RICS Rules of Conduct Flashcards
When were the new RICS Rules of Conduct published?
They were published in October 2021 but became effective from 2nd February 2022 on a global basis and replace the previous Rules of Conduct for Members and Firms and the 5 Global Professional and Ethical Standards.
The set of rules apply to members and firms, providing a simple structure with clear example behaviours for each rule
What are the FIVE rules of Conduct?
- Members and firms must be honest, act with integrity and comply with their personal obligations, including obligations to the RICS
- Members and firms must maintain their professional competency and ensure that services are provided by competent individuals who have the necessary expertise
- Members and firms must provide good-quality and diligent service
- Members and firms must treat others with respect and encourage diversity and inclusion
- Members and firms must act in the public interest, take responsibility for their actions and act to prevent harm and maintain public confidence in their profession
What is included in the Ethical Decision Tree?
- Ethical scenarios
- Framework of questions which members should ask themselves when facing a situation in which they are asked to act in a potentially unethical manner or situation
- Encourages considering the legality of one’s actions and their consistency with the Rules of Conduct, as well as to consult with appropriate people and have clear reasoning before making decisions.
- Ultimate test = whether members would be content to have their decisions or actions made public.
- The RICS Regulation Confidential Hotline offers assistance to members with any ethical issue
What are Terms of Engagement and what is included?
States in writing a clients agreement to the proposed fee basis, payment of expenses (and how calculated) and that a copy of firm’s complaints handling procedure is available upon request.
Three steps:
1. Check professionally competent
2. No conflicts of interest or personal interests
3. Confirm terms of engagement in writing and get written approval from the client BEFORE you start work on the instruction (CIT)
What is the ‘cooling off period’ from the date of agreement and under what Act?
The Consumer Rights Act 2015 allows a cooling off period of 14 days from the date of agreement
It may be appropriate to decline an instruction - for what reasons? (8 reasons)
- Not competent - outside your limitations
- Insufficient facts
- Proposed client won’t sign your ToE or complete AML checks
- COI or Personal Interest
- PI Insurance liability cap cannot be agreed
- Advice is for a friend or on a pro bono basis (e.g. free of charge for a charity) and your professional indemnity insurance will not cover work carried out on a personal basis
- The potential client is included in the UK Government’s sanctions list
- Would you be content for your actions to be made public - newspapers or internet?
What sets out a framework to consider as to whether to act for a client?
The RICS Ethics Decision Tree
What is required for agency work?
Compliance with Section 18 of the Estate Agents Act 1979 and money laundering checks (Moeny Laundering Regulations, 2017) is required
When does a conflict of interest arise?
When a member or firm’s independence and impartiality is threatened due to the existence of a conflict between two clients.
- any financial interest
- a personal interest
- commercial relationships
- acting on both sides of a transaction
What is the difference between conflict avoidance and conflict management? (no v yes)
- conflict avoidance is when you do not accept the instruction
- conflict management is when the instruction is accepted, and steps are agreed and put in place to manage the conflict, such as information/ethical barrier, with the written agreement of all parties
What is the mandatory statement that relates to Conflicts of Interest?
RICS Global Professional Statement on Conflicts of Interest, 2017
- It is a mandatory statement that came into effect on 1st January 2018
It states that…
- ‘a member must not advise or represent a client where doing so would involve a conflict of interest or a significant risk of a conflict of interest, other than where all those who are, or may be affected have provided their informed consent’
- ‘Informed consent may only be sought where the RICS member or regulated firm is satisfied that proceeding despite a conflict of interest is in the interests of all those who are or may be affected and is not prohibited by law’ (RICS, 2017)
What are the three types of conflict of interest and how are they defined?
- A ‘Party Conflict’ relating to work on the same or related instruction for two different parties
- An ‘Own Interest Conflict’ relating to a personal interest
- A ‘Confidential Information Conflict’ relating to work between two parties that is confidential
What is Informed Consent?
- This can be given in writing by the party if the person explaining the positon to them is entirely transparent about any material factors and sure that the party affected understands what they are doing
- Surveyors should only seek informed consent if satsfied that all relevant parties are best served by doing so
What other key areas are included in the professional statement?
- All conflicts must be managed in accordance with the Professional Statement
- Every RICS firm must have in place effective systems and controls appropriate to the size and complexity of their business to ensure full compliance
- All firms must keep records to show their compliance with the Statement
When a conflict arises between the interests of two or more clients of a firm, what are the THREE main steps that must be undertaken?
(CONSIDER TRANSPARENCY AND OPENNESS)
- Conflict avoidance
- Upon receipt of the full facts, consider whether the conflict is irresolvable because your impartiaity is compromised and should be avoided or whether it can be properly managed maintained transparency and openness.
- Decide whether you want to accept or decline the instruction from Client A and Client B - Written advice to both parties
- Assuming you wish to accept the instruction, set out in writing as soon as possible following the information to Client A and Client B covering the following three points: - Disclose the nature of the conflict, the circumstances surrounding it and any other relevant facts and set out your proposals for how the firm intends to deal with the conflict, such as the setting up of an information/ethical barrier
- Be clear - ensure both parties make their own decision (inform them to seek independent advice if needed)
- Request written confirmation from both clients of their informed consent your firm can act in accordance with the provisions of the procedure proposed.
- Conflict management
- Once you have received written consent to your declaration of the conflict and your proposals in respect of the proposed management of the conlflict from Client A and Client B, set up an information barrier in accordance with the provisions agreed with both clients.
Conflict management - what is the use of information and or ethical barriers?
If both clients agree in writing, your firm can act for two parties where a conflict of interest exists, having completed the above procedure, by creating an information barrier between those acting for the respective clients.
Operated by…
- Barrier must be robust to offer no chance of information passing between the two parties
- Must take ‘reasonable steps’ to operate an effective barrier
- Surveyors acting on the two sides must be different and must be physically separated - w/ separate support teams
- All information regarding the instruction should be securely stored
- Keep a clear audit trial of the conflict check process and all written and oral communication; the firm’s compliance officer must oversee all actions
What is the additional agency Professional Statement?
RICS Professional Statement: Conflicts of interest - UK commercial property market investment agency - 2017
- Additional mandatory professional statement relates only to UK commercial investment agency work where a specific risk has been identified
- It came into effect on 1st Jan, 2018
What does the RICS Professional Statement: Conflicts of interest - UK commercial property market investment agency - 2017 relate to?
It deals with DUAL AGENCY - where an agent has a contractural agency relationship with both the seller and the buyer at the same time
= this practice should not be undertaken from 1st Jan 2018 by RICS members
MULTIPLE INTRODUCTIONS
- where an agent has competing contractural relationships simulatenously with several buyers for commercial real estate investment opportunitites.
- when a client appoints an agent to act on their behalf in acquiring a commercial real investment, terms of engagement must be agreed in writing and the agent must make it clear whether they’re acting on an EXCLUSIVE or NON-EXCLUSIVE basis
- If EXCLUSIVE - other buyers with whom the agent was in contact must be informed that they’re no longer to advise them.
- If NON-EXCLUSIVE, the agent must obtain informed consent from the client(s) subject to the necessary information barriers being in palce.
- on appointment, the seller/seller’s agent must be advised accordingly.
INCREMENTAL ADVICE
- agent is approached by another party to provide advice, to include valuation, building surveying or planning, related to a purchase or disposal that is incremental to an existing instruction.
- an example given is where an agent is acting for the seller in relation to a disposal but is apporoached by the buyer, lender to provide a val
- RICS members must only provide incremental advice if consent is given and an information barrier is put in place before providing any incremental advice to the prospective buyer
PERSONAL INTEREST/OWN INTEREST CONFLICT
- arises when acting for a family member, close business associate or someone whom you have a financial or personal interest or benefit (‘connected person’)
- not let personal interest interfere or influence professional judgement = full transparency required
- Declare facts promptly and in writing before accepting the instruction
- Section 21 of Estate Agents Act 1979 declaration required for agency work
