Ethics, Rules of Conduct and Professionalism Flashcards
When was the RICS founded?
- 1868 founded
- 1881 royal charter
How is the RICS governed?
- Governing Council (20 members)
- The Standards and Regulation Board
- Management Board
Who is the CEO?
Justin Young
Who is the President?
Tina Paillet
What are the 4 levels of membership?
- FRICS
- MRICS
- AssocRICS
- Trainee/Student
What is the role of the RICS?
Promotes and enforces the highest professional qualifications and standards in the development and management of land, real estate, construction and infrastructure
What are the 3 key roles of the RICS?
- Maintain highest standards of education and training
- Protect consumers through strict regulation of professional standards
- To be the leading source of information and independent advice on land, property, construction and associated environmental issues
What was the purpose of the Bichard (2022) review?
- Clarify the role of the RICS
- Make recommendations on its governing structure
- Proposals for incoming leadership on future culture
Created the Standards & Regulation Board, and Management Board
What were the 7 key areas of recommendation in the Bichard review?
- Public interest (public interest panel to advise Governing Council)
- Self-regulation
- Diversity and Inclusion
- Focus on younger generation
- Review of governance every 5 years
- Simpler governance
- Greater leadership on sustainability
What are the 5 RICS Future Foundations?
- Vision (built environment that is sustainable, resilient and inclusive)
- Mission (inspire, advance, uphold)
- Strategic goals (sustainability, next gen, trust in profession, member engagement)
- Values (professional, collaborative, inclusive, ambitious)
- World class organisation (efficient, effective organisation)
What are the 5 benefits of being a RICS member?
S - status
K - knowledge
R - recognition
A - advantage
N - network
When must a firm register to be RICS regulated?
- If 50% of principles are RICS members (important people)
What info does the RICS need to register a firm?
- Type of business
- Name of responsible principle
- Statutory regulated activities
- Nature of clients
- CHP
- PII
- Whether holds client money
What are the 5 rules of conduct?
- Honesty & integrity
- Competent & expertise
- Good quality & diligent
- Respect & D&I
- Act in public interest
What must members do?
- CPD
- Cooperate
- Provide all info
What must firms do?
- CHP
- PII
- Sole practitioners must have arrangements in event of death
- Cooperate
- Provide all info
- RICS logo
- Report any matter under the Rules for the Registration of Firms
What is the ethics decision tree?
Framework of questions which members should ask themselves when facing a situation in which they are asked to act unethically
What questions are in the ethics decision tree?
- Facts
- Legal
- In line with Rules of Conduct
- Consulted with correct people
- Clear reasoning
- Informed decision
What are the 3 levels of disciplinary action?
- Action by Head of Regulation
- Disciplinary Panel
- Appeal Panel
What is included in Step 1 - initial investigation stage?
Formal investigation by Head of Regulation who can:
- Fixed Penalty Notice
- Regulatory Compliance Order
- Refer to Regulatory Tribunal
- Refer to Disciplinary Panel
What leads to a fixed penalty?
- If don’t supply info
- Fine / caution
What leads to a regulatory compliance order?
- Minor breaches that can be rectified like not doing CPD
- Warning / fine
What leads of disciplinary panel?
- Serious breach
- Could issue regulatory compliance order / fine / conditions / expulsions / publication of results
What happens at an appeal panel?
- Review decision and evidence
- Vary penalty if want to
When might the RIC+01S0 investigate social media?
- Discrimination
- Dishonesty
- Abuse / threats
- Bullying / harassment
- Concerning communications
- Ignoring advice / warnings
What are the types of RICS core material?
- Professional standards (formerly professional statements and guidance notes) (set requirements)
- Practise information (best practise)
- Practise alerts (upcoming risks)
What must fee negotiations be?
- Avoid price fixing
- Market based / ad hoc
- Can enter into future fees if submitted initial proposal
- No undercutting
- Transparent if receiving referral fee
What is a COI?
When a members / firms impartiality and independence if threatened due to the existence of a conflict between two clients
What is the difference between conflict avoidance and conflict management?
- Avoidance is declining instruction
- Management is accepting but put information / ethical barrier in place (with written agreement of all parties)
What is key RICS guidance on COI?
RICS Global Professional Standard: Conflicts of Interest (2017)
What are the 3 types of COI?
- Party (same instruction for two different parties)
- Own Interest (personal)
- Confidential Information (work between two parties that is confidential)
What is informed consent?
Given in writing if person explaining position is transparent and all parties are best served by doing so
How do you handle a COI?
- Conflict avoidance
- Written advice (1. nature of conflict, 2. clear drafting, 3. written confirmation)
- Conflict management (information barrier)
What is an example of an information barrier?
- Firm can act for two parties if in place
- Must be different surveyors and physically separated in different floors / buildings
- Virtual IT barrier
- Securely stored info
- Audit trail
- Compliance Officer must oversee
When have you managed a COI?
- Selling plot of land on Project
- Appointed CBRE to sell it
- They informed me other CBRE team were acting for a potential investor
- I provided informed consent as the two teams were in separate offices so there was an information barrier in place
What is RICS guidance on COI?
RICS Professional Statement: Conflicts of Interest - UK Commercial Property Market Investment Agency (2017)
What is dual agency?
- Agent acts for both seller and buyer
- Not allowed
What is multiple introductions?
When an agent has multiple buyers
- Exclusive: Can only act for one buyer
- Non-exclusive: Can act for multiple buyers as long as information barrier is in place
What is incremental advice?
Agent approached to provide advice that is incremental to existing instruction (acting for seller to sell but approached by buyer to provide valuation)
Can only do this if informed consent given and an information barrier in place
What is the RICS stance on confidentiality?
- If a third party wants access to client info, must get clients approval (unless police/HMRC)
- Files held for 6 years then destroyed
- If overhear confidential info, report to firm’s compliance officer and disposed
What is the requirement around complaints handling?
- Must have CHP
- CHP in TOE
- Notify PII if complaint
- Details of CHP issued to client at Terms of Business
- Complaint’s log
- Must include ADR in CHP
What are the steps in complaints handling?
Step 1:
1. Details of CHP issues when complaint received inc. The Complaints Handling officer
2. Complaint made in writing
3. Acknowledged in 7 days
4. Investigated within 28 days
Step 2:
1. If not happy refer to redress schemes such as RICS Dispute Resolution Scheme
What are CPD requirements?
- 20 hours pa
- 10 hours formal
- Understand Rules of Conduct during a 3 year period
Formal: Structured / clear objectives
Informal: Self managed
When would a negligence claim be made?
- When a duty of care if breached
- Leads to loss
- A claim for damages arises (negligence claim)
What is a duty of care?
Exists to clients and third parties, using ‘reasonable care and skill’
What is an example of negligence?
Yianni v Edwin Evans & Sons (1981)
- Case established that a resi valuer instructed by a mortgager lending institution could owe a duty of care in tort to a mortgage purchaser relying on a valuation
- Yianni’s decided to buy a £15k house if they could get a £12k loan
- Applied for a loan from the building society who procured a valuation from Edwin Evans & Sons
- They valued the house and said it was suitable for the £12k loan so the Yianni’s were loaned £12k
- Edwin Evans and the building society knew that these people would not get an indepent valuation done and would rely on the one from the building society
- They bought the house but found cracks in foundations, the cost to repair was £18k
- Brought action against Edwin Evas & Sons arguing that for damages for negligence as they didn’t see the cracks
- Edwin Evas & Sons argued they owed no duty of care to the Yianni’s, only the building society, and that the Yianni’s were negligent for not reading the building society’s advice about getting an independent survey
- Conclusion - Edwin Evans & Sons did owe the Yianni’s a duty of care
What does the Limitation Act (1980) set out?
Limitation periods:
- Contract: 6 years from date of negligent act
- Tort: 6 years from the date the claimant suffered the loss
How can you avoid negligence?
- Understand client’s objectives and confirm in TOE
- Competent
- In accordance with RICS Professional Standards / Practise Information
- File notes / photos
- CPD
- Cap liability on PII
What is the purpose of PII?
Mandatory for surveyors, protects clients, surveyors and third parties against negligence claims when duty of care is breached
Works on a claims basis, policies cover claims in that period
What are the RICS PII requirements?
£1000,000 less = £250,000
£100,011 - £200,000 = £500,000
£200,001 + = £1,000,000
Up to £10m = 2.5% / £10,000 (excess)
Over £10m = No set limit
What is run-off cover?
Required following cessation of trading
Consumer claims: £1,000,000 required over 6 years
Commercial claims: Firms decide
RICS Run-off Pool
What is good practise relating to handling clients money?
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 must you do to protect client money?
- Secure and identifiable account
- ‘Client’ on bank account
- Have money on demand
- Interest agreed and accounts kept in credit
- Monthly checks on reconciliation (received and expenditure)
- Accurate records with running balance
- Annual audit
- Money can be withdrawn if properly required
- Records must show all transactions
- Signatories must be agreed with authorised staff
- RICS Regulatory Review Visits(3 yearly basis)
- Display procedures on website
What is required by the RICS to start a new practise?
- Inform RICS (Firm Details Form)
- Appoint a Responsible Principle
- Register with RICS for regulation of the firm
- PII and send to RICS
- Client handling money (inc. protection scheme)
- Register for RICS Valuer Registration Scheme (VRS) if Red Book Global Valuation
- CHP and get it approved
- Complaints log
- Complaints handling officer
- Logo kit
- Plan for future running of business if sole practitioner
- CPD logged
- Annual return completed
What are statutory requirements to start a new practise?
- Disclose business name
Comply with:
- Disability discrimination
- Financial services compliance
- Bribery act
- Money laundering
- H&S
- Asbestos
- Fire safety
- Data protection
- Estate agency compliance
- Inform HMRC for tax
- Employment law
- Insurance compliance
What is a bribe?
Giving, offering, promising or receiving of an advantage such as a payment, gift or service
How do you close a practise?
- Inform RICS of closure and deregister
- Inform clients
- Return monies
- Inform insurers (run-off cover for 6 years)
- Client files for 6 years
What are the 6 principles of bribery?
- Proportionality
- Top level commitment
- Risk assessment
- Due diligence
- Communication
- Monitoring and review
What are the 4 offences related to bribery?
- Bribing
- Receiving a bribe
- Bribing a foreign public official
- Failing to prevent bribery
How can you prevent bribery?
Take steps:
- Identify risks
- Staff training
- Clear policies
- Regular reviews
What is the penalty for bribery?
Polices by Serious Fraud Office
10 years prison / unlimited fine for individuals, unlimited for firms
What governs money laundering?
Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations (2017, 2023)
What is money laundering?
Proceeds of criminal activity are disguised / converted and realised as legitimate assets
How do you prevent money laundering?
- Risk assessment
- Systems, policies, controls, procedures to address money laundering and terrorist financing
- Internal controls
- Staff training
- Due diligence
- Comply with PEP requirements
- Appropriate record keeping
- AML checks to check source of funds
- Include high risk factors when assessing need for enhanced due diligence (third world countries / high risk people)
What are estate agents legal obligations?
- Register with HMRC if let property for more than 10,000 euros/month
- CDD checks on vendors, purchasers, landlords and tenants
- EDD checks if red flags (high risk countries / non face to face)
What transactions should you scrutinise?
- Large
- Unusual pattern
- No economic / legal purpose
What is included in customer due diligence?
- Identify client and identity (passport / driving license)
- Identify beneficial owners of client (Persons of Significant Control)
- Company name, number, address
- Names of directors (unless listed on LSE)
- Info on business relationship and proposed funding
What is included in enhanced due diligence?
- Additional procedures for ‘high risk third country’ or ‘PEP - politically exposed person’ (prominent public function, higher risk by virtue of their profession)
- More detailed examination of background, purpose of transaction and increased monitoring
What are other key requirements of the Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations, 2017,2023
- Limit of 10,000 euros for acceptance of cash
- Monitor relationship with client
- Record keeping of procedures
- Senior staff / board member must be appointed to take responsibility
- Money Laundering Reporting Officer must be appointed to report any suspicions with a Suspicious Activity Report (SAR) to the National Crime Agency
- Maintain record for 5 years and to report to Companies House any discrepancies between information the firm holds with info on Companies House
What are the penalties for money laundering?
- 14 years prison / unlimited fine for assisting
- 5 years prison / unlimited fine for tipping off
What are the typical AML checks for a public limited company?
London Stock Exchange listing
What are the typical AML checks for a public accountable company?
Government ownership / control
What are the typical AML checks for a private limited company?
- Certification of incorporation
- Full name
- Registered number
- Registered office
- Business address
- Names of directors and shareholders with 25% or more holding
- Identify higher risk client
- Report discrepancies to Companies House
What are the typical AML checks for a private individual?
- Valid passport or driving license with photo
- Copy of bank statement
- Credit card bill
- Council tax statement / utility bill for address (no more than 3 months old)
What are red flags?
- Inability of parties to provide identity documents
- Changes to parties in transactions
- Unusual transaction features (unexpected urgency / loss making)
- Payment in unusual currencies
What is set out in the Sanctions and Anti-Money Laundering Act (2018)?
- Wider sanctions issued in light of geopolitical activities such as Ukraine conflict
- HM Treasury’s Office of Financial Sanctions Implementation (OFSI) provides regularly updated guidance
What is set out in the RICS Anti-money laundering sanctions update (2022)?
Reminder about sanctions and estate agents role:
- Consider risks to business as part of AML procedure, noting the sanctions lists include UK citizens and people who live in the UK
- Risk factors and red flags
- Software as part of due diligence if a firm is likely to engage with higher risk clients or assets
- Checking individual clients of a higher risk against the HM Treasury ‘Consolidated List’
- Checking existing clients regularly where they present a higher risk (subscribe to HM Treasury’s Sanctions Notices)
- What to do if client is a match on a sanctions list, including contacting Office of Financial Sanctions Implementation (OFSI)
What is set out under the Proceeds of Crime Act (2002)?
- Concealing criminal property (conceals, disguises, converts or transfers criminal property)
- Arrangements (person enters into or becomes concerned in an arrangement which they know facilitates the acquisition, retention, use or control of criminal property)
- Acquisition use and possession (acquires, uses or has possession of criminal property)
What is set out under the Economic Crime (Transparency & Enforcement Act (2022))?
- Measures for a beneficial ownership register of overseas entities owning property in the UK
- Strengthens the investigation powers regarding unexplained wealth orders (UWOs)
- Allows easier prosecution of those involved in sanctions-busting inability or unwillingness of parties to provide identity documents
What is set out under the RICS Professional Standard: Countering Bribery, Corruption, Money Laundering and Terrorist Financing (2019)?
Divided into 3 parts:
- Mandatory requirements
- Guidance for good practise
- Supplementary guidance
What does Part 1 set out? Mandatory Requirements
Bribery and Corruption:
- Not offer or accept a bribe
- Procedures in place to comply with law
- Report suspicion to relevant authority
- Act with due diligence to perform periodic written evaluations of the risks the firm faces
- Retain records to show how the firm has met the requirements of this Professional Statement
Money Laundering and Terrorist Financing:
- Not facilitate or be complicit in ML and TF
- Systems in place to comply with laws
- Report suspicion
- Evaluate and review risks presented to the firm
- Use third party reliance for checks only where there is a level of confidence for the quality of the info provided by the third party
- Appropriate measures to understand the client and purpose of instruction
- Verify client by undertaking basic ID checks
- Retain records to show how firms have met requirements of the Professional Statement
What does Part 2 set out? Guidance
- Written policy in place and for senior management to take control of the procedures
- Code of behaviour for staff and staff training
- Encourage transparency
- Gifts register
- Up to date with legislation
What does Part 3 set out? Supplementary guidance
- ‘Risk based approach’, consider three W’s (who you act for, what you are doing, why you are being asked)
- Dealing with PEPs (higher risk as they hold positions of influence and enhanced DD is required)
- Identify beneficial ownership of a company (requesting Certificate of Incorporation or Annual Return for a company)
How is the RICS governed?
- Governing Council (20 members)
- Standards and Regulations Board
- Management Board
What are the 5 Rules of Conduct?
1- Honesty and integrity
2 - Competent
3 - High level diligent service
4 - Promote D&I
5 - Act in public interest
Please can you provide an example of when you have acted in line with Rule 1? Honesty and Integrity
Honesty and integrity
Honest - I do not accept gifts / hospitality / bribes
Integrity - I do not misuse client money
What is a conflict of interest?
When a members / firms impartiality and independence is threatened due to the existence of a conflict between two clients
What would you do if a conflict of interest happens when you advise a client?
Receive informed consent
Given in writing if person explaining position is transparent and all parties are best served by doing so
How can conflicts be managed?
Avoidance is declining instruction
Management is accepting but put information / ethical barrier in place (with written agreement of all parties)
Can you talk me through the ethics decision tree?
Framework of questions which members should ask themselves when facing a situation in which they are asked to act unethically
Can you talk me through the LL CHP?
Step 1:
1. Details of CHP issues when complaint received inc. The Complaints Handling officer
2. Complaint made in writing
3. Acknowledged in 5 days
4. Investigated and keep informed
Step 2:
1. If not happy refer to redress schemes such as RICS Dispute Resolution Scheme
What would happen if an NDA was breached?
- Lawsuits / court action (associated legal costs)
- Pay for financial damages
What are protected characteristics under the Equality Act?
How would you undertake money laundering checks on a new client?
What signs might indicate that a client has a high risk of money laundering?
What is the purpose of PII?
What is the purpose of public liability insurance?
What is the purpose of employer’s liability insurance?
What would you do if a consultant was not able to provide the requested PII levels?
What type of info would you find on a balance sheet?
What are four offences of the Bribery Act?
- Bribing someone
- Accepting a bribe
- Bribing a foreign public official
- Failing to prevent bribery
Who polices bribery and what are the penalties?
Serious Fraud Office
10 years prison / unlimited fine
