Ethics (Good Questions) Flashcards
Tell me what you understand about the RICS Rules of Conduct
- New rules were published in October 2021 and became effective in February 2022.
- The rules replace the previous Rules of Conduct for Members and Firms and the 5 Global Professional and Ethical Standards.
- The rules apply to members and firms.
- There are five rules of conduct.
- Appendix A sets out professional obligations which are to be followed by members and by regulated firms.
- The new rules of conduct were developed to have easier structure, clear examples, focus on respect, diversity and inclusion and to tackle global challenges.
What are the Five Rules of Conduct in RICS Rules of Conduct 2021?
- Members and firms must be honest, act with integrity and comply with their personal obligations, including obligations to RICS.
- Members and firms must maintain their professional competency and ensure that services are provided by competent individuals who have the necessary expertise.
- Members and firms must provide good-quality and diligent service.
- Members and firms must treat others with respect and encourage diversity and inclusion.
- Members and firms must act in the public interest, take responsibility for their actions and act to prevent harm and maintain public confidence in their profession.
What is Rule 3 of the RICS Codes of Conduct? What are example behaviours
Rule 3: Members and firms must provide good-quality and diligent service.
Example behaviours:
- Understand client’s needs and objectives.
- Agree scopes of work, limitations and timescales for work.
- Inform clients that they are regulated by RICS and may need to disclose records to RICS.
- Undertake work in a timely manner, with due care, skill and diligence.
- Keep proper records of their work and decisions.
- Communicate with clients clearly in a way they can understand.
What is Rule 1 of the RICS Codes of Conduct?
Can you give some examples of behaviours supporting Rule 1?
Rule 1: Members and Firms must be honest, act with integrity and comply with their professional obligations, including obligations to RICS.
Rule 1 covers being ethical
- Members / Firms must not mislead by actions or omission (e.g altering a valuation)
- Members must not allow themselves to be influenced improperly (e.g bribery).
- Members and firms identify actual and potential conflicts of interest throughout an assignment and either do not act, or do so in accordance with RICS Conflicts of Interest Professional Statement.
- Members and firms act to prevent others being misled about their professional opinion.
- Firms keep client money safe and have appropriate accounting controls.
- Members do not misuse client money.
- Members / firms do not facilitate financial crime and firms have effective processes to prevent employees from doing so.
What is Rule 2 of the RICS Codes of Conduct? Can you give some example behaviours?
Rule 2: Members and firms must maintain their professional competence and ensure that services are provided by competent individuals who have the necessary expertise.
Example Behaviours
Rule 2 covers competency and knowledge
- Have required knowledge, skills and resources to competently undertake work.
- Supervise employees to ensure they are competent.
- Check that subcontractors have the necessary knowledge, skills and resources to undertake tasks competently.
- Reflect on the work undertaken and its impact, and consider how they might apply what they have learned to their future work.
- Comply with CPD requirements to maintain and develop knowledge and skills throughout career.
What is Rule 4 of the RICS Codes of Conduct? What are some example behaviours?
Rule 4: Members and firms must treat others with respect and encourage diversity and inclusion.
Example behaviours:
- Respect rights of others and treat others with courtesy.
- Do not bully, victimise or harras.
3.Firms should check that supply chains do not include modern slavery. - Report abusive labour practices.
- Develop and inclusive culture in their work place.
- Members / Firms should not discriminate.
What is Rule 5 of the RICS Codes of Conduct? What are some example behaviours
Rule 5: Members and firms must act in the public interest, take responsibility for their actions and act to prevent harm and maintain public confidence in the profession.
Example behavious:
1. Question practices and decisions that they suspect are not right.
2. Support others who have acted in good faith to report concerns.
3. Ensure public statements do not undermine public confidence in the profession.
4. Quickly respond to complaints in an open and professional manner.
5. Manage professional finances responsibly.
6. Do not dissuade complainants from approaching an ADR provider / RICS or any other regulatory body.
What are the professional obligations of RICS firms?
Firms must:
1. publish a CHP, incl. ADR provider approved by RICS and maintain a complaints log.
2. Ensure previous & current professional work is covered by adequate and appropriate PII cover that meets RICS standards.
3. with sole principals must make appropriate arrangements for their professional work to continue.
4. must cooperate with RICS
5. promptly provide all information reasonably requested by the Standards and Regulation Board, or those acting on its behalf.
6. display on their business literature, a designation to denote they are RICS regulated.
7. Report to RICS any matter they are required to under the Rules for the Registration of Firms.
What are the Professional obligation to RICS for Members?
Members must:
- Comply with CPD requirements.
- Cooperate with RICS.
- Promptly provide all information reasonably requested by the standards & regulation board, or those acting on its behalf.
What RICS Guidance note covers the use of social media? What is your understanding of it?
Use of social media: Guidance for RICS members, 2021.
- RICS notes the importance of social media to members and firms.
- Reminds members of the high standards of professional behaviour expected of RICS members.
- RICS may take disciplinary action in certain situations to protect the profession.
RICS is likely to investigate concerns about social media posts where they involve:
- Discrimination
- Dishonesty
- Abusive / threatening behaviour
- Bullying
- Frequent concerning communications
- ignoring previous advice or warnings.
RICS is unlikely to investigate posts which:
- Are critical of an organisation
- Use professional and respectful language
- are removed if requested.
What RICS documents cover conflicts of interest?
- RICS Global Professional Standard on Conflicts of Interest, 2017
- RICS Professional Statement: Conflicts of Interest - UK Commercial Property Market Investment agency
What is your understanding of RICS Conflicts of Interest 2017?
- Came into effect on 1st January 2018.
- States members must not advise or represent a client where doing so would involve a conflict of interest or significant risk of conflict of interest unless all affected parties provide informed consent.
- States Informed consent may only be sought where the RICS Member / Firm is satisfied that proceeding is in the interests of all those affected and is not prohibited by law.
- Members / Firms must identify and manage Conflicts of Interest in accordance with the professional standard.
- Keep records of decisions made in relation to whether to accept assignments, obtain informed consent and avoid conflicts of interest arising.
-Defines three types of conflict of interest
- Party Conflict - relating to work on the same or related instruction for two different parties.
- Own Interest Conflict - relating to a personal interest.
- Confidentiality Conflict - relating to work between two parties that is confidential.
What is your employers conflict of interest procedure?
- Declare any actual or potential conflicts of interest on iEthics.
- Discuss situation with my line manager and HR Business Partner.
- Line manager is then responsible for dealing with conflict of interest and ensuring suitable processes and procedures are put in place. E.g removing conflicted employee from the situation.
- Processes and procedures are to documented on iEthics.
What is your understanding of RICS Professional Statement: Conflicts of Interest - UK commercial property market investment agency?
- Mandatory professional statement relating to UK commercial investment agency where specific risk has been identified.
- Covers dual agency; Where an agent has a contractual relationship with both seller and buyer - this practice is not to be undertaken.
- Multiple introductions; where an agent has competing contractual relationships simultaneously with several buyers for commercial real estate investment opportunities. - Agent must make clear on ToE whether acting on Exclusive or Non-Exclusive basis.
- Incremental Advice; Where an agent is approached by another party to provide advice that is incremental to an existing instruction - RICS member must only provide such incremental advice if consent is given and an information barrier is put in place.
- Personal Interest / Own Interest Conflicts - Must not allow to influence professional judgement. Facts should be declared promptly and in writing before accepting the instruction.
What is your understanding of the RICS Professional Standard: Countering Bribery and Corruption, Money Laundering and Terrorist Financing (2019)?
The Professional Standard sets out mandatory, globally applicable requirements for RICS members and regulated firms in relation to bribery, corruption, money laundering and terrorist financing.
Divided into three parts:
1. Mandatory requirements.
2. Guidance setting out good practice.
3. Supplementary guidance.
Part 1:
RICS regulated firms must:
- Not offer or accept bribes or facilitate / be complicit in ML and TF
- Have procedures and systems in place to comply with the law.
- Report suspicion to relevant authority.
- Evaluate and review risks to the firm.
- Retain records to show firm has met requirements of the Professional Standard.
- Use third party reliance for checks only when confident in quality provided. (ML & TF)
- Take appropriate measures to understand the client and the purpose of the instruction. (ML &TF)
- Verify the client by undertaking basic ID checks. (ML & TF)
Part 2: Guidance
Practical guidance is provided such as:
- Have a written policy in place for the procedures.
- Publish a code of behaviour.
- Provide staff training.
- Encourage transparency.
- Set up a gifts register.
- Keep up to date with the legislation.
Part 3: Supplementary guidance.
- Establish risks-based approach - 3 W’s - Who / What / Why
- Dealing with PEP’s - EDD
- Need to identify beneficial ownership - e.g by requesting certificate of incorporation.
What legislation covers Bribery? What is the aim of it?
Bribery Act 2010 - the aim is to reduce bribery in business in the UK and abroad.
What are the six principles of the Bribery Act 2010?
- Proportionality.
- Top Level Commitment
- Risk Assessment.
- Due Diligence.
- Communication.
- Monitoring and Review.
What are the four offences of the Bribery Act 2010?
- Bribing
- Receiving a bribe
- Bribing a foreign public official
- Failing to prevent bribery
What legislation covers Money Laundering?
Terrorist Financing and Transfer of Funds Regulations 2023 amendment. (Originally 2017)
What is your understanding of the Terrorist Financing and Transfer of Funds Regulations (2017) 2023 amendment?
Key provisions of the regulations include:
- A requirement to have written risk assessments.
- Implement systems / policies / controls / procedures to address risks and meet regulation requirements.
- Adopt appropriate internal controls.
- Provide staff training.
- Comply with new customer, enhances, and simplified due diligence requirements.
- Comply with the requirements relating to PEPS.
- Ensure appropriate record keeping, policies and procedures.
- AML checks must be undertaken to verify identify and source of funds prior to exchange.
- Include additional high-risk factors when assessing the need for EDD and to seek additional info and monitoring in certain cases.
ALSO
- Limit of 10,000 euros for acceptance of cash
- Detailed record keeping of procedures undertaken is required.
- Senior member of staff / board member must be appointed to take responsibility for compliance.
- Money Laundering Reporting Officer must be appointed to report suspicions to National Crime Agency.
- Firm must maintain records for minimum of 5 years.
- Firms must report to Companies House any discrepancies between their information held on Companies House Register.
What are an estate agents legal obligations under Terrorist Financing and Transfer of Funds Regulations 2023 amendment?
- Register with HMRC if they let properties for more than 10,000 euros a month.
- Individuals and businesses need to be approved and remain registered by HMRC to trade.
- CDD checks on new sales / lettings > 10,000 euros.
- EDD checks if red flags occur.
- Firms must have policies to identify and scrutinise transactions which are
- Complex / large
- unusual
- Firms must train employees to identify and prevent ML & TF risks.
What are the penalties for failing to comply with money laundering regulations?
- Maximum 14 years imprisonment and/or unlimited fine for assisting with ML.
- Maximum 5 years imprisonment for informing someone they are under suspicion / failing to report suspicion.
What are the typical requirements for CDD money laundering checks?
- Public Limited Company = check if listed on regulated market e.g London Stock Exchange listing.
- Publicly accountable body = check government ownership / control.
- Private Limited Company = Certificate of Incropration + Full Name + Registered Number + Registered Office + Business Address + Names of directors + shareholders with over 25% or more holdings.
- Private individual = Copy of valid passport or driving licence with photo + Bank statement / credit card bill / council tax statement / utility bill less than 3 months old.
What are EDD checks and when would you conduct them?
Additional Procedures required for any transaction involving a PEP or a person established in a high risk third country / or a family member of a PEP.
- More detailed examination required as higher risk of money laundering / terrorist financing.
- PEP’s are at higher risk of corruption by virtue of their position and influence.
How might a company protect itself from employees undertaking bribery?
- Ensure adequate policies and procedures are in place to prevent bribery such as:
- Identifying potential risks.
- Staff Training
- Provision of Clear Policies.
- Regular reviews.
Who policies the Bribery Act and what are the penalties if breached?
- Serious Fraud Office policies the Bribery Act
- Maximum penalty of 10 years imprisonment and / or an unlimited fine. (COMPANY FINE ONLY)
What are some examples of red flags with money laundering?
- Inability or unwillingness of parties to provide identity documents
- Changes to parties involved in transactions
- Unusual transaction features - e.g urgency or loss making.
- Payment in unusual currencies.
What is some recent RICS Guidance on sanctions? What does it cover
Anti-money laundering sanctions update, 2022
- Covers estates agents roles in enforcing sanctions
What can an estate agent do to enforce sanctions?
- Consider risks to a business as part of AML procedure.
- Understand sanctions can include UK citizens and people who live in the UK
- Understand risk factors and red flags.
- Use software as part of due diligence
- Check individual clients against consolidated list
- check existing clients regularly
- Contact Office of Financial Sanctions Implementation (OFSI) for assistance if client is a possible match to sanctions list.
What does the Proceeds of Crime Act 2002 cover?
Proceeds of Crime Act 2002
- Provides powers for enforcement authorities to recover proceeds of crime.
- Creates a set of criminal offences intended to combat money laundering
What are the three main areas of offence in the Proceeds of Crime Act 2002?
- Concealing criminal property.
- Arrangements (facilitating / getting involved)
- Acquisition, use and possession.
What does the Economic Crime (Transparency and Enforcement) Act 2022 cover?
- Includes measures for a beneficial ownership register of overseas entities owning property in the UK.
- Strengthens investigation powers into unexplained wealth orders.
3.Allows easier prosecution of those involved in sanctions-busting / not providing identify documents.
What RICS compliance do you need to follow when starting a new practice?
RICS Compliance for Starting a new practice:
- Inform RICS of new practice (complete Firm Details Form)
- Appoint a Responsible Principal for RICS Communication
- Register with RICS for regulation.
- Arrange PII and send details to RICS.
- Set up procedures for Client Money Handling requirements, incl. Protection Scheme.
- Register for RICS Valuer Registration Scheme if undertaking Red Book valuations.
7.Obtain RICS approval for the Complaints Handling Procedure. - Appoint a Complaints Handling Officer (NR = Railway Ombudsman)
- Use a logo kit from the RICS to comply with designation ‘‘Regulated by RICS’’.
- Plan for succession if sole practioner
- Ensure CPD logged online on the RICS CPD Management Sytem
- Set up Staff Training Plan
- Ensure completion of an online RICS Annual Return at the end of each year.
What statutory compliance must you undertake when starting a new practice?
- Disclose business name
- Appoint a money laundering officer.
- Register for data protection.
- Asbestos Register.
- Inform HMRC for VAT and Tax registration
- Insurance compliance for employer and public liability.
COMPLY WITH
- Equality Act 2010
- Financial services compliance
- Bribery Act 2010
- Fire safety compliance
- Estate agency compliance
- Health and Safety compliance.
- Employment law compliance.
What RICS compliance do you need to follow when closing a practice?
- Inform RICS
- Ensure clients are informed and hand over arrangements are made.
- Return any monies held by clients to their accounts.
- Inform insurers
- Procure PII run-off cover for a minimum of 6 years in accordance with RICS requirements.
- Retain a copy of the client files and records for a minimum of 6 years.
What RICS guidance covers Client Money?
RICS Professional Standard ‘Client Money Handling’ (2019).
What are the six main areas of good practice as set out in the RICS Professional Standard ‘Client Money Handling’ (2019)?
- Holding Client Money
- Providing information to Clients
- Receipts of client money
- Payments from client accounts
- Accounting records and controls
- Compliance
What procedures should Chartered surveyors need to be aware of when handling Client Money?
- Client accounts must be kept separately & clearly identifiable.
- The words ‘client’ must be on the bank account and cheque book.
- A client must be able to have their monies on demand.
- Payment of interest is agreed with a client and accounts must be kept in credit.
- Regular bank reconciliation checking that payments received are transferred to the bank account.
- Expenditure records checked monthly.
- Accurate records are kept with running balance available.
- Annual audit and reporting obligations are met (by a RICS employed certified accountant).
- Money can only be withdrawn from a client account if properly required.
- Records show all cash transactions.
- Signatories must be agreed with authorised staff (two signatures should be required).
- Firms handling client money must display their procedures documents on their websites.
What RICS schemes are available for when an RICS Regulated firm is unable to repay a client’s money?
RICS runs a Client’s Money Protection Scheme for claims.
- Last resort for when a firm is unable to repay a clients money.
- Limits and exceptions set out in scheme rules.
- Scheme is split into two parts for commercial and residential surveying firms.
What is negligence?
Breach in the duty of care which results in damages.
What case law relates to negligence?
Yianni v Edwin Evans (1981)
- Established that a residential valuer instructed by a mortgagor lending institution could owe a duty of care in tort to a mortgagee purchaser relying on a valuation
OVER TURNED BY SCULLION V BANK OF SCOTLAND (2010) IN THE CASE OF A COMMERCIALLY ASTUTE BORROWER
Scullion v Bank of Scotland (2010)
- Relates to a breach in duty of care owed to Mr. Scullion in relation to a valuation report.
- Court of Appeal held that a surveyor who provides advice on value to a lender in respect of a buy-to-let purchase does not owe a duty of care to the borrower.
- Overturned Yianni v Edwin Evans (1981) in the case of a ‘‘commercially astute’’ borrower.
Burges v Lejonvarn (2020)
- Established professionals providing pro bono professional services without a contract still owe a duty of care in tort to act with reasonable care and skill.
- Court of Appeal also determined that they are not under a duty to advise or give warnings and not liable for work they do not do.
What are the limitation periods for negligence?
Limitation Act 1980
Contract
- 6 years from date of negligent act / breach of contract / omission.
- Section 14a provides an alternative limitation period of 3 years from the date of knowledge of the damage (15 year long stop from negligent act)
Tort
- 6 years from the date the claimant suffered the loss.
How could you avoid negligence?
- Understand clients objectives
- Confirm precise instructions in writing the ToE
- Ensure you are competent
- Undertake work in accordance with RICS standards and practice information.
- Make detailed file notes and take photographs.
- Keep up to date with market knowledge and legislation.
- Undertake and record CPD
- Cap liability excess on PII policy in ToE.
Why is PII important?
- Protects clients, surveyors and third parties against negligence claims
Is PII mandatory?
Yes
What RICS documents set cover PII?
- RICS Professional Indemnity Insurance Requirements
- RICS Practice Information - Risk, Liability and Insurance (2021)
What are RICS members PII requirements?
- Members must ensure there is an adequate and appropriate level of insurance in place.
- All policies must be underwritten by an RICS approved insurer
- Firms must consider their risk profile to negligence claims when deciding their level of insurance.
- The policy should be fully retroactive as PII policies work on a claims made basis.
- Certificate is to be sent to RICS on annual basis as part of the firms annual return to RICS.
- Insurers must be notified when potential claim arises.
- Adequate and appropriate run off cover is required following cessation of trading.
- PII cover is required for pro-bono work.