General Ethics questions Flashcards
1
Q
How/when was the RICS founded?
A
Founded in 1868, granted a Royal Charter in 1881
2
Q
What sets out the governance of the institution?
A
Regulations and bye-laws
3
Q
Which body ratifies bye-laws?
A
The Privy Council
4
Q
How many current members are there?
A
Over 137,500 qualified and trainees
5
Q
What are the four levels of membership?
A
Fellow, member, associate, trainee/student
6
Q
What is the RICS’ current governance structure?
A
- Various internal councils and boards.
- Governing council has over 20 members.
- Standards and Regulation Board and Management Board report to Governing Council.
- 17 specialist professional groups, each with elected board, responsible for outlining standards for competence and practice.
7
Q
Who is the current CEO?
A
Justin Young
8
Q
Who is the current president?
A
Anne Gray FRICS, from Jan 2023. Now chairs the governing council.
9
Q
What was the Levitt Review?
A
- Alison Levitt QC’s 2021 review of the RICS’ internal governance failings.
- Commissioned Lord Bichard to undertake a further review.
10
Q
What is the role of the RICS?
A
- To maintain the highest standards of education and training.
- To protect consumers through regulation of professional standards.
- To be the leading source of information and independent advice on land, property, construction and associated environmental issues.
11
Q
What was the Bichard Review?
A
- Followed the Levitt review.
- To clarify the purpose of the RICS; its public-interest responsibility; make governance recommendations; provide proposals on future culture/strategy.
12
Q
What were some of the recommendations of the Bichard Review?
A
- New Management Board & Standards and Regulation Board
- Increased focus on public interest.
- Increased focus on diversity and inclusion.
- Greater leadership on issues such as sustainability & climate change.
All recommendations were adopted.
13
Q
What are the 5 key benefits of RICS membership?
A
- Status - professional credentials
- Recognition - promotion of professionalism to governments/markets
- Competitive market advantage
- Knowledge sharing
- Network
14
Q
Information required by the RICS for registration as a firm?
A
- Type of business
- Responsible Principal
- Statutory regulated activities - e.g. FCA
- Nature of clients
- Complaints handling procedure details
- PII details
- Whether handling client money
15
Q
What are the types of practice?
A
Corporate body, partnership, LLP, sole practitioner
16
Q
What do the Rules for the Regulation of Firms 2022 state?
A
Must be regulated if >=50% of Principals are members.
Can be if >=25% are.
17
Q
What is a Principal and Responsible Principal?
A
Principal = leadership position in firm with status to act autonomously.
Responsible Principal = obliged to ensure all reasonable steps are taken and systems in place to ensure compliance with regulatory and RICS requirements.
18
Q
What are the five rules?
A
- Honesty and integrity, comply with professional obligations
- Competency
- Service - good quality and diligent
- Diversity and inclusion - treat with respect
- Public interest, prevent harm and maintain confidence in the profession
19
Q
Give me an example of a rule that you have complied with
A
Rule 1 - Honesty, integrity, professional obligations.
When undertaking conflict checks prior to undertaking instructions.
20
Q
Give me another example of a rule that you have complied with
A
Rule 2 - maintain professional competency and ensure services are provided by competent individuals with relevant expertise.
I only undertake client work where I have the relevant expertise. E.g. healthcare properties valuation request in Yorkshire.
21
Q
Give me another example of a rule that you have complied with
A
Rule 4 - treating other with respect and encouraging diversity and inclusion.
I attend CPD on diversity and inclusion wherever possible and try to eliminate any unconscious biases.
22
Q
What does Appendix A in the Rules of Conduct include?
A
Professional obligations for members and firms
23
Q
What are the mandatory professional obligations for members?
A
- Comply with requirements set by the RICS and CPD (20 hours pa, 10 formal).
- Cooperate with the RICS.
- Promptly provide information reasonably requested by the Standards and Regulation Board.
24
Q
What are the mandatory professional obligations of regulated firms?
A
- Publish a complaint-handling procedure including ADR resolution and maintain a complaints log.
- Work to be covered by adequate PII.
- Those with sole principal must have adequate arrangements for their work to continue in the event of incapacity.
- Co-operate with RICS.
- Display that they are regulated by RICS on literature.
- Report to RICS any matter that are required to under the rules of Registration of Firms.
25
What do the rules of conduct replace and why were they updated?
They replace 3 documents: Rules for firms, Rules for members, and Global ethical principles. In effect from Feb 2022.
They were updated to give a simpler structure, making it easier for members and firms to understand. They focus on respect, diversity and inclusion, and on tackling global challenges such as climate change.
26
What is the RICS decision tree?
A flow chart of questions designed to help members make ethical decisions. It is published on the RICS website.
Additionally the RICS Regulation Confidential Hotline offers further assistance to members when making ethical decisions.
27
Tell me about the RICS' disciplinary procedures?
Policed by the SRB.
Investigation by the Head of Regulation who can:
1. fine
2. regulatory compliance order
3. refer to member of Regulatory Tribunal or to a Disciplinary Panel
28
What is a Regulatory Compliance Order?
For low level breaches of the rules which could be easily corrected. Failure to undertake CPD may result in a fine or disciplinary action which could result in expulsion.
29
What actions can a disciplinary panel take?
For more serious breaches. Actions include:
1. Regulatory Compliance Notice
2. Reprimand
3. Fine
4. Unlimited fine per breach, proportionate to offence
5. Expulsion
30
What can an Appeal Panel do?
Consider previous and new evidence and allow appeal and vary previous penalty.
31
What guidance is there on the use of social media and what does it say?
Use of Social Media: Guidance for RICS members 2021.
RICS will investigate posts relating to discrimination, dishonesty, abusive or threatening behaviour, bullying, etc.
It is unlikely to investigate posts that are critical of an organisation, its policies and performance, rather than individuals.
Posts should be professional, respectful, and removed if requested.
32
What are the new types of core material that are replacing all current RICS core material?
Professional Standards (mandatory) and Practice Information (guidance)
- replacing international standards, codes of practice, professional statements and guidance notes.
33
What does competition law cover?
Price fixing or collusion with competitors.
Fee negotiations should be professional, transparent of referral fees, not undercut other firms and should not affect the level service provided unless agreed with the client and still compliant.
34
What should you do prior to issuing a terms of engagement?
Check competence, conflicts, written approval of terms in writing prior to commencing work.
35
What regulations are relevant to terms of engagement?
Section 18 of the Estate Agents Act 1979 (informing the client of fee liability) and money laundering checks - for agency work.
The Consumer Rights Act 2015 - 14 day cooling off period.
36
When should you decline an instruction?
1. Not competent.
2. Insufficient facts.
3. Client won't sign terms or complete AML check.
4. Conflict of interest.
5. Professional Indemnity Insurance cap can't be agreed.
6. Pro bono advice not covered by PII.
7. Client on sanctions list.
37
What are the three types of conflict of interest?
1. Party conflict - work on same instruction for two parties.
2. Own interest conflict - arising from connected person.
3. Confidential information conflict - work between two parties that is confidential.
38
What is the difference between conflict avoidance and conflict management?
Avoidance is not taking an instruction. Management is taking steps to prevent it from affecting the impartiality of advice, for example information/ethical barriers.
39
What is the relevant RICS guidance on conflicts?
RICS Global Professional Statement on Conflicts of Interest 2017
Must not advise a client where there is a conflict, unless it is in their best interests, does not affect a second party and informed consent has been sought, and a management procedure has been agreed and implemented.
40
What must information/ethical barriers be?
1. Robust
2. Physical separation of surveyors
3. Secure data storage
4. Clear audit trail
41
Give me an example of where you have managed a conflict of interest
Acquisition valuation - party conflict, informed consent, information barrier.
42
What should you do if you have a personal /own interest conflict?
Declare promptly and in writing before instruction.
Section 21 of Estate Agents Act 1979 declaration for agency work.
43
What does the RICS say about client confidentiality?
Must be maintained for all client affairs.
Client permission for 3rd party access to files, unless statutory obligation - criminal investigation.
Files held for 6 years min.
44
What is the RICS guidance on handling complaints?
RICS Guidance Note on Complaints Handling 2016
45
What must the complaints handling procedure be?
1. Approved by RICS
2. PII insurers notified if there is a complaint
3. Issued to client with terms of business
4. Complaints log maintained
5. Include RICS approved Alternative Dispute Resolution procedure
46
Standard minimum procedures for handling a complaint?
Stage 1 (in house):
- CHP issued to complainant to whom the firm owes a duty of care
- contact details of complaints handling officer given
- complaint in writing
- acknowledged within 7 days and investigated within 28 (RICS)
Stage 2 (ADR - 3rd party resolution):
- if complainant not happy with review, independent redress scheme implemented
- name of scheme given to complainant
e.g. The Centre for Dispute Resolution and The Property Redress Scheme
47
What is your firm's chosen ADR?
It depends who the complainant is.
1. For estate agency and property management
- the Property Ombudsman.
2. For all other disputes
- business = RICS
- consumer = The Centre for Dispute Resolution
3. For ethics, conduct and conflicts
- RICS
48
What are the four CPD requirements of members?
1. 20 hours per year minimum.
2. 10 hours formal.
3. Rolling 3 year understanding of the Rules of Conduct.
4. Record CPD on the RICS CPD Management System by 31st Jan.
49
What is PII?
Professional Indemnity Insurance protects members and firms from negligence claims arising from their duty of care.
Adequate insurance covering all potential liabilities should be in place for each instruction, underwritten by a RICS approved insurer.
50
What are the minimum PII requirements?
Based on firm's annual turnover:
£100k or less = £250k
£100k to £200k = £500k
£200k or more = £1m
Most firms cap liability.
51
What is the max uninsured excess required by RICS?
Based on firm's annual turnover:
Up to £10m = greater of 2.5% of insured sum or £10k.
Over £10m = no limit
52
What should the PII policy be?
1. Retroactive
2. Claims made basis (claims during cover, regardless of when negligence occurred).
3. Certificate sent to RICS in annual return.
53
What run off cover should there be?
Consumer claims - min £1m for 6 years.
Commercial claims - firms must consider adequate level and hold for 6 years.
54
Is PII required for pro-bono work?
Yes
55
What is the RICS Assigned Risk Pool?
PII pool available at cost for members who can't arrange cover.
56
What is the Member Support Service?
A service for members who ca face claims for work carried out for an employer who has gone into administration.
57
What is the RICS guidance on capping liability?
RICS Guidance Note on Risk, Liability and Insurance 2021 recommends using caps and being aware of third-party reliance.
58
What needs to have happened for a negligence claim to be made?
Duty of care breached, leading to a loss and a claim for damages.
59
What did the Yianni v Edwin Evans 1981 case establish?
That a residential valuer instructed by a mortgage lender owed a duty of care to a mortgagee relying on the valuation.
60
What did the Scullion v Bank of Scotland plc 2010 case establish?
A residential valuer did not owe a duty of care to a buy-to-let purchaser as they were a commercially astute borrower.
61
What did the Burgess v Lejonvarn 2020 case establish?
Professionals owe a duty of care for pro-bono work and should act with reasonable care and skill but they are not under duty to advise or give warnings.
62
What is the legislation surrounding limitation periods for negligence?
The Limitation Act 1980 - 6 years for a breach of contract or omission. 6 years for a loss (Tort).
63
How can you avoid negligence claims?
- Understanding client objectives in the terms of engagement.
- Ensuring competency.
- Following the relevant Professional Standards and Practice information.
- Detailed file notes and photos, adequately recorded.
- Cap PII in terms of engagement.
64
What must you do when handling client money?
1. Keep separately in own account, clearly identifiable with client in name.
2. Return money on demand.
3. Agree payment of interest.
4.Accurate records and running balance.
5. Annual audit by certified accountant.
6. Display procedures document on website.
65
What is RICS' scheme for money handling?
Client money protection scheme - last resort protection for client claims where the firm is unable to repay. Split into surveying services and residential agents.
66
What is required to start a new practice?
Clarify whether they are referring to RICS or legal requirements. If RICS:
- Inform RICS on suitable form
- Appoint Responsible Principal
- Register for regulation
- Arrange PII and send details to RICS
- Setup client money handling procedures and protection scheme
- Complaints handling procedure - RICS approval and publish on website
- Succession planning
- CPD requirements and log
If legal:
- Disclose business name
- Disability discrimination compliance (Equality Act 2010)
- Bribery Act 2010
- Health and safety Act 1974 as amended
- Control of Asbestos Regulations 2012
- Fire safety acts
- Data protection act
- Estate agents act 1979
- Inform HMRC for tax and VAT registration
67
What must you do when closing a practice?
- Inform RICS
- Inform clients and hand over arrangements to new firm
- Return client monies
- Inform insurers and get PII run-off cover
- Retain client files for 6 years
68
Outline the act relevant to bribery
The Bribery Act 2010 aims to reduce bribery in the UK and abroad.
A bribe is giving, offering, promising or receiving an advantage for an untrustworthy or illegal action.
Some of the key principles include proportionality, risk assessments and due diligence.
The offences are bribing, receiving a bribe, bribing a foreign official, or failing to prevent bribery.
69
What are the penalties under the Bribery Act 2010?
Individuals = max 10 years imprisonment or an unlimited fine.
Companies = an unlimited fine.
It is policed by the Serious Fraud Office.
70
What regulations relate to money laundering?
Terrorist Financing and Transfer of Funds 2017 (amended 2022)
71
What is money laundering?
Disguising or converting the proceeds of criminal activity to legitimise it.
72
What are some of the key provisions of - Terrorist Financing and Transfer of Funds 2017 (amended 2022)?
- Internal controls
- Staff training
- New customer, enhanced and simplified DD requirements
- PEPs requirements
- AML checks
73
What are some estate agents obligations for money laundering?
- Lettings agents required to register if they let properties more than £10k per month
- Registered with HMRC
- Checks on vendors, purchasers, landlords and tenants on new sales, lettings or relettings
- Enhanced checks on red flags (e.g. high-risk countries, non face-to-face relationships)
74
What do customer DD checks involve?
- Reasonable endeavours to identify beneficial owners of client
- Company – name, number, registered address
- Directors names unless listed
- Purpose and intended nature of business relationship and funding arrangements
75
What does Enhanced DD involve?
- High risk country or politically exposed persons or PEP family member/business associate
- Additional evidence and monitoring
76
What are the penalties of the Terrorist Financing and Transfer of Funds Regulations?
* Max 14 years imprisonment
* Max 5 years prison sentence / unlimited fine for tipping off person under suspicion
77
What are some red flags for money laundering?
* Inability/unwillingness to provide identity documents
* Changes to parties involved in transactions
* Unusual transaction features
* Payment in unusual currencies
78
Which countries are on the UK gov sanctions list?
Russia, North Korea, Syria, Iran, Cuba, Belarus
79
What is the proceeds of crime act?
Proceeds of Crime Act 2002
Powers for authorities to recover criminal and civil proceedings money and other assets.
Offences include concealing; arranging; acquisition, use and possession.
80
What is the Economic Crime (Transparency & Enforcement) Act 2022?
* Measures for beneficial ownership of overseas entities owning property in UK
* Investigation powers – unexplained wealth orders (UWOs)
* Allows easier prosecution of those involved in sanctions
81
What is the RICS professional statement relevant to bribery, corruption and money laundering?
RICS Professional Statement, Countering bribery, corruption, money laundering and terrorist financing 2019
Mandatory global requirements for members/firms
3 parts:
1. Mandatory requirements
2. Guidance on good practice
3. Extra guidance on some of parts 1 & 2
82
What are the mandatory requirements under the RICS Professional Statement, Countering bribery, corruption, money laundering and terrorist financing 2019?
For bribes, firms must:
* Not offer/accept bribes
* Report suspicious activity to authorities
* Act with due diligence
For money laundering and terrorist financing, firms must:
* Not facilitate / be complicit
* Report suspicion
* Evaluate and review risks to firm
* Understand client and instruction’s purpose
* Client ID checks
83
What are the guidance points in the RICS Professional Statement, Countering bribery, corruption, money laundering and terrorist financing 2019?
* Written policy for procedures, executed by senior management
* Publish code of behaviour for staff & provide training
* Encourage transparency
* Set up gifts register
* Keep up to date with legislation
84
What are the supplementary guidance points in the RICS Professional Statement, Countering bribery, corruption, money laundering and terrorist financing 2019?
* Risks-based approach – 3 Ws:
Who you act for
What you are doing
Why you are being asked to do it
* Dealing with PEPs – higher risk
* Identify beneficial ownership of a company, partnership or trust
85
Why is anti-money laundering important?
For deterring and detecting money laundering activities, protecting the integrity of the financial system, and contributing to global efforts to combat organised crime and terrorism.
86
Tell me about the RICS Professional Standard on Countering Bribery and Corruption, Money Laundering and Terrorist Financing 2019.
* Emphasises the importance of adopting robust control measures to prevent these illicit activities within the surveying profession.
* Requires RICS members to conduct enhanced DD on clients and business associates to ensure they are not involved in bribery, corruption, money laundering, or terrorist financing. This includes identifying beneficial owners and understanding the source of funds.
* Obligation for members to promptly report any suspicions.
* Procedures in place to train staff, establish internal controls, carry out risk assessments, and comply with applicable legal and regulatory requirements.
87
What are the three steps of money laundering?
* Placement – initial transformation of illicit cash into other assets; easiest stage to spot.
* Layering – sequence of transactions to disguise the source of money and the beneficial owner. The more layers, the harder to trace.
* Integration – return of the money from seemingly legitimate sources to the criminal. All suspicious traces erased.
88
What are the potential repercussions of using a business to money launder?
* Business closed, employees laid off, work unfinished, contracts broken.
* Arrest with possible fines of 200% of the value of the laundered money.
* Businesses and assets may be liquidated and personal assets seized.
89
What does Client Due Diligence involve?
* Verify client’s identity and credentials
* Conduct ongoing monitoring of their transactions and relationships
* Identifying beneficial owners of funds and assets
* Also responsibility to report unusual activity through the proper channels (discussing outside is tipping off)
90
How would you know whether a gift constitutes a bribe?
* Intention
* Value & proportionality
* Transparency and disclosure
* Business practice and local customs
* Impact on decision-making
91
What are acceptable forms of proof of identity and address?
Proof of ID = passport or driving license
Proof of address = bank statement or bill less than 3 months old
92
What identity checking software did you use?
Smartsearch
93
Why is political exposure risky?
Higher chance of bribery or corruption.
94
Which internal database did you use to do the conflict check?
Salesforce. However, if this was not available I would have searched through my company’s client files and emailed all of my colleagues to check if there was a potential conflict.
95
What are the key questions on the RICS Ethics Decision Tree?
1. Sufficient facts?
2. Legal?
3. In line with Rules of Conduct?
4. Consulted with appropriate people to make informed decision?
5. Clear reasoning?
6. Happy for actions to be made public?
96
RICS compliance for setting up a new firm?
1. PII
2. Complaints handling
3. Money handling
4. Succession
97
Statutory compliance for setting up a new firm?
1. Equality Act 2010
2. Bribery Act 2010
3. Money Laundering Reporting Officer
98
When may it be appropriate to decline an instruction?
1. Deadline too soon – cant satisfy requirements
2. Conflict
3. Falls outside competence/expertise, topic or location
4. PII cap can’t be agreed
5. Informal / pro bono
6. On UK sanctions list
