Ethics & Rules of Conduct Flashcards
What do you understand about conflicts of interest? L1
When someone in a position of trust has a competing personal or professional interest making it difficult for them to fulfill their duties impartially.
This will result in reduced impartiality and chartered surveyors have an obligation to make clients aware of this if necessary and decline work opportunities where there is a conflict of interest.
How could a conflict of interest be managed internally if two separate departments were working for the same client? L2
- Ensure exclusivity of staff to each department.
- Separate geographical locations, secure office and data storage.
- Sign up to confidentiality/non-disclosure agreements.
- Monitor potential conflict and keep the client updated.
If client was insistent that you worked for them despite an existing conflict of interest, how would you proceed. L2
- Check clients understanding around the conflict of interest.
- Make them aware of the potential for reduced impartiality.
Seek a letter of instruction from the client to continue.
Talk through working procedures to manage the conflict.
Agree formally in writing with the client.
What are the minimum levels of indemnity. How do you determine the level of PI cover.
RICS has a standard form that determines the minimum levels of indemnity required. Depends on the firms turnover.
E.g. if turnover of company is £100k or less, then minimum level of indemnity cover is £250k.
£100,000 or less then £250,000
£100,001 to £200,000 then £500,000
£200,001 and above then £1,000,000
What are the maximum level of uninsured excess (the part of each claim the firm must pay itself) L1
RICS has a form which outlines this. It depends on the level of indemnity.
If level of indemnity is up to £500,000 then maximum level is 2.5% of insured sum or £10k.
over £500,000 = 2.5% of insured sum.
What sort of insurances do chartered surveys need to have in place? L1
Professional Indemnity Insurance - recovers any losses due to professional negligence.
Buildings and Contents Cover - For RICS Regulated firms
Employer’s Liability Insurance
Runoff cover - Run-off cover, also known as extended reporting period (ERP), is a type of insurance that protects against claims made after a business has closed, or an individual has retired or stopped practicing
What is the UK Bribery Act 2010?
The UK Bribery Act 2010 is the main anti-corruption law in the United Kingdom. It came into force in July 2011 and covers both public and private sector bribery. The Act defines a bribe as any advantage given to influence a person to perform a function improperly or to reward them for doing so
What are the main principles of the Bribery Act 2010? L1
Making a bribe, receiving a bribe, bribery of a foreign public official. Applies to all UK companies. Includes all associated people.
What are the 6 principles of prevention in the bribery act?
Proportionate procedures - the policies and procedures should be in line with the bribery risks.
Top level management - should be committed to preventing bribery and fostering a culture where bribery is unacceptable.
Due diligence - Apply due diligence procedures to individuals who perform services.
Communication - Organisation should ensure bribery prevention policies are understood.
Monitoring and review - organisation should monitor and review bribery prevention procedures.
When under the bribery act, under what circumstances is a facilitation payment permitted?
Only permitted if you are under duress, i.e. there is a real risk of danger to life, if you or companions are under immediate physical threat, put safety first, make payment and report the matter.
You are attending a main contractor business conference where it is announced that you have been randomly selected as the winner of this months prize draw. How would you act? L2
I would be extremely uncomfortable accepting the prize in this scenario. The prize is of significant value and could be interpreted as a bribe.
Due to working on the project with the main contractor at the time of this scenario, the prize would have been highly inappropriate and could be interpreted as having an affect on my business conduct.
Respectfully decline the prize and make a charitable donation.
Due to seriousness of this incident, report this to the line manager.
You receive an invite to attend the theatre with some members of the project team but they dropped out due to illness at the last minute, would you still attend.
In first instance, declare this hospitality on my companies gifts and hospitality register.
Assuming the invite was approved and I was authorised to attend, I would need to decline the invite due to the project team dropping out.
Since the project team won’t be present this isn’t a business event.
Decline the hospitality.
You are bidding for a project and the client advises if you reduce your fee by 3000, you will be first place in the tender. How would you advise the client. L3
Unfair competition gained insight from the client that the competitors may not be aware of. Not treating competing surveyors with respect they deserve, not acting with integrity. Unsustainable to undertake business in this manner.
May need to reduce the scope to achieve the same margin, would this provide a high standard of service.
This could be interpreted as a bribe. Decline this offer from the client.
Client takes you out for lunch on a business meeting where they continue to discuss business. The bill comes to £200, what should you do?
Lunch had legitimate business purpose so it’s fine to accept the hospitality.
Client should have considered how a £200, bill for lunch could be percevied and chosen a more modest restaurant.
Given size of bill, must be declared on the companies hospitality register and make the line manager aware.
Offer to reciprocate but ensure this is carried out in a more modest manner.
Merrett vs Babb case law:
Court case in 2001. Babb had carried out a valuation as employee of a company for a house purchased by merrett.
Valuation later found to be negilgent.
Original company no longer existed. Court ruled Merrett could pursue the individual Babb for the losses.
Significance of Merrett and Babb case law:
Consider whether employees are vulnerable to claims brought directly against them for advice given on behalf of their employers.
Highlights the importance of having runoff cover in place.
Professional individuals should ensure runoff cover is in place after an employer ceases trading.
Individuals should ensure their ex-company keeps the cover on their behalf.
How long should runoff cover be in place?
Depends on type of contracts the professional has been involved in. Usually it’s 6 years if contract executed under and and 12 years if executed as a deed.
5 Global professional and ethical standards:
Act with integrity - making sure you are honest open and transparent in your dealings and look to avoid conflicts of interest.
Always provide high standard of service - providing the best possible advice, support and performance to whom you have a professional responsibility.
Act in a way that promotes trust in the profession - acting professionally and positively in private and professional settings.
Treat others with respect - having courtesy, be polite, be aware of cultural sensitivites.
Take responsibility - being accountable
What are the requirements regarding PI by the RICS. L1
Must be made on a each and every claims basis.
Standard form gives us a minimum wording.
Sets out the minimum level of indemnity cover
Sets out maximum levels of uninsured excess.
Runoff cover must be in place for at least 6 years.
Runoff cover should include cover for past and present employees, directors and partners.
What if the loss exceeds the cover provided by the PI insurance. L1
The professional/firm is liable for the difference and they would need to cover this in the assets they own.
What methods should be in place to avoid PI claims
Have full and detailed records of meetings, conversations.
Record recommendations and advice given to clients.
Use proper letters of engagement, scope of services and terms of engagement.
Don’t advise on a specialism outside of your field of experience.
Avoid poor management and excessive workload
A newly appointed PM working for your client organisation states that they are concerned about the terms their predecessors agreed with you. The client advise that you give a 20% discount otherwise they won’t renew your contract, how would you respond. L2
Client manager is asking for a steep discount is more a matter of renegotiation contract terms so this can’t be classed a a bribe.
Advise that we can offer the saving but the level of service would need to be reviewed in line with the reduction.
Were the original fees considered good value and a fair and reasonable amount.
It may not be sustainable and in the client’s interest if a high standard of service cannot be provided.
A fee profile of resources should be prepared to determine if the saving is adequate and the level of service can be offered.
Are you familiar with the term, limit of liability and where would it be used? L1
Limit of liability is used to place a cap on the level of exposure a business signs up to.
In the aggregrate = maximum after many different claims.
if cover is for each and every claim, then the overall level of aggregate cover is unlimited.
Anything not covered by PI insurance can be gone after so assets could be at risk so as such companies place a limit on their level of exposure.
Assuming you were chartered, how would you deal with a situation where a friend asks you to provide them with qs advice. L1
Could not offer advice without my own PI cover in place.
If I did have my own PI insurance, I would ensure that the information given was subject to the thorough checking process given to all information prior to issue regardless of who the info was being issues to.
If you’re not comfortable acting for them, advise them to use the RICS find a surveyor scheme.
Make sure we adhere to the RICS rules of conduct at all times.
A tender is in progress for which you have submitted a bid. A client contacts you and advises that they are involved as a parent in a theatre group. The client has read about the firms initiatives and asks you to sponsor their annual performance as they are in desperate need of the funds. How would you advise them?
The client may not be trying to obtain a bribe but because the tender is still in progress, any sponsorship could be perceived as an undue influence or bribe.
Explain to the client and decline to make a donation.
Report the request to manager for transparency.
Contractor invites you to lunch and advise they have two michelin stars. They say they are keen to discuss the details of their tender they are about to submit for the project. How would you respond.
Going to a lavish lunch paid for by the contractor in the middle of a tender is an against company policy and could be an offence under the UK Bribery Act.
If this is the first time, could explain that such an invitation is inappropriate.
If supplier is persistant, and they cannot discuss what he wants to in writing, could be reported as infringement/breach.
Not acting with integrity or respectful to other surveyors.
What was Carsberg Report 2005?
Through internal and external review of the regulation of RICS.
This was in response to general dissatisfaction with the aspects of RICS regulation.
Key recommendations of Carsberg Report?
A conduct board should be established to operate the disciplinary structures.
RICS should regulate firms as well as members.
Review of existing CPD requirements and compliance should be initiated.
What are the 5 principles of regulation?
Proportionality, accountability, consistency, targetting and transparency.
Purpose of 5 principles of better regulations.
RICS is a self-regulated body that has a duty to the public interest.
5 principles of better regulation set out how the rics regulates itself internally to maintain the highest standards of professionalism and integrity in the benefit of the public interest.
Pick two of the 5 principles of better regulations and explain what they mean to you?
Proportionality - RICS should only intervene when necessary, and any remedies imposed should be proportionate. E.g. late payment of rics fees by a member may be dealt with by a verbal warning, continued failure could result in expulsion.
Accountability - regulators must be able to justify their actions under public scrutiny to promote complete fairness - explain why the decisions have been taken.
Consistency - treat everyone the same, no matter what background you are from.
Targetting - focus on the problem, any policies that are put in place are unambigious.
Transparent - keep regulations simple and user friendly to communicate effectively.
Partner says all fees have been spent on the job, final account still needs to be agreed and some areas are still to be measured according to contractor. What do you do? L1
Don’t lower your level of services.
Investigate why all the fees have been spent.
If it’s an error in calculation, put in place measures to ensure it doesn’t happen again.
If it’s because of additional services, I give all the details to my director and prepare a claim for additional fees.
Ensure we keep track of fee spending of works not included within scope of services.
Name topics on which the RICS publishes help sheets and policy documents. L2
Topics include CPD, PI insurance requirements, complaints handling procedures, maintaining professional and ethical standards, procurement and tendering and cashflow forecasting.
Why does the RICS have rules of conduct in place.
Provide a framework that we can all work to and so the client knows they are getting a set level of service.
As well as being an important tool for the institution, rules of conduct are also useful professional guidance for individual institution members.
What steps would you need to take when setting up a practice.
Inform the RICS that you’re setting up a practice
Appoint a contact officer
Register with RICS for regulation
Arrange for professional indemnity insurance.
Set up a client business banking account for handling money
Set up a complaints handling procedure
Set up staff training and CPD.
What steps must you take for handling clients money?
Clients must always have access to funds
Client money must be kept separate and clearly identifiable.
include ‘client’ in account name.
Interest on the account must be agreed with the client.
Maintain a client ledger or running balance of any transactions
Agree the terms and advise the client of the bank details
Bank account must never be in an overdrawn/overdraft position.
What is the client’s money protection scheme
Run by RICS
Provides for any member of the public to be re-imbursed for their direct loss of funds.
This is provided through the RICS insurance policy.
If a client was to pay you in advance for services, how would you ensure this was dealt with?
Set up a separate client account that is properly named with a statement of account.
Provide client with a statement of account
Inform them and agree drawdowns/withdrawals
Prior to withdrawing money, send a statement of how much is to be withdrawn and what the services and associated fees are made up of.
What sort of information do registered firms have to send to the RICS annually?
This is called an annual return and it is done online. If this is not done, it can lead to a fixed penalty.
The annual return includes the type of business and staffing levels, nature of clients, training provision, complaints handling procedures details and records, PI Insurance details, whether the firm holds clients money.
What are the RICS byelaws?
Applications and definitions
Memberships and registration
Designations
Contributions to funds
conduct
Governing council, officers and staff
Subordinate boards, committees and groups, procedure for general meetings, accounts and audits, general
What is GDPR?
EU General data protection regulation replaces the data protection directive which was designed to harmonise data privacy laws across europe.
Protect and empower all EU citizens data privacy, reshape the way organisations across the region apporach data privacy.
GDPR is designed to protect personally identifiable info (Personal data)
How will GDPR affect surveying practices?
For a chartered surveying firm, the data we hold to service our clients e.g. data in valuation systems, compliance systems, accounts, book keeping payroll, HR data, emails and correspondence . All of the above can fall under the remit of regulation
How do firms comply with GDPR?
You must have knowledge of the data you store and process
Know the geography and where it resides
Must provide information on how the data is used, on the rights of individuals regarding their data
Demonstrate that you are managing personal data in a manner compliant with the regulations and supply on request the data you hold and how it has been used.
Have to be able to delete everything in reference to an individuals data in compliance with the right to be forgotten.
Would you accept a gift or offer of hospitality from someone in a work capacity?
Gifts, hospitality and promotional activity is generally acceptable and considered a part of doing business. However it is linked to the Bribery Act 2010.
The bribery act defines acceptable gift and hospitality.
The gift should be reasonable and proportionate.
includes : modest, and occasional meals, sport and cultural events.
Must not be lavish or frequent and should be in accordance with the bribery act.
Gifts could potentially accepted if: The gift should be of nominal value, must be offered openly and not discreetly, must not be regular, must not be cash and influence decisions that are ongoing.
Should be open and transparent.
Keep records (gift register in excess of £100).
Consideration: Value, timing, making sure it’s proportionate, who is the giver.
How many rules of conduct are there for members?
9
Why should a firm have PI insurance?
- If the firm faces a claim, they are protected against financial loss that they cannot meet from their own resources.
- It protects the ensured member or firm against the consequences being liable to pay damages for breaches of professional duty.
- It ensures the firm’s clients do not suffer financial loss which the firm cannot meet.
What should the nature and extent of the insurance be?
Should be on an each and every claim basis or aggregate.
Minimum level of indemnity should be based on the firms turnover.
What is the maximum level of uninsured excess?
For indemnity up to and including 500k = The excess (bit the firm must pay itself) = Either 2.5% of the sum insured or 10k, whichever is greater.
For indemnity over 500k = 2.5% of the sum insured.
What are the minimum limits of indemnity?
For a turnover of 100k or less = £250k indemnity
For 100k - 200k = £500k indemnity
For 200k and above = 1million indemnity
What is runoff cover? PII
Runoff cover is required so that if a firm, members and their clients are not exposed to financial detriment if the company ceases trading.
The runoff cover should cover a period of 6 years from the time of cessation.
Why is cover required for past and present employees?
It protects the firm for the work that has been carried out in it’s name and also those who leave the firm.
