Ethics (L3) Flashcards
What are the 3 main roles of the RICS?
- To maintain the highest standards of education and training
- To protect consumers and businesses through strict regulation of the profession
- To be the leading source of information and independent advice on land, property, construction and associated environmental issues.
How do RICS regulate and promote best practice?
- RICS regulate is self-regulatory.
- PACTT.
What are the 5 principles of better RICS regulation?
P.A.C.T.T
Following the Carsberg Report. Purpose: members/firms can use 5 principles to decide how best to meet requirements of Rules of Conduct.
1. PROPORTIONALITY – making the penalty proportional to the breach
2. ACCOUNTABILITY – to all members and the public
3. CONSISTENCY – treating all members the sam, level playing field
4. TARGETING – targeted to be relevant and useful, but not prescriptive
5. TRANSPARENCY – to all members, clients and the public
What is the Royal Charter?
A formal document granted 1881. A formal document issued by a monarch granting a right or power to an individual or a body corporate. Last update in 2009 – Requires members to promote the usefulness of the profession for the public advantage.
What are the 5 ethical values of the RICS Professional and Ethical Standards 2015? – STIRR
- Always provide a High Standard of Service = have a professional responsibility to provide client with the best possible advice
- Act in a way that promotes Trust in the profession = act in a way that positively promotes you individually and the profession
- Act with Integrity = be honest and straightforward in all you do
- Treat others with Respect = treat everyone with courtesy and respect cultural differences
- Take Responsibility = be accountable for your actions
How do the 5 ethical standards and bye laws link?
Direct link to the BYE LAWS is Bye-Law 5 (Conduct), requires members to conduct themselves in manner befitting membership of RICS.
What happens if you deviate from 5 ethical standards?
Deviation = RICS disciplinary action
What is the ethical decision tree?
It is a Yes/No flowchart that helps to determine whether to proceed when faced with an ethical grey area.
Starts with:
• Do you have sufficient facts?
• Is it legal?
• Is it in line with RICS global professional and ethical standards?
What else is available to you when facing an ethical dilemma apart from ethical decision tree?
Detailed case studies on RICS website. RICS confidential hotline to discuss ethical issues.
What rules do the RICS Rules of Conduct 2007 (effective 2013) set out for members?
9 Rules for Members:
PART I:
1. Interpretation of ‘Member’
2. Communication – i.e. post, e-mail etc
PART II
3. Ethical Behaviour – act at all times with integrity and avoid conflicts of interest
4. Competence – carry out professional work with due skill, care and diligence and with regard for technical standards (i.e. not following MANDATORY STANDARDS is a disciplinary offence)
5. Service - carry out professional work in a timely manner, with proper regard for standards of service/customer care
6. Continuing Professional Development (CPD) – comply with RICS requirements in respect of CPD
7. Solvency – ensure that personal and professional finances are managed appropriately
8. Information to the RICS – submit in a timely manner such information as required
9. Co-operation - fully co-operate with RICS staff and any person appointed by Regulatory Board
What 15 rules do the RICS Rules of Conduct 2007 (effective 2017) set out for firms?
9 Common Rules (Members), 6 EXTRA for Firms:
Part I
1. Definition of ‘Firm’
2. Communication
Part II Conduct of Business (PCS CPD CCI):
3. Professional Behaviour – act at all times with integrity, avoid conflicts of interest and actions/situations that are inconsistent with its professional obligations
4. Competence – carry out professional work with due skill, care and diligence with proper regard for technical standards
5. Service – carry out professional work with expedition and property regard for standards of service/customer care
6. Training and Continuing Professional Development (CPD) – necessary procedures in place to ensure staff are properly trained and competent
7. Complaints Handling – operate a complaints handling procedure and maintain complaints log – procedure must include an alternative dispute resolution mechanism that is approved by regulatory board
8. Client’s Money – preserve the security of client’s money entrusted to its care in the course of its business/practice
9. Professional indemnity insurance – ensure that all previous/current professional work is covered by adequate and appropriate PII cover which meets standards approved by regulatory board
Part III Form Administration
10. Advertising – promote services in truthful and responsible manner
11. Solvency – ensure all finances managed appropriately
12. Arrangements to cover incapacity/death of sole practitioner
13. Use of designations – must display on business lit a designation to denote it is RICS regulated (in accordance with RICS policy)
14. Information to RICS
15. Cooperation
What is the difference between the Rules of Conduct and Ethical Standards?
Rules – clear and instructional
Standards – are a framework to apply to different situations
What is the link between the Ethical Standards and the Rules of Conduct?
• Direct link to Rules of Conduct is Rule 3 (Members & Firms), requires members to act with integrity and avoid conflicts of interest.
What happens if you do not comply with the Rules of Conduct?
Disciplinary action.
Self-regulation by RICS.
PACTT.
What are CBRE’s internal policies on gifts/inducements?
Can give/receive gifts of a nominal value, as long as the intent behind the gift cannot be misconstrued.
Ask yourself if it is appropriate?
The permitted allowance is £100. Anything above that must be immediately declared to the Compliance Director (Geraldine Mash) who will decide if it appropriate (disciplinary action if no disclosed, could be criminal offence). Employees required to keep a record of gifts.
What RICS guidance relates to gifts and inducements?
Countering bribery and corruption, money laundering and terrorist financing, February 2019
What legislation relates to gifts and inducements?
Bribery Act 2010
Proceeds of Crime Act 2002
What is a bribe?
Bribe = something given/promised in expectation of a change in behaviour.
What is the Bribery Act 2010?
The Act aims to reduce bribery in business in the UK. New corporate criminal offence of failing to prevent bribery; a company will be responsible for employee corrupt acts if they cannot show adequate policies/procedures
Once qualified, what are the requirements regarding Continuing Professional Development (CPD)?
Members = min. 20 hours CPD per annum
Min. 10 hours should comprise formal
Ethics CPD every 3 years
1 Jan – 31 Dec, must log by 31 Jan on RICS website
Failure to comply = disciplinary action (Rules of Conduct Members - Rule 6)
What is the difference between formal and informal CPD?
FORMAL: includes all forms of structured learning that has clear learning objectives and outcomes
INFORMAL: includes any self managed learning that is relevant or related to your professional role
What is a conflict?
When are firm or individual’s impartiality is threatened due to a conflict of interest. Types of interest are financial, personal, commercial relationships, acting on both side of a transaction, acting for two clients on the same side of a transaction (i.e. submitting two bids)
What guidance is there to deal with a conflict of interest?
UK and Global Professional Statements (Mandatory for Firms and Members).
- Conflicts of interest, 1st edition, March 2017 (became effective 1st Jan 2018)
- Conflicts of interest – UK commercial property market investment agency, 1st edition, May 2017
Links to Rule 3 Ethical/Professional behaviour (act w/ integrity and avoid conflicts of interest).
Global: Conflicts of interest, 1st edition, March 2017 (became effective 1st Jan 2018)
In three parts:
- Part 1: Mandatory rules for COI and definitions
- Part 2: Principles as to how to apply the PS
- Part 3: Guidance on how to meet the obligations set out in Part 1
General Principles (Part 1):
- Member/Firm must not advise or represent a client a Conflict of Interest or a significant risk of a Conflict of Interest;
- Unless those affected have provided their Informed Consent
- Must identify and manage Conflicts of Interest
- Must keep records of the decisions made in relation to whether to accept COIs, Informed Consent, preventing COIs arising (to show compliance)
UK: Conflicts of interest – UK commercial property market investment agency, 1st edition, May 2017 (became effective 1st Jan 2018)
Firms and members acting on the open market sale or acquisition of a commercial investment real estate.
Dual Agency: where an agent (firm/member) has a contractual agency relationship with both seller and buyer at the same time. MUST NOT be undertaken in UK. Also applies to Related Firms to the agent (must be separate legal entities, no fee sharing, no common directors and no common internal data/access to).
Multiple Introductions: agent has competing contractual relationships to acquire similar opportunities. Must inform new client, MUST be agreed in written TOE happy to proceed on this basis, and MUST say exclusive/non-exclusive basis. If exclusive, advise other parties intro’d same property to that no longer able to act for them. If non-exclusive, obtain Informed Consent w/ info barriers.
Incremental Advice: e.g. you act for seller but buyer approaches you for planning/valuation advice (not to act for them in agency capacity). Can with Informed Consent/Info Barriers.
BTR Development Site, Bristol
What steps did you take to check for Conflicts of Interest?
I used CBRE’s internal conflict check database. Checked:
- Property address
- Client’s name
- Borrower’s name
Printed the results page, Job Director signed, dated and held on the Job File.
Even though no conflict, I included a statement in both the Terms of Engagement and Valuation Report.
BTR Development Site, Bristol
What would you have done if the conflict was flagged?
Contact the Fee earner of the conflicting instruction; see if there is a resolution. (e.g. Info Barrier)
I would disclose any previous or current involvement with the parties or the property to be valued to the client:
• Within the past 12 months for financial reporting purposes
• Within the past 24 months for other purposes
What is a risk check? What were the additional approval procedures you undertook?
Prior to job registration, risk check is carried out using CBRE’s risk management tool.
Development sites = ‘high risk’ under the VAS Risk Analysis. Developments increase the risk score over the ‘high’ risk threshold. Anything at 16 or above requires additional approvals.
Only certain valuers on the approved CBRE Development Appraiser and Reviewer Registers.
Approval obtained from the VAS country head – Michael Brodtman.
Provided a sensitivity analysis; must be provided within the final report as it was a secured lending valuation.
Horlicks Factory
How did you identify a conflict of interest?
I used CBRE’s internal conflict check database. Both the client and the property address searches returned results for current or prior involvement.
I contacted the Fee earner of the conflicting instruction on the land agency team to see if there was a resolution.
We determined that it would be feasible to implement an Information Barrier if the client was happy to proceed on this basis. I informed all parties affected of the conflict in writing.
Horlicks Factory
What is Informed Consent?
Consent to proceed where a conflict exists (after all facts have been disclosed to them) by the affected parties. It must be received in writing. It should only be sought if surveyor thinks that best interests of the affected parties will be served in proceeding. Must be willingly given with knowledge of all the facts.
Horlicks Factory
When can you seek an Informed Consent?
When the RICS member or regulated firm is satisfied that proceeding despite a Conflict of Interest is:
(a) in the interests of all of those who are or may be affected
(b) is not prohibited by law,
(c) the conflict will not prevent the member or regulated firm from providing competent and diligent advice to those affected.
Horlicks Factory
What is an Information Barrier?
Barrier between two parties acting for the same client.
- Must be robust
- Must take reasonable steps to make effective
- Surveyors on each side must be different and physically separated
- Information securely stored
- Keep an audit trail of the conflict identification and management process
- specific arrangements made with the client to manage a potential conflict must be recorded in the Terms of Engagement and referred to in the valuation report
Horlicks Factory
What Information Barriers did you implement? How did you enforce them?
Physical:
- separation of teams on different floors of the same building
- different surveyors and support staff
- exercised caution as to what was said to the other team
Electronic:
- project folder with restricted access
- sensitive documents within the folder were password protected
Mansion Block Apartment, Marylebone
What did the client say? How did you respond?
The draft valuation had been issued to the client to check all facts were correct. They had expected the figure to have grown since the last valuation 6-months prior, however market conditions for central London residential at that time were poor and values were flat. I had already been through a thorough valuation process in line with the Red Book, however I wanted to show good Service to my client and take Responsibility for the value I had reported therefore I agreed to double check my methodology and figures, and then come back to the client to discuss.
Mansion Block Apartment, Marylebone
Why were you confident in your opinion of value?
I had already undertaken a thorough valuation process in line with the Red Book. After analysing comparable evidence from within the block and from the immediate area where there are a number of mansion blocks, and speaking to local agents to gauge market conditions, it was clear that transaction volumes were active but there had been no growth since the previous valuation 6-months prior and the outlook appeared stable. Therefore I held my opinion of value.
Mansion Block Apartment, Marylebone
Can you change the figure?
Yes if I had found new evidence or received new advice that materially impacted the Market Value. However I had relied on a number of comparables – four of which were from within the block - and spoken to five agents, which gave a holistic overview.
