Ethics Flashcards
Why do you want to become Chartered?
Gold standard of my profession
Confidence and credibility for clients
Network of 125,000
Competitive market advantage
What is the main role of the RICS?
(RAT)
Regulation - protect consumers
Advice - leading source of information
Training - High standard of education and training
When was RICS founded and when did it receive Royal Charter?
Founded: 1868
Royal Charter: 1881 (Privvy Council)
Why were the new RICS Rules of Conduct (2022) introduced?
To provide a simple & clear structure
Increase focus on diversity & inclusion
What are your obligations as RICS members?
To comply with CPD requirements (20 hours a year, min 10 formal)
Co-operate with RICS
Provide all information reasonably required by the Standards & Regulations Board
What are firms obligations to RICS?
1) Publish complaints handling procedure
2) Appropriate Professional Indemnity Insurance (PII) cover
3) Sole principal must make appropriate arrangements in the event of their death
4) Co-operate with RICS
5) Provide all information reasonably required by SRB
6) Display on business literature they are RICS regulated
7) Report to RICS any matter that are required
What is a bribe?
A gift or incentive which impairs professional judgement
What are the 4 offences under the Bribery Act (2010)
Bribing
Receiving a bribe
Bribing a foreign public official
Failing to prevent bribery
What are the different types of Conflict of Interest?
1) Party Conflict - Work on the same instruction
2) Own Interest Conflict - Personal conflict
3) Confidential Information Conflict - work between two parties that is confidential
What are the 5 RICS Rules of Conduct (2022)?
1) RICS members and firms must act with honesty, integrity and comply with their personal and professional obligations to RICS.
2) Maintain professional competency and ensure necessary expertise.
3) Good-quality and diligent service.
4) Treat others with respect and promote diversity & inclusion
5) Act in the public interest and maintain public confidence in the profession - in accordance with the Royal Charter
What is the current governance structure of the RICS?
The Governing Council is in charge and provides strategic and management direction.
The Standards & Regulations Board (SRB) and Management Board report into the Governing Council.
BUT SRB resigned en masse & interim SRB been appointed.
I am aware of the Bichard Review (2022) into the governance structure.
What was the purpose of the Bichard Review (2022)?
Independent review into RICS’ purpose, governance and strategy.
36 recommendations in 7 key areas.
Including a focus on diversity & inclusion, focus on younger members and simplify governance structure
What recommendations did Bichard make?
36 recommendations on 7 key areas:
1) Increase focus on public interest
2) Maintain self-regulation through greater independence
3) Increase focus on Diversity & Inclusion
4) Greater support for regional boards and focus on younger members
5) Independent review of RICS governance
6) A new simplified, clear governance structure
7) Focus on Sustainability
What has been RICS’ response to the Bichard Review?
Adopt all 36 recommendations
Equality, Diversity & Inclusion Panel chair recruited (Louise Brooke-Smith)
Governing Council elections to better reflect geogaphical location of members
What is the purpose of the RICS Ethical Decision Tree?
Provides a framework of questions that members should ask themselves when facing a situation in which they’re asked to act in a potentially unethical manor.
It encourages the legality of one’s actions and their consistency with the Rules of Conduct.
The final question is whether members would be content to have their actions made public.
When would a disciplinary procedure be triggered?
Complaint by client or third party to RICS
Information received or established by RICS
Breaching the Rules of Conduct
E.g. failing to meet CPD requirements.
What are the 3 levels of disciplinary action?
1) Action by Head of Regulation
2) Disciplinary Panel
3) Appeal Panel
What could the Head of Regulation do if disciplinary action is required?
1) Serve a fixed penalty notice (fine or caution)
2) Make a regulatory compliance order
3) Refer to Regulatory Tribunal
4) Refer directly to Disciplinary Panel
Are you aware of any recent disciplinary hearings?
Peter Heath - Disciplinary Panel - August 2023
Failed to comply with RICS’ requirement in respect of CPD.
Sanction: Reprimand and fine.
Published on RICS website
What are the disciplinary proecdures for minor and major breaches of conduct?
Low level breaches = Compliance Orders (e.g. failure to undertake CPD)
Major Breaches = Disciplinary Panel Hearing (e.g. breach Rules of Conduct)
What is the first step in Disciplinary Action?
A formal investigation by the Head of Regulation.
Can either serve a compliance order or refer the breach to Disciplinary Panel.
What are the new RICS Guidance documents as of 2023?
RICS Professional Standards = Mandatory to follow (ex Professional Statements) e.g. Comparable Evidence in Real Estate Valuation.
RICS Practice Information = Not mandatory and no explicit recommendations (ex Guidance Notes)
How should fee negotiations be conducted?
NO UNDERCUTTING
Fee negotiations should be conducted with honesty and transparency reflecting the market level ensuring you can provide a diligent service for the fee.
How do Terms of Businses differ from Terms of Engagement?
Terms of Business = Standard document relevant to the company and applies across all service lines.
Terms of Engagement = Bespoke, relevant to specific instructions. Sets out fee agreement and complaints handling procedure.
What must you include in Terms of Engagement prior to starting work on an instruction?
Written agrement on the proposed fee basis, any expenses to be treated and the Complaints Handling Procedure is available upon request.
What must you do prior to accepting an instruction?
Conflict of Interest check
Check professional competence (SUK)
Signed Terms of Engagement
(AML checks for agency)
When would it be appropriate to decline an instruction?
There is a Conflict of Interest
The client will not sign Terms of Engagemenet / AML checks
If you are not competent to undertake the work (SUK)
What is a Conflict of Interest?
When your ability to act impartially or objectively is compromised (can be actual, potential or perceived)
What are the most common types of Conflict of Interest?
1) Party Conflict (same instuction)
2) Own Interest Conflict (personal interest)
3) Confidential Information Conflict
Have you ever come across a Conflict of Interest in your work?
Yes.
A party conflict arose on a disposal in Hammersmith, where an occupier represented by Cluttons requested a proposal. I informed the client of the conflict and, following confirmation they wished to proceed, communicated how this would be managed. I obtained written consent from the client confirming their approval. I created an information barrier between myself and my colleague and ensured all files relating to the disposal were password protected. To further manage the disposal, I advised that our joint agents assumed all responsibility for the negotiations.
What is the difference between Conflict Avoidance and Conflict Management?
Conflict Avoidance = Declining instruction.
Conflict Management = Managing a conflict by putting an information or ethical barrier in place and seeking informed consent.
What is informed consent?
Written consent once the parties consenting clearly understand their position and full facts.
How would you handle a Conflict of Interest?
In accordance with the 3-step process:
1) Conflict Avoidance - Can you still carry out the instruction impartially?
2) Written Advice to both Parties - Set out in writing the nature of the conflict, how you intend to manage it (information barrier) and request informed consent.
3) Conflict Management - Implement the information barrier.
What is your Complaints Handling Procedure?
Remember (5-10-10-5)!!!!!!!
Contact Head of Division
Acknowledge receipt of the complaint within 5 days
Within 10 working days, the Head of Division will inform the complainant about an outcome.
If disattisfied, the Managing Partner can conduct a separate review and get in contact within 10 working days.
If still unsatisfied, an independent redress system will be provided within a further 5 days - we use The Property Ombudsman.
What is the RICS Guidance for Complaints Handling?
RICS Guidance Note on Complaints Handling (2016)
What does the RICS Guidance Note on Complaints Handling say?
A firm’s Complaint’s Handling Procedure must be approved by RICS.
Details must be issued to clients with Terms of Engagement.
Complaints must be logged to show detials, progress and outcomes.
Must include an RICS approved ADR mechanism.
What are CPD requirements for members?
Minimum 20 hours per year (at least 10 formal)
What is formal CPD vs informal CPD?
Formal = Structured learning where there are clear learning objectives and outcomes (e.g. training course / seminar).
Informal = Self-managed learning (e.g. private study / on-the-job training)
What is Professional Indemnity Insurance?
Mandatory for surveyors.
To protect clients, surveyors, and third parties against negligence claims where a duty of care has been breached and a claim for damages arises.
What are the current minimum requierments for Professional Indemnity Insurance (PII)?
Minimum cover is based on a firm’s turnover in the preceding year:
£100,000 less = £250,000
£100,001 to £200,000 = £500,000
£200,001 more = £1 million
What is the maximum level of uninsured excess required by RICS for PII?
Based on a firm’s turnover in the preceding year:
Up to £10 million = 2.5% of the sum insured of £10,000
Over £10 million = No set limit
Uninsured excess is the amount a member may be required to pay before indemnity is granted.
What are the RICS requirements for Professional Indemnity Insurance?
Mandatory
Must be underwritten by an RICS approved insurer (listed underwriters on the RICS website)
Fully retroactive & on an each and every ‘claims made’ basis
Early notification to the insurer of a potential claim
How would you assess PII if the firm was a new business with no previous turnover?
Estimate the turnover and adjust in due course accordingly
If your firm’s turnover in the preceding year was £100,000 or less, what is the minimum level of indemnity insurance required?
£250,000
Where do you buy Professional Indemnity Insurance from?
It must be from an RICS approved insurer - Listed underwriters on the RICS website.
Do you still need Professional Indemnity Insurance for Pro-Bono (unpaid) work for charities or friends?
Yes - you are still required to draw up ToE and you still need PII
What is Run-Off Cover?
When a firm ceases to trade or you die - you still need insurance for a minimum of 6 years to cover the recent work carried out.
PII is on a ‘claims made’ basis.
What is the RICS Requirement for Run-Off cover once a firm closes?
For Consumer Claims = at least £1 million of cover for 6 years.
For Commercial Claims = “Adequate and appropriate” amount for a minimum of 6 years.
(RICS recommends longer than 6 years)
What if a Firm is unable to obtain Run-Off cover?
Apply for coverage to the RICS Run-Off Pool
What needs to have occurred for a negligence claim to be made?
When a duty of care has been breached and a claim for damages arises resulting in a loss, a negligence claim can be made.
How might you avoid claims of negligence made against you?
Clearly understand clients objectives and confirm precise instructions in Terms of Engagement
Ensure you are competent to undertake the work (SUK)
Follow RICS Guidance during practice
Keep detailed file notes and audit trail
How long should you retain clients’ files for prior to securely destroying them?
6 years.
What is the difference between public liability and professional indemnity?
Public Liability = covers for risk of injury and damage
Professional Indemnity Insurance = covers negligence claims.
How does your firm handle clients money?
The clients money is to be held in a separate, named account with the word “client” included on the bank account.
A client must be able to access their money on demand, even at the sacrifice of interest.
Regular reconciliatio checking that payments are received
Protected by the RICS Client Money Protection Scheme
What is the RICS Client Money Protection Scheme?
A last resort protection in instances where a firm is unable to repay a client’s money.
Split into two parts (general surveying practices) and (residential agency).
What are mandatory requirement of the Professional Standard: Client Money Handlign (2019)?
Client money must be held in a separate bank account clearly named as ‘client’
A client must be able to access their monies on demand, even at the sacrifice of interest.
Regular reconciliation checking that payments are received.
Account must be kept in credit
When MUST a firm register for RICS Regulation?
When providing surveying services to the public
When 50% of Principals are RICS Members = regulation MANDATORY.
If 25% of Principals are RICS Members = firm eligible to register.
The firm must appoint a ‘Responsible Principal’ to liaise with RICS
If 25% of Principals are RICS Members - does the firm need to be regulated?
No - but they are eligible to register.
50% if mandatory for reigstration.
Why are RICS firms required to sign up for Registration?
To ensure there is a recognised quality benchmark for all firms
What are the key steps to setting up a new firm? (RICS Requirements)
- Inform RICS of your new practice
- Appoint ‘Responsible Principal’ to coordinate with RICS
3.Arrange Professional Indemnity Insurance - Set up procedures for Handling Client Money
- Obtain RICS approval for Complaints Handling Procedure & appoint Complaints Handling Officer
- Use RICS logo kit - designation
- if sole practitioner plan for succession/future running of business (Locum Agreement)
- Ensure completion of the RICS Annual Return
What are the key steps to setting up a new firm (Legal Requirements)
1) Ensure compliance with current Employment Law (e.g. Living Wage)
2) Inform HMRC (VAT + Tax reasons)
3) Bribery Act (2010) compliance
4) Equality Act (2010) compliance
5) Health & Safety Act (1974) compliance
6) Appoint AML Officer
7) Register for Data Protection (Data Protection Act, 2018)
What are the key steps for closing down a Surveying Practice?
- Inform the RICS
- Inform all clients asap
- Return clients money
- Ensure Professional Indemnity Insurance Run-Off Cover for a minimum of 6 years.
- Retain clients’ files - minimum of 6 years.
What would you do if you were in a pub and a friend asked you to give them a quick estimated value of their property?
I would remain polite and explain that I cannot give them any advice until our Terms of Engagement have been signed.
If they ask why … because they could claim for negligence and my companies PII cover would not cover anything if ToE are not signed).
What is your firm’s policy on receiving a gift?
If a gift is under £50 we are able to accept it, as long as it is logged in our gift policy register.
We do not accept cash/money vouchers/tickets/events where the donor is not present.
If in doubt, company policy is to politely refuse.
Include everything on the company gift register which is regularly reviewed by Compliance Officer.
Would you accept a gift from a contractor/agent tendering or neogitating for work?
Never - not even coffee - decline.
What are the key principles of the Bribery Act (2010)?
- Proportionality (proportionate to the bribery risks faced)
- Top Level Commitment (Senior staff committed to preventing bribery)
- Risk Assessment (Identify hazards and manage the risk)
- Due diligence
- Communication
- Monitoring and review (regularly check the gift register)
What are the offences under the Bribery Act (2010)?
Must not:
1. Give a bribe
2. Receive a bribe
3. Bribe a foreign public official
4. Passive and not prevent a bribe
What would you do if you receive a gift? You’re offered a bottle of wine - what do you do?
Review the firm’s gift policy.
If the value is less than £50 I would be able to accept, in line with company policy, but must log on the company gift register.
When being offered corporate entertainment, what should you be thinking and what steps should you undertake?
Review company gift policy
Proportionality (to the risks faced and work undertaken)
Does the entertainment genuinely promote business interest?
No undue influence
Value of gift (No more than £50)
Log on gift register
Who polices the Bribery Act (2010)?
Serious Fraud Office
What are the penalties for breaching the Bribery Act (2010)?
Max 10 years in prison and/or unlimited fine.
What is Money Laundering?
Cleaning money from criminal activity to appear legitimate
Who is the industry regulator for AML?
HMRC
As an agent, when would you do AML checks?
All letting agents MUST register with HMRC if they let property for more than €10,000
Do you just do AML checks on your client?
No!
At least CDD checks on landlords / tenants / vendors and purchasers MUST be undertaken on any letting equivlent to €10,000
What are the levels of due diligence checks?
Customer Due Diligence (CDD) = KYC - Verify client identity based on passport / driving licence ID. Identify the beneficial owners (i.e. check Companies House).
Enhanced Due Diligence (EDD) = Required for high risk clients or PEPs. More detailed examination into proof of funds and purpose of transaction.
How would YOU conduct Customer Due Diligence (CDD) checks / how do you check for AML?
Verify identity using passport / driving licence
Check the company name, beneficial owners, company number and registered address (Companies House).
Name of directors required unless company is on the London Stock Exchange
Identify the purpose and proposed funding arrangements
When would you require Enhanced Due Diligence (EDD)?
In the event a person is in a ‘High-Risk Third Country’
Dealing with a Politically Exposed Person (PEP)
You identify Red Flags
What are Red Flags to be aware of?
Unexpected urgency (pushing for a quick transaction)
Unwilling to provide ID documents (passport / drivers licence)
Wanting to pay in strange currencies i.e. cryptocurrency
What is a Politically Exposed Person (PEP) and why do they present higher risk?
A PEP is someone who holds a prominent public position.
High risk by virtue of their position / influence.
What is the role of the Money Laundering Reporting Officer (MLRO)?
Once suspicious activity has been identified - MLRO can decide whether to submit a Suspicious Activity Report (SAR) to the National Crime Agency.
What are the penalties for breach of money laundering?
Max 14 years in prison and/or unlimited fine for assisting with Money Laundering
Max 5 years in prison and/or unlimited fine for tipping off
What are bye-laws?
Over-arching principles underpinning rules and regulations
There are 10 RICS Bye-Laws.
Can you tell me a key bye-law?
Bye Law 5 - Conduct
5.2.1 - RICS members must conduct themselves in a manner benefitting the profession.
Give me an example of how you have applied the 5 Rules of Conduct in practice?
Rule 1 - Avoiding Conflicts of Interest
Rule 2 - Engage Specialists or act under supervision
Rule 3 - ToE and clear understanding clients objectves
Rule 4 - Do not discriminate, set a good example, always give notice before viewings
Rule 5 - Feel comfortable standing behind my actions in the media
What’s topical with RICS at the moment?
SRB resigned en masse earlier this year - New interim SRB have been appointed.
Also since Bichard Review (2022) - RICS promoting diversity & inclusion. RICS recently recruited an Equality, Diversity & Inclusion Panel Chair (Louise Brooke-Smith).
May 2023 - Association of Muslim Surveyors held debut event at Great George Street HQ.
June 2023 - LGBT+ inclusion at the second Pride event supported by RICS.
What is a ‘Responsible Principal’
Lead contact who will provide accountability and report to RICS
What Bye Law does the RICS Rules of Conduct (2022) come under?
Bye Law 5.1 - Conduct
In your Level 2 example you’ve mentioned confidentiality. What governs confidentiality for RICS members?
Bye Law 5 - Conduct.
Under Rule 1 of the Rules of Conduct (2022) act with honesty, integrity and professional/personal obligations to RICS.
When have you shown respect in your work?
Always provide access in good time when attending site visit
Always notify reception / building manager
How do you determine if you are competent for an instruction?
SUK
Skills
Understanding
Knoweldge
What is a Compliance Order
An agreement between RICS and a Registered Member that they are liable for disciplinary action.
What scheme does the RICS run for instances where an RICS regulated firm is unable to repay clients money?
RICS Client Money Protection Scheme - it’s a last resort
What are the 4 levels of RICS membership?
FRICS
MRICS
AssocRICS
Trainee/Student
How do you become FRICS?
Evidence of 4 fellowship characteristics:
5 years or more at MRICS
Leadership role in the industry
Professional achievement
Academic achievement
Raising the profile of RICS
As a sole practitioner, what must your complaints handling procedure have?
Your Complaints Handling Officer MUST be an external professional from outside of the company.
What if your cant afford Run-Off Cover?
Apply for coverage to the RICS Assigned Risk Pool
What is a Royal Charter?
Awarded by Privvy Council in 1881
Means that the organisation can work as a self-regulatory body and act in the public interest.
What is the RICS core material?
Currently there are Professional Standards & Guidance Notes.
But I am aware these are both going to merge into Professional Standards. These are mandatory requirements and best practice.
E.G. Comparable Evidence in RE Valuation has just become a Professional Standard.
Practice Information documents will also be created to support good practice. This is supplementary guidance and is not mandatory, does not provide recommendations.
What has been keeping you busy in the office before today?
Marketing a building in Westminster - viewings and interest schedules
What is the Ethical Decision Tree?
(New q)
The Ethical Decision Tree = a framework of questions that members should ask themselves when facing a situation in which they are asked to act in a POTENTIALLY UNETHICAL MANNER.
It encourges consider the LEGALITY of one’s actions and their consistency with the Rules of Conduct, as well as having clear reasoning before making decisions.
The ultimate test is the FINAL STAGE = whether members would be content to have their decisions or actions MADE PUBLIC.
Can you give me an example of when you have acted ethically please in a non-work context?
I was walking to the office one morning, and saw a cyclist and car incident. I had to make an ethical decision - did I stay and help and assist or did I just carry on and walk on by. The dilemma was I would have been late to the office.
I chose to help & informed my line manager I would have been later in the office.
