professionals worldwide
What are the 5 RICS principles of better regulation embedded in the rules?
PROPORTIONALITY – making the penalty proportionate to the breach
ACCOUNTABILITY – to all members and the public
CONSISTENCY – treating all members the same
TARGETING – serious breaches
TRANSPARENCY – to all members, clients and the public
What are the 5 global professional and ethical standards?
- Act with integrity
- Act in a way that promotes trust in the profession
- Always provide a high standard of service
- Take responsibility
- Treat others with respect
What bye-law relates to the ethical and professional standards?
5.2.1 - requires members to conduct themselves in a manner befitting membership of the RICS.
What is the RICS decision tree?
It provides a framework of questions which members should ask themselves when facing a situation in which they are asked to act in a potentially unethical manner or situation.
What document covers the rules for members?
Rules of Conduct for Members 2007, as amended 2020
What are the 7 rules of conduct for members?
- Ethical behaviour
- Competence
- Service
- CPD
- Solvency
- Information to the RICS
- Co-operation
What RICS rules cover firm registration and when was it effective?
RICS Rules for the Registration of Firms 2019, effective 1st April 2020
When must a firm register with the RICS?
If 50% of principles of a UK firm are RICS members.
When can a firm register with the RICS?
If at least 25% of principle of a UK firm are RICS members
What is the definition of a Principle in a firm?
Sole practitioners, directors, partners or board members or someone who can act autonomously/without supervision in a firm
What strict rules are in place regarding the RICS logo and the designation ‘Chartered Surveyors’?
The logo can only be used by members and registered firms, as per the rules that came into effect in April 2020, including a restriction to use the designation ‘Chartered Surveyors’ by firms to the trading name only.
What information in a firms annual return?
- Type of business and staffing details
- PII details
- Nature of clients
- Whether the firm holds clients money
- CHP and records
- Statutory regulated activities (e.g. FCA)
What document covers the rules for firms?
Rules of Conduct for Firms 2007, as amended 2020
What are the 7 rules of conduct for firms regarding the firms Conduct of Business?
- Professional Behaviour
- Competence
- Service
- CPD and training
- Complaints Handling
- Client’s Money
- Indemnity
What are the 6 rules of conduct for firms regarding the firms administration?
- Solvency
- Information to the RICS
- Co-operation
- Advertising
- Arrangements to cover the incapacity or death of a sole practitioner
- Use of designations
What is the new RICS statement of ethical principles and rules of conduct?
A new simplified structure of 5 rules of conduct which will bring all ethical standards into one single document to replace the current rules of conduct for members and firms and the existing global professional and ethical standards.
When will the new rules be effective?
02 February 2022
Who regulates the RICS?
The RICS is self-regulated.
How can a disciplinary procedure be triggered?
- Somebody complaining to the RICS
- An allegation by a client or third party
- Information received or established by the RICS
What is the first step of a formal investigation?
Investigation by the Head of Regulation.
After an initial investigation, what four actions can be imposed?
- Served a fixed penalty notice - only regarding the supply of information to the RICS
- Regulatory Compliance Order - for low level breaches, such as minor breaches that can be easily corrected
- CPD Sanctions - an obligation on a member to follow CPD requirements
- Refer matter to the disciplinary panel for consideration under the disciplinary rules - more serious breaches
What penalties can be imposed by the disciplinary board?
- Issue a compliance order - written document which lays out what the member should do
- Unlimited fine - must be proportionate to the breach
- Impose conditions on future membership of the RICS
- Expulsion from membership of the RICS
- Publication of the results of the hearing on the RICS website, Modus and local newspaper
Can you appeal to a disciplinary outcome?
Yes - appeal panel is 50% lay members
penalty can be varied
can have regard to previous and new evidence
What can you tell me about fee negotiations?
- Healthy competition when quoting fees is encouraged
- Fees should be market-based and agreed on an ad-hoc basis with clients
- Price fixing, aggressive fee cutting or collusion is not accepted
- Further fee negotiations after you have submitted your initial fee proposal is permitted, however if lowering, can you still provide a high standard of service?
- Need to be completely transparent with fees and service needs to be in ToE
- Links back to ethics, rules of conduct and Bribery Act 10.
What do you do following a letter of instruction?
- Check you are competent to carry out the job
- Check for conflicts of interest
- Confirm work in ToE in writing and get back signed before starting work
For agency - compliance with money laundering regulations 2017
For what reasons would you decline an instruction?
- Not competent to carry out the work
- Do not have sufficient facts on the issue
- Proposed client will not sign ToE and/or complete AML checks
- There is a conflict of interest
- A PII cap cannot be agreed
- The advice is for a friend on a Pro bono basis and PII does not cover you for this work
- Client is on the UK Governments sanction list
- Would you be content for your actions to be made public?
RICS Professional and Ethical Standards Decision Tree can help.
What is a conflict of interest?
Arises when a firm or members impartiality and independence is threatened due to the existence of a conflict between two parties.
What are the three types of conflict of interest?
- Party conflict - work on the same instruction
- Own interest conflict - relating to personal interest
- Confidential interest conflict - work which is confidential
What RICS publication concerns conflicts of interest?
RICS Professional Statement on Conflicts of Interest 2017
What is informed consent?
- Consent for a surveyor to act for a client when a conflict of interest exists
- Should only be sought if satisfied that all relevant parties are best served by doing so
- Must be given in writing
- Full transparency of the conflict, the circumstances surrounding it and how you will deal with the conflict on instruction
- Must be signed by all parties prior to commencing work and an information/ethical barrier put up
What key areas are covered by the RICS Global Professional Statement on Conflicts of Interest?
- Definition of 3 types of conflict
- Informed consent
- Every RICS firm must have in place effective systems and controls appropriate to the size and complexity of their business to ensure full compliance
- All firms must keep records to show their compliance
How do you setup an information barrier?
- Must be robust enough to offer no chance of information passing
- Must take reasonable steps to operate an effective barrier
- Surveyors on both sides must be different and physically separated
- All information shall be securely stored
- Keep a clear audit trail of the conflict check process and all written and oral communication
- Firms compliance officer must oversee all actions
What additional conflict of interest statement is there for agency?
RICS Professional Statement Conflicts of Interest - UK Commercial Property Market Investment Agency 2017 - relates to UK agency work where a specific risk has been identified
What is dual agency?
Where an agent has a contractual relationship with both buyer and seller at the same time - this must not be undertaken by RICS members from 1st January 2018
What is incremental advice?
Where a member is approached by another party to provide additional incremental advice to an existing instruction. e.g. valuation of an asset currently being sold.
Can you give incremental advice?
Only if informed consent is given and information barriers are put in place before providing advice.
What is an own interest conflict?
This arises when acting for a family member/close business associate or someone with whom you have a financial/personal interest/benfit
What do the RICS Bye Laws state about confidentiality?
That client confidentiality must be maintained for all client affairs.
If a third party want to access confidential information on a client, what must you do?
You must obtain your clients permission.
When do you not have to get your clients permission to release confidential information?
When you are subject to a statutory duty overriding the clients confidentiality rights, such as police or HMRC.
When do you not have to get your clients permission to release confidential information?
When you are subject to a statutory duty overriding the clients confidentiality rights, such as police or HMRC.
How long should old files be retained for?
6 years
What happens if you received confidential information not intended for you?
This cannot be used for own purposes and you must inform the sender and intended receiver of the error and inform firms compliance officer.
Define negligence?
Failure to take proper care of something, leading to a loss and a potential claim for damages.
What is the main case for a negligent act?
Yianni v Edwin Evans (1981) - case established a residential valuer instructed by a mortgagee lending institution could owe a duty of care in tort to a mortgagor relying on valuation.
What is the case of a commercially astute borrower?
Scullion v Bank of Scotland Plc (2010) - CA held that a valuer providing advice for a B2L mortgage does not owe a duty of care to the borrower who is seeking funding for the purchase.
What is the main case regarding pro bono work?
Burgess v Lejonvarn (2020) - established that professionals providing services on pro bono basis and without contract owe a duty of care in tort to act with reasonable care and skill however not under any duty to advise or give warnings, and nor are they liable for work they do not do.
What is the main legislation for the limitations for claims?
Limitations Act 1980
What is the current limitation period for a contract?
6 years from the date of the negligent act, breach of contract or omission.
What is the alternative limitation period under the LA1980?
Section 14a, which is 3 years from the date of knowledge of the damage subject to the 15 years long stop from the negligent act or omission.
What is the limitation period in tort?
6 years from the date the claimant suffered loss.
How do you avoid being negligent?
- Clearly understand clients objectives
- Clearly document ToE
- Have ToE signed and return before commencing work
- Undertake work in accordance with RICS standards and guidance
- Make detailed notes and take plenty of photographs
- Keep up to date with market knowledge, legislation and CPD
- Cap the professional liability excess on your PII policy in ToE
What is Personal Indemnity Insurance?
Insurance in place to protect clients, surveyors and third parties against negligence claims when a duty of care has been breached and a claim for damages arises.
Where are the requirements for PII set out?
RICS Professional Indemnity Insurance Requirements Version 7 effective 01/05/20.
What requirements are in place for PII?
- All members must ensure that an adequate and appropriate level of insurance is in place for each instruction
- All policies must be underwritten by an RICS approved insurer
What are the current minimum limits of indemnity for PII claims?
£100,000 or less = £250,000
£100,001 to £200,000 = £500,000
£200,001 + = £1,000,000
What are the maximum amounts of uninsured excesses for PII claims?
Up to and including £500,000 = 2.5% of the sum insured or £10,000, whichever is greater
Over £500,000 = 2.5% of the sum insured
What does it mean if a PII policy is fully retroactive?
PII work on a claims made basis meaning the policy covers claims that are made against the insured during the period of insurance regardless of when the negligent act occured.
What happens if you retire or stop working?
Adequate and appropriate run off cover is required for minimum of 6 years however commercial claims can be made 15 years after and so the RICS recommend the longer period.
What must you do when a potential claim is received?
Immediately notify insurance company
What is the main guidance for handling clients money?
RICS Professional Statement Client Money Handling 2019
What are the 6 main areas of good practice for handling clients money?
- Holding client money
- Providing info to clients
- Receipts of clients money
- Payment from clients accounts
- Accounting records and controls
- Compliance
What best practice steps should be followed when handling clients money?
- Client accounts must be kept separate and clearly identifiable
- Kept in credit
- Client on bank account and cheque book
- Payment of interest agreed
- Regular bank reconciliation
- Accurate records and running balance
- Annual audit by certified accountant
- Money only withdrawn if properly required
- Signatories agreed
- Display money handling procedures on website
What RICS steps must be followed when starting a new practice?
- Inform RICS by completing a firm detail form
- Appoint a responsible principle
- Register with the RICS for regulation
- Arrange PII and send cover to the RICS
- Set up clients money handling procedures
- Register for VRS scheme if undertaking Red Book valuations
- Obtain RICS approval for CHP
- Appoint complaints handling officer
- Obtain logo kit from the RICS
- Ensure CPD of staff logged online
- Setup staff training plan
- Ensure completion of RICS annual return
What statutory compliance is needed when setting up firm?
- Disclose business name
- Equality Act 2010
- Financial Services compliance
- Bribery Act 2010
- Money Laundering Regulations 2017 and appoint money laundering reporting officer
- Asbestos register (Control of Asbestos Regs 2012)
- Fire Safety
- Data Protection Act 2018
- Estate Agency Act 1979
- Consumer Protection Regulations 2008
- Misrepresentations Act 1967
- Informa HMRC for tax reg and VAT
- Employment law compliance (national living wage)
- Ensure employer and public liability insurance
- -
What steps do you take when closing an RICS registered practice?
- Inform the RICS of retirement or closure
- Ensure clients informed at the earliest opportunity
- Handover arrangements made to new firm
- Return clients money to their own accounts
- Inform insurers and procure PII run off cover
- Retain a copy of clients files for a minimum of 6 years
What are the four requirements of members for CPD?
- Members to undertake a minimum of 20 hours CPD per annum
- Of the 20 hours, at least 10 must be formal
- Maintain a relevant current understanding of RICS professional and ethical standards during a rolling 3 year period
- Must record CPD activity using the RICS CPD management system
What is formal CPD?
- Includes all forms of structured learning that has clear learning objectives and outcomes
- e.g. structured online training, courses, seminars, self-managed learning that can be assessed by an expert third party
What is informal CPD?
Includes any self-managed learning that is relevant or related to your professional role
How can you decide if your CPD is formal or informal?
The RICS provided a useful decision tree to decide if formal or informal
What is the main legislation concerning Bribery?
Bribery Act 2010
What is the main legislation surrounding the proceeds of crime?
Proceeds of Crime Act 2002
What can be accepted as a gift and would not constitute bribery?
- Hospitality
- Promotional business expenditure
- “Low Value” business expenditure
What is the aim of the Bribery Act?
To reduce bribery in businesses in the UK and abroad.
Define a bribe.
The giving, offering, promising or receiving of an advantage such as payment, gift or service for an action which is in breach of trust.
What are the 6 principles of the Bribery Act?
- Proportionality
- Top Level Commitment
- Risk Assessment
- Due Diligence
- Communication
- Monitoring and Review
The four offences under the Bribery Act are?
- Bribing
- Receiving a bribe
- Bribing a foreign public official
- Failing to prevent bribery
Are companies liable for their employees?
Yes - unless they can show that they had adequate policies and procedures in place to combat bribery.
What is the government guidance on what is classed as bribery?
- Lavish entertainment can be classed as bribery
- Hospitality is not prohibited by the act but must be reasonable and proportionate
What criteria would a company need to meet to prove a defence to an employee guilt of bribery?
- identification of potential risks
- staff training
- provision of clear policies
- regular reviews
Who polices bribery and what are the penalties?
- Policed by Serious Fraud Office
- Maximum penalty of 10 years imprisonment and/or unlimited fine
What is the legislation covering Money Laundering?
Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (Amended 2019)
What is money laundering?
When the proceeds of criminal activity are disguised or converted and realised as legitimate assets.
Key provisions of ML regulations?
- Must have a ML and TF risk assessment
- Implement systems, policies and controls to address ML and TF
- Adopt appropriate internal controls
- Provide staff training
- Comply with new customers, enhanced and simple due dili…
- Comply with requirements relating to PEP’s
- Ensure appropriate record keeping
- AML checks to confirm identity and source of funds
- Include additional high risk factors when assessing the need for EDD and to seek additional information, e.g. transactions in third world countries
What regulations were amended and which affect letting agents legal obligations to ML and TF?
Money Laundering and Terrorist Financing (Amendment) Regulation 2019 - effective 10 January 2020
What is the limit on the acceptance of monthly rent?
£10k per month, anything over must be registered with HMRC
What checks need to be done by letting agents?
CDD on any new letting or reletting
What must a letting agent do if they accept rent in excess of £10k per month?
Register with HMRC by May 2020
When does a letting agent have to conduct EDD?
If red flag indicators occur:
- high risk countries
- non face-to-face business activities
Firms must have policies in place to scrutinise transactions for ML and TF, what are signs?
- Complex
- Unusually large
- Unusual patterns of transaction
- Without apparent economic or legal purpose
What is Customer Due Diligence?
- Identify the client and verify identity (passport and DL)
- Make reasonable endeavours to identify beneficial owners
- For a company, its name, company number, address, names of directors (unless listed on regulated stock market (eg LSE)
- Obtain information on the nature of the business relationship and proposed funding arrangements
What is Enhanced Due Diligence?
- Additional procedures for relationships/clients in a high risk third world country, PEP or PEP family member
Who is a Politically Exposed Person?
Someone who has been entrusted with a prominent public function
Why EDD for a PEP?
A PEP presents a higher risk for involvement in bribery and corruption by virtue of their position and the influence they may hold
What other key requirements under ML, TF and IoP regs?
- Register with HMRC on an annual basis
- On-going business relationships should be monitored
- RICS have issued red flag indicators
- Detailed record keeping required
- Responsible principal must be appointed to take responsibility
- Any suspicious activity must be reported to National Crime Agency
- Firm to maintain records for 5 years
- Firm to report any discrepancies between information held/received and Companies House
What are the penalties for a breach of ML, TF and IoP Regs?
- Maximum 14 years in prison and/or unlimited fine for assisting ML
- Maximum 5 years in prison and/or unlimited fine for tipping off a person that they are under investigation or failing to report suspicion
What are the red flag indicators for ML or TF?
- Inability or unwillingness to provide identity checks
- Changes to parties involved in transactions
- Unusual transaction features, eg unexpected urgency or potential loss making
- Payment of fees, purchase or rental monies in unusual currencies
Main legislation relating to the proceeds of crime?
Proceeds of Crime Act 2002
What does the Proceeds of Crime Act provide?
Powers for enforcement authorities in the UK to recover in criminal and civil proceedings money and other assets which are deemed to be the proceeds of crime
What are the three main offences created by the Proceeds of Crime Act?
- Concealing criminal property
- If a person knowingly enters into an arrangement that they suspect or know facilitates the acquisition, retention, use or control of criminal property
- If a person acquires, uses or has possession of criminal property
What RICS publications cover ML, TF and Bribery?
RICS Professional Statement - Countering Bribery, Corruption, Money Laundering and Terrorist Financing 2019
What is the point of the RICS Prof Statement on ML, TF etc…. and what are the three main parts of the statement?
To clarify that the RICS expects its members to comply with the legislation. Three parts:
- Mandatory requirements for anti-bribery, corruption, AML and TF
- Guidance setting out supporting good practice for the above
- Supplementary guidance on points 1 & 2
