Ethics Flashcards
What is the Ethics Decision Tree?
A framework that provides guidence to RICS members when they are faced with ethical dilemmas. Questions asked include:
Is it Legal?
Is it in line with the Rules of Conduct?
Have you consulted with appropriate people to make an informed decision?
RICS regulated Confidential Hotline offers assistance to members.
Rules of Conduct
- Honesty and integrity – Members and firms must be honest and act with integrity and comply with professional obligations, including obligations to RICS.
- Competence – members and firms must maintain their professional competence and ensure that services are provided by competent individuals who have the necessary expertise
- Good quality and diligent service – Members and firms must provide good-quality and diligent service.
- Respect – Members and firms must treat others with respect and encourage diversity and inclusion.
- Act in public best interest and take responsibility – Members and firms must act in publics interest, take responsibility for their actions and act to prevent harm and public confidence in their profession.
Mandatory Obligations of firms and members.
- RICS members must:
1. Comply with CPD requirements
2. Cooperate with RICS
3. Promptly provide information reasonably requested by the Standards and Regulation Board - RICS-regulated firms must:
1. Publish a CHP
2. Ensure previous and current work is covered by PII.
3. If having a sole principal, make appropriate arrangements for their professional work to continue in the event of incapacity, death, absence from or inability to work.
4. Coorperate with RICS
5. Promptly provide information reasonably requested by the Standards and Regulation Board
6. Display on business literature a designation to denote that they are regulated by the RICS.
7. Report to RICS any matter that they are required to report under the Rules for the Registration of Firms.
Fee negotiations
- Firms should avoid price fixing, aggressive fee cutting or collusion with competitors.
- Fees should be market bases and agreed on ad-hoc basis
- Healthy competition is encouraged but aggressive fee cutting not allowed
- You can enter into further fee negotiations after you have submitted your initial fee proposal.
- In deciding upon a fee, you should consider the amount of time and resources required and that you have appropriate expertise.
- You can vary level of service depending on fee quote but be aware you still have to provide a high standard of service
- Should not undercut another firm
- Be transparent so they understand that you may be in receipt of, or offering, a referral fee and state in ToE if applicable.
- Granting and accepting referral fees should be considered in the context of bribery.
Terms of Engagement
- Must state in writing client’s agreement to the proposed fee basis, payment of expenses, and the firms CHP.
- 3 key steps:
1. Check professionally competent
2. No conflict of interest or personal interests
3. Confirm terms of engagement in writing and get written approval from the client before you start work.
What is a Conflict of Interest
When a member of firm’s independence is impartially threatened due to the existence of a conflict between two clients
Conflict avoidance v conflict management
o Conflict avoidance is when you do not accept the instruction
o Conflict management is when the instruction is accepted, and steps are agreed to and put in place to manage the conflict, such as information/ethical barrier, with the written agreement of all parties.
What is the RICS publication of Conflict of Interest?
- RICS Global Professional Standard: Conflict of Interest, 2017
o Mandatory
o Members cannot advise a client if there is a risk or risk of a conflict of interest unless all those affected provide informed consent.
o Informed consent may only be sought where the RICS member of regulated firm is satisfied that proceeding despite a conflict of interest is in the interests of all those who may be affected and it is not prohibited by law (RICS, 2017)
3 types of conflict of interest
o Party conflict – work on the same or related instruction for two different parties
o Own interest conflict – personal interest
o Confidential information conflict – work relating between two parties that is confidential.
Explain informed consent
o Can only be given in writing by the party if the person explaining the position to them is entirely transparent about any material factors and are sure that the party affected understands what they are doing.
o Surveyors should only seek informed consent if satisfied that all relevant parties are best served by doing so.
How to handle a conflict of interest
- Transparency and openness
1. Conflict avoidance
o Consider whether the conflict is irresolvable because your impartiality is compromised and should be avoided or whether it can be properly managed.
o Decide whether to accept of decline
2. Written advice to both parties
o If you accept, set out in writing covering three points:
1. Disclose the nature of the conflict, the circumstances surrounding it and any other relevant facts and set out your proposals for dealing with the conflict
2. Be as clear as possible – ensure both parties make their own decision and inform them to seek independent advice is needed
3. Request written confirmation from both clients of their informed consent.
3. Conflict management
o Once received written confirmation, set up barriers in accordance with agreements with clients
Explain the use of information/ethical barriers
- Barriers must be robust enough to offer no chance of information passing between the two parties.
- Must take reasonable steps to operate an effective barrier.
- Surveyors acting on each side must be different and physically separated.
- 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.
What is a personal interest/own interest conflict?
- Arises when acting for a family member, a close business associate or someone with whom you have a financial or personal interest or benefit (aka ‘a connected person’)
- You must not let a personal interest interfere with your professional judgement. Full transparency required.
- Declare facts promptly and in writing before you accept the instruction.
- Section 21 of Estate Agents Act 1979 declaration required for agency work.
Confidentiality
- RICS Bye laws – ‘client confidentiality must be maintained for all client affairs’ and this includes historic information and information provided prior to instruction.
- Client approval must be sought if a 3rd party wants access to your files unless you are subject to statutory duty overriding the client’s confidentiality, such as police or HMRC investigation.
- Old files should be held for a minimum of 6 years.
- If a surveyor finds out confidential information, then this cannot be used for their own purposes. The client should be advised of the error and a note should be recorded to the firm’s compliance officer.
What is CBRE’s CHP?
- Acknowledge complaint within 5 working days.
- Respond to complaint, outlining steps taken after 20 working days.
- If complianant is not happy with response, refer them to ADR (CEDR - Centre for Effective Dispute Resolution).
What are the 4 CPD requirements
- Members must do 20 hours CPD in a calendar year
- Of the 20 hours, 10 hours must be formal.
- Members must maintain a relevant understanding of the RICS Rules of Conduct during a rolling 3-year period
- CPD must be recorded using CPD Management System available online by 31st January each year.
Talk to me about negligence
- Duty of care exists to clients and third parties, using a ‘reasonable care and skill’. When breached, and there is a loss, a claim for damages arises.
- Limitation Act 1980, Current limitation periods for negligence are:
o Contract – 6 years from the date of the negligent act, breach of contract or omission. (Also section 14a provides an alternative period of 3 years from the date of acknowledgement of the damage subject to 15 years long stop from the negligent act or omission.
o Tort – 6 years from the date the claimant suffered the loss. - Avoidance of negligence – Claims may be avoided or reduced by undertaking actions to include:
o Clearly understand the client’s objectives and confirm the precise instructions in the ToE
o Ensure competence
o Undertake work in accordance with RICS advice
o Make detailed file notes and take photographs
o Keep up to date with market knowledge and undertake CPD
o Cap professional liability excess on your PII policy in ToE.
Professional Indemnity Insurance
- Mandatory
- To protect clients, surveyors and third parties against negligence where there is a duty of care breached and a claim for damages arises.
- All members must ensure they have an adequate and appropriate level of insurance in place for each instruction having potential liabilities.
- All policies must be unwritten by an RICS approved insurer.
What are the current PII requirements for a firm’s minimum limit of indemnity.
Firm’s turnover in the preceding year Minimum limit of indemnity
£100,000 or less = £250,000
£100,001 to £200,000 = £500,000
£200,001 and above = £1,000,000
What are the current PII requirements when considering a firm’s maximum uninsured excess
Turnover up to £10m - The greater of 2.5% of the sum insured or £10,000
Over £10m - No set limit
RICS Professional Standard: Client Money Handling, 2019
- 6 main areas set out in RICS Professional Standard: Client Money Handling, 2019:
1. Holding client money
2. Providing information to clients
3. Receipts of client money
4. Payments from client accounts
5. Accounting records and controls
6. Compliance
What are the procedures for handling client’s money
o Client accounts must be kept separate and clearly identifiable
o Word ‘client’ is on the bank account and cheque book
o Client must be made available on demand
o Payment of interest agreed with a client and accounts must be kept in credit
o Regular bank reconciliation checking that payments received are transferred to the bank account and expenditure records are checked at least monthly.
o Accurate records are kept with a running balance available
o Annual audit and reporting obligations by certified accountant employed by the RICS are met
o Money can only be withdrawn from a client account if properly required.
o If cash receipts are made to settle transactions, make sure your records show all cash transactions.
o Signatories must be agreed with authorised staff and two signatories should be required.
o A discrete account is for a single named client account only
o All firms handling client money need to display their procedures documents on their website.
