Ethics, Rules of Conduct and Professionalism

Question 1

5 Rules of Conduct (Feb 2022)
Members and firms must:

Answer 1

1. Rule 1 – Honesty and Integrity – Be honest, act with integrity and comply with their professional obligations to the RICS.
2. Rule 2 – Competence – Ensure services are provided by competent individuals who have the necessary expertise.
3. Rule 3 – Service – Provide good quality and diligent service.
4. Rule 4 – Respect – Treat each other with respect and encourage diversity and inclusion.
5. Rule 5 – Responsibility – Act in the public interest, take responsibility for their actions and maintain public confidence.

Question 2

When an instruction comes in?

Answer 2

1. C Check Competent
2. C No Conflict (or conflict managed)
3. T Terms in writing and approved

Question 3

Fee Negotiations

Answer 3

• Avoid price fixing, cutting or collusion.
• Market-based and agreed on an ad-hoc basis.
• Consider level of service when negotiating.
• Be completely transparent (e.g., if a referral fee is involved).
• Consider the Bribery Act 2010 and the RICS Rules of Conduct.

Question 4

Conflicts of Interest

Answer 4

RICS Conflicts of Interest Professional Statement 2017
3 types of conflict: Party, Own Interest, Confidential Information
* “Informed consent” must be given (must have all facts).
* Must be in best interest of all parties and legal.

RICS Conflicts of Interest – UK Commercial Property Market Investment Agency Professional Statement 2017
* Dual agency prohibited from January 2018.
* Multiple introductions allowed if on “non-exclusive basis” – informed consent given from all clients and declared.
* Incremental advice allowed if consent is given, and an information barrier must be in place.

Question 5

Confidentiality

Answer 5

• RICS Byelaws – Client confidentiality must be maintained.
• Permission to share information is needed unless under investigation.
• Files must be held for a minimum of 6 years before disposal.
  If confidential information is overheard?
• Cannot be used for own purposes, info disposed of securely.
• Client must be notified of error and matter recorded.

Question 6

Handling Clients Money

Answer 6

RICS Professional Standard Client Money Handling 2019
Includes providing info, receipts, payments, accounting records, and compliance.
1. Keep accounts separate / identifiable (use word “client”).
2. Client must be able to have monies on demand.
3. Money only to be withdrawn if properly required.
4. Keep accurate records.

Question 7

Complaints Handling Procedures (CHP)
RICS Guidance Note on Complaints Handling 2016

Answer 7

Notify PI insurers and CHP must be approved by the RICS. Whenever the firm receives a complaint from who they owe a duty of care.
STAGE 1 – In House
CHP details issued, clear procedure, impartially implemented, complaints handling officer, submitted in writing.
Acknowledged within 7 DAYS and Investigated within 28 DAYS.
CBRE CHP –
Acknowledged within 5 DAYS and Investigated within 20 DAYS.
STAGE 2 – ADR, 3rd Party
If unresolved, an appropriate redress mechanism must be provided such as the Property Redress Scheme and the RICS Dispute Resolution Service.

Question 8

Alternative Dispute Resolution (ADR)

Answer 8

1. Negotiation
2. Mediation – neutral mediator – facilitates discussions between parties.
3. Early neutral evaluation – independent, non-binding opinion
4. Ombudsman – confidentially receive case details and instigates resolution of complaint.
5. Arbitration (Arbitration Act 1996) – evidence provided, limited right of appeal to High Court, not liable for negligence, powers of disclosure, bound by decision – issues award.
6. Independent Expert Determination (RICS Guidance Note 2016) – appointed by two parties, undertakes own investigations both parties bound be decision, can be sued – issues determination.

Question 9

Professional Indemnity Insurance (PII Cover)

Answer 9

Protects against negligence claims when duty of care is breached.
Policy should be retroactive on a ‘claims made’ bases.
RUN OFF COVER – following cessation of trading.
Minimum of £1m of aggregate cover over 6 years, RICS run-off pool.
RICS Guidance Note Risk, Liability, and Insurance (2021)
Liability caps on each instruction to mitigate risk and be wary of 3rd party reliance on instructions.

Question 10

Minimum PII Cover

Answer 10

• £100,000 or less = £250,000
• £100,001 - £200,000 = £500,000
• £200,001 and above = £1,000,000

Question 11

Maximum Uninsured Excess

Answer 11

Firms Turnover in Preceding Year Max uninsured Excess
Up to £10 million Greater of 2.5% or £10k
Over £10 million 2.5% of the sum insured

Question 12

Negligence and Case Law?

Answer 12

Duty of care exists. Claim for damages arises.
Yianni vs Edwin Evans 1981
Established that a residential valuer instructed by a Lender could owe a duty of care in tort to the Borrower relying on a valuation.

Question 13

Limitation Act 1980

Answer 13

Contract - 6 years from date of negligent act / 3 years from date of knowledge / 15 years long stop date.
Tort – 6 years from the date the claimant suffered the loss.

Question 14

The Bribery Act 2010 (e. 2011)

Answer 14

SIX principles:
1. Proportionality
2. Top level commitment
3. Risk Assessment
4. Due diligence
5. Communication
6. Monitoring and Review
FOUR offences:
1. Bribing
2. Receiving a bribe
3. Bribing a foreign public official
4. Failing to prevent bribery.

Question 15

Accepting a gift

Answer 15

• Consider the Bribery Act 2010.
• CBRE Procedures (up to £100, must be declared).
• Professional objectivity.
• Tax implications and sanctions.
• Contract details and proportionality.

Question 16

Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (amended 2022)

Answer 16

Requirement for a written policy and terrorist financing risk assessment.
Have controls in place and staff training, complying with DD.
Undertake AML checks and source of funds and any high-risk factors.
Estate Agents Legal Obligations:
1. Register with HMRC if they let properties over €10,000 pcm.
2. Enhanced DD on transactions which are without economic purpose.
Customer DD - identify, verify, address, directors, business info.
Enhanced DD - extra procedures, e.g., high risk country or PEP.
Other - cash limit of €10,000, business relationship monitored, and a record kept, MLRO appointed, maintain records for 5 years.

Question 17

Typical ML Checks and Penalties

Answer 17

Public Ltd Company – London Stock Exchange Listing
Publicly Accountable Body – Government Ownership Control
Private Limited Company – Certificate of Incorp. Full Name and ID.
Private Individual – Passport driving licence/bank statement/3 months
Penalties
* Maximum sentence of 14 years and/or unlimited fine for doing.
* Maximum sentence of 5 years and/or unlimited fine for assisting

Question 18

RICS Professional Statement: Countering bribery, corruption, money laundering and terrorist financing 2019

Answer 18

• RICS Firms must not accept anything that constitutes a bribe.
• Procedures must comply with the law and suspicion reported.
• Use 3rd party checks if level of confidence is there.
• Understand the client and the purpose of the transaction.
• Retain records to show the firm has met requirements.
  WHO you act for. WHAT you are doing. WHY you are doing it.
  Dealing with politically exposed persons (PEPs) is higher risk as they hold positions of power and enhanced DD is required.

Question 19

Starting a new practice - RICS Compliance

Answer 19

1. Inform RICS, appoint ‘Responsible Principal’.
2. Register with RICS regulatory board.
3. PII and CHP details to RICS.
4. Procedures for client money handling.
5. Complaints Handling Officer and log.
6. Comply with use of RICS logo.
7. Succession plan.
8. CPD logged and RICS annual return completed.

Question 20

Starting a new practice - Statutory Compliance

Answer 20

1. Disclose business name.
2. Equality Act 2010, Financial services Act 2012, Bribery Act 2010.
3. Money Laundering Regulation 2007 – appoint MLRO.
4. Health & Safety Act 1974, Control of Asbestos Regulations 2012.
5. Fire safety compliance, Estate Agents Act 1979.
6. GDPR 2016 and Data Protection Act 2018 compliance.
7. Inform HMRC – VAT threshold = £85k per annum.
8. Compliance with current employment law.

Question 21

Closing a practice - RICS Compliance

Answer 21

1. Inform RICS and clients.
2. Return any money held.
3. Inform insurers and procure ‘run-off cover’ for a minimum of 6 years.
4. Retain a copy of client’s files for a minimum of 6 years.

Question 22

Role of the RICS

Answer 22

RAT
Regulation
Advice
Training

Question 23

Disciplinary Action - policed by?

Answer 23

The Standards and Regulatory Board

Question 24

Benefits to membership?

Answer 24

MARKSN
* MA - Market advantage
* R - Professional recognition
* K - Knowledge – International Practice Standards
* S - Status
* N - Global network

Question 25

Disciplinary Action Steps

Answer 25

1) Action by Head of Regulation (Initial Investigation)
* Serve a Fixed Penalty Notice
* Make a Regulatory Compliance Order (RCO)
2) Action by Disciplinary Panel (Non-RICS members on Panel)
3) Appeal Panel (Non-RICS members on Panel)

Question 26

CBRE Anti-Money Laundering Checks

Answer 26

Public Ltd Company – London Stock Exchange Listing
Publicly Accountable Body – Government Ownership Control
Private Limited Company – Certificate of Incorp. Full Name and ID.
Private Individual – Passport driving licence/bank statement/3 months.

Question 27

What are the legal obligations for estate agents under the AML regulations?

Answer 27

1. Register with HMRC if they let properties over €10,000 pcm.
2. Enhanced DD on transactions which are without economic purpose.
   Customer DD - identify, verify, address, directors, business info.
   Enhanced DD - extra procedures, e.g., high risk country or PEP.
   Other - cash limit of €10,000, business relationship monitored, and a record kept, MLRO appointed, maintain records for 5 years.

Question 28

What are the 2 levels of AML Due Diligence Checks?

Answer 28

Customer DD - identify, verify, address, directors, business info.
Enhanced DD - extra procedures, e.g., high risk country or PEP.

Question 29

What red flags would you consider to be associated with potential money laundering?

Answer 29

• If transaction is loss making.
• If the transaction is in a strange currency.

Question 30

RICS Founded?

Answer 30

1868

Question 31

President

Answer 31

Ann Gray FRICS

Question 32

President Elect

Answer 32

Tina Paillet

Question 33

Bichard Review

Answer 33

2022
Commissioned by the RICS, outcome was 5 key themes:
Governance, Strategy, People, Member Service, Culture and Values

Question 34

Levitt Review

Answer 34

2021
Public exposure of lack of clarity, structure and purpose of Governance Arrangements

Question 35

RICS Core Material

Answer 35

1. RICS Professional Standards (Previously Professional Statements)
   Mandatory, best practice advise documents.
2. RICS Practice Information (Previously Guidance Notes)
   Supports the practice, knowledge and performance, no explicit recommendations.

Question 36

Co-living Valuation, Harrow - What happened?
Why is this a conflict?

Answer 36

I was instructed to provide a secured lending valuation and another colleague valued for accounts.
This is a party conflict as CBRE was instructed on by two different parties to provide Red Book valuations of the same asset.

Question 37

Co-living Valuation, Harrow - How was the conflict resolved?

Answer 37

Conflict management implemented.
Information barriers by password protecting the files and working on different floors of the building to accommodate for this.

Question 38

Co-living Valuation, Harrow - What was in the conflict of interest letter?

Answer 38

Details of the information barrier.
Previous involvement with the borrower.
Full details of the conflict.