RICS Revision Notes - Ethics PDF

ETHICS & RULES OF CONDUCT LEVEL 3 Background to Royal Institution of Chartered Surveyors: Fellow - 5 or more years as MRICS; a leadership role; RICS was founded in 1868 profe...

ETHICS & RULES OF CONDUCT LEVEL 3 Background to Royal Institution of Chartered Surveyors: Fellow - 5 or more years as MRICS; a leadership role; RICS was founded in 1868 professional/technical achievement; academic achievement; or Royal charter granted by Privy Council 1881 raising profile of RICS RICS Regs and Bye-laws set out the governance of the Institution RICS currently governed under the Royal Charter by various 4 levels of membership: internal councils and boards 1) FRICS Governing Council has over 20 members 2) MRICS Current Chief Exec - Justin Young 3) AssocRICS Current President, effect from 1 Jan 2024 - Tina Paillet 4) Trainee/Student ROLE OF THE RICS 5 BENEFITS OF BEING A RICS MEMBER: "The RICS promotes and enforces the highest professional 1) Status - Profoessional credentials provide client qualifications and standards in the development and maangement confidence of land, real estate, construction and infrastructure" (RICS, 2020) 2) Recognition - Promotion of professional excellence to governments and markets 1) To maintain the highest standards of education and training 3) Market Advantage - RICS Status and standards gives you 2) To protect consumers through strict regulation of competitive advantage professional standards 4) Knowledge - International practice standards, 3) To be the leading source of information and independent professional guidance CPD and knowledge sharing advice on land, property, construction and assocaited 5) Network - Access to professionals worldwide (over enironmental issues 140,000 members) BICHARD REVIEW: Independent review commissioned by the RICS Governing Board in Dec 2021 into the purpose governance and strategy of the RICS Commissioned following the Levitt Review and aimed to create a new sense of purpose and direction of the RICS The review advised 36 recommednations that are currently being implemented, including: Commercial Activity will now be separated from other activities within the RICS and led by a suitable qualified executive with strong commercial experience who reports to the Commercial Committee. RICS Matrics should give younger members a stronger voice through an improved governance structure with an appropriately selected representative from the community of younger members to sit on the Governing Council. A Diversity and Inclusion Panel will be setup to provide advice to the RICS Board and Standards and Regulation Board. Improvement of Technology within the RICS. A Public Interest Panel will be setup to advise the Governing Council. The Governance Structure will be updated to include a Public Interest Panel, Sustainability Panel, Commercial Committee and Audit, Risk, Finance & Assurance Committee. RICS published 5 Future Foundations in Nov 2023 following the Bichard Review VISION MISSION A natural and built environment that is Inspire members sustainable, resilient and inclusive for all Advane Knowledge Uphold standards STRATEGIC GOALS VALUES Lead and influence on sustainability Professional Attract a diverse next generation Collaborative Strengthen trust in the profession Inclusive Enhance member value and engagement Ambitious A WORLD CLASS ORGANISATION An efficient, effective and inspiring professional body that is easy to do business with ETHICS & RULES OF CONDUCT LEVEL 3 RICS RULES OF CONDUCT 2021 New rules effective 2nd Feb 2022 Single set of rules apply to both members and Firms Provides simple structure with clear example behaviours for each rule Rules accompaies by 12 supporting case studies RICS published new material/detailed guidance on Rule 4 in March 2024 - Diversity equity & inclusion 1) Members & firms must be honest, act with integrity and RICS Members must: comply with their personal obligations, including obligations to o Comply with PCD requirements (20 hours per annum - at RICS least 10 (50%) to be formal) o Formal - structured learning, with clear 2) Must maintain professional competence and ensure services objectives/outcomes eg, professional courses/seminars are provided by competent individuals who have necessary o Informal - self managed learning/private study expertise o Cooperate with RICS o Promptly provide all info reasonably requested by the 3) Must provide good quality and diligent service Standards Regulation Board, or those exercising delegated authority on its behalf 4) Must treat others with respect & encourage diversity and inclusion (Read update on Website) RICS Firms must: o publish complaints handling procedure including ADR 5) Act in public interest, take responsibility for actions and act to provider. approved by RICS, and maintain a complaints prevent harm and maintain public confidence in the log profession o Ensure all previous and current work is covered by adequate Professional Indemnity (PI) cover - should meet standard approved by RICS o If a sole Principle, arrangements for their work to RICS CORE MATERIAL: continue in event of incpacity, death or absence o Cooperate with RICS RICS Professional Standards o Promptly provide all info reasonably requested by the New Category of core material repalcing Professional Statements Standards Regulation Board, or those exercising and Guidance Notes delegated authority on its behalf Set of requirements and expectations for RICS members and o Display on business literature, in accordance with RICS firms about how they provide services or the outcomes of their policy on designations, a designation to denote they are actions regulated by RICS May include mandatory requiremtns, which use the word "must" o Report to RICS any matter they are required to report - these must be complied with under the Rules for Registration of Firms Also may inlcude recommended best practice which use the word "should" RICS Practice Information Disciplinary Procedures: not advice o Cundertaken by Standards and Regulation board info to supprt practical knoweldge and performance o Disciplinary procedure can be triggered by a complaint can include good practice, information, insights and processes to the RICS, alleegation by client or third party o Where a member or firm has failed to follow RICS RICS Practice Alerts guidance this will be considered by RICS as part of key tools for alerting profession of emerging areas of risk procedures o RICS Regulatory Decision Making 2022 provides outline of the regulatory approach o The disciplinary process is set out in the RCIS Regulatory Social Media: Tribunal Rules, 2022 Use of Social Media: Guidance for RICS Members, 2021 3 Levels of disciplinary action: Reminds members f standards / professional behaviour 1) Action of Head of Regulation RICS likely to investigate concerns about social media posts 2) Discplinary Panel where they involve: 3) Appeal Panel discrimination dishonesty abusive behaviour Initial formal investigation by Head of Regulation - bullying/harrassment he/she can initiate one of 4 following actions upon ignoring previous advice/warnings completion of their investigation if they consider disciplinary required: RICS unlikley to investigate when: 1) Serve Fixed Penalty notice the post is critical of a firms policies rather than individuals 2) Make Regulatory Compliance Order use professional/respectful language 3) Refer matter to single member of Regulatory Tribunal post is removed when asked to do so 4) Refer matter to Disciplinary Panel Will investigate personal post may damage rep of profession HANDLING CLIENTS MONEY RICS Professional Standard: Client Money Handling, October 2019 (effective Jan 2020) - 6 main areas of good practice: 1) Holding client money 2) Providing info to clinets 3) Receipts of client money 4) Payments from client accounts 5) Accounting records and controls 6) Compliance Members must be aware of the following procedures: Client accounts kept seperately and clearly identifiable Word 'client' is on the bank account and cheque book Client must be able to have their money on deand Payment of interest is agreed with a client and accounts must be kept in credi Regular bank reconciliation Accurate records are kept with running balance available Annual audit and reporting obligations by certified accountant Signatories agreed with authorised staff - two signatures must be required All firms handling client money need to display their procedures document on their website RICS also runs a Client' Money Protection Scheme -provides last resort protection in instances where an RICS Firm is unable to repay clients money. STARTING A NEW PRACTICE CLOSING A PRACTICE RICS COMPLIANCE RICS COMPLIANCE o Inform RICS of your new practice by completing Firm o Inform RICS of closure and deregister Details form o Ensure clients are informed at earliest opportunity o Appoint a Responsible Person for all RICS Communication o handover arrangements made with new firm o Register with RICS for regulation of the firm o Return any monies held by clients to their own accounts o Arrange PII insurance and send details to RICS o Inform insurers and procure professional indemnity run off o Set up procedures for Handling Client Money, inc cover for min. 6 years for expiry of policy in accordance with protection scheme RICS requirements o Register for the RICS Valuer Registration Scheme (VRS) if o Retain a copy of the client files and records for a min. 6 years undertaking Red Book Vals o Complaints handling procedure - obatin RICS approval o Appoint Complaints handling officer o Use logo kit frokm RICS to comply with 'Regulated by RICS' designation o Ensure CPD logged - set up a staff training plan o Complete online RICS Annual Return at end of each year STATUTORY COMPLIANCE o Disclose business name o Disability discrimination compliance - Equality Act 2010 o Financial Services compliance - Financial Services and Markets Act 2000, Financial Services Act 2012 o Bribery Act 2010 compliance o Appoint Money Laundering Reporting Officer - Money Laundering Regulations 2017 o H&S compliance - H&S Act 1974 o Asbestos Register o Fire Safety Complaince o Register for Data protection o Inform HMRC for VAT and TAx registration o Insurance compliance ETHICS & RULES OF CONDUCT LEVEL 3 TERMS OF ENGAGEMENT May be approproate to decline instruction, for example: Must state in writing the clients agreement to the proposed you are not competent to do the work fee basis, payment of expenses (& how calculated) and that a You dont have sufficient facts on the issue copy of the firms complaints handling procedure is availbale Client will not sige ToE or complete AML cheks upon request Conflict of interest 3 steps to follow: Professional indemnity insurance laibility cap cannot be 1) Check professional competency agreed 2) No conflicts of interest If advice is for a friend or free of charge and PI insurance 3) Confirm terms of engagement in writing and get written wont cover work carried out on personal basis approval from client BEFORE starting work on the Client on UK Gov Sanctions list instruction RICS decision Tree sets out framework for considering whether to act for a client FEE NEGOTIATIONS CONFLICTS OF INTEREST Should avoid price fixing, fee cutting or collusion with competitors Conflicts between 2 Clients fees should be market-based and agreed When impartiality is threatened due to existence of conflict between 2 clients: on ad-hoc basis Financial interest you can enter into further fee personal interest negotiations after submitting initial fee Commercial relationship proposal, so long as you act in Acting on both sides of the transaction professional manner deciding fee, consider amount of time & Conflict avoidance Vs Management (No Vs. Yes) resources required and that you have Avoidance - when you do not take the instruction correct expertise - you may wish to make Management - when accpeted instruction with agreed steps in place to manage reasonable profit teh conflict, such as information/ethical barrier, with written agreement of all tied to scope of works parties you should not be seen undercutting another firm RICS Global Professional Standard: Conflicts of Interest, 2017 be completely transparent with clients Mandatory standard effective 01 Jan 2018 and consumers - if in receipt of referral "Member must not advise or represent client where doing so would involve a fee, state so in ToE conflict of interest or a significant risk of a conlfict, other than where all those Referral fees to be considered in context who are, or may be affected, have provided their informed consent". of Bribery Act 2010 & RICS RULES OF CONDUCT Three types of conflift, defined as: PARTY CONFLICT - relating to work on the same or related instruction for two different parties CONFLICT - 3 StepProcess OWN INTEREST CONFLICT - a personal interest 1) CONFLICT AVOIDANCE CONFIDENTIAL INFORMATION CONFLICT - relating to work between two parties On receipt of full facts, consider if that is confidential conflict is irresolvable - is your impartiality compromised and therefore Informed Consent instruction to be avoided - or can it be sought only where the RICS member or firm is satisfied that proceeding despite managed? a conflict is in the interests of all those who are or may be affected and is not Decide if you want to accept instruction prohibited by law (RICS 2017) from Client A and Client B can only be given in writing by the party if the person explaining the position to them is entirely transparent about material factors and sure that the party 2) WRITTEN ADVICE TO BOTH PARTIES affected understands what they are doing If accepting, set out in writing the following to Members should only seek informed consent if satisfied that all parties are best both clients: served by doing so Disclose nature of conflict and all relevant facts - set out proposals for how you/firm Other key areas: will manage all conflicts must be managed in accoradance with the RICS Professional Be clear - ensure both parties can make Standard their own decision RICS firm must have in place effectice systems and controls to ensure full Request written confirmation from both compliance clients of their informed consent all firms muct keep records to show their compliance with the Standard 3) CONFLICT MANAGEMENT Once you have written consent from both clients of your declaration of the conflict and your proposals to manage Information/ethical barriers - should operate as follows: the matter, set up an info barrier in must be robust enough with no chnce of info passing between the two parties accordance with the provisions agreed must take reasonable steps to operate effectice barrier Surveyors acting must be different and physically seperated, preferably in different buildings or floors Virtual IT barrier - all info stored securely Claear audit trail of conflict check process - compliance officer to oversee  RICS Ethics Decision Tree RICS provides the decision tree (above) and case studies demonstrating different ethical scenarios Decision Tree provides framework of questions members should ask themselves when facing a potentially unethical situation Encourages consideration of legalality of ones actions and the consistency with RICS Rules, as well as consult with appropriate people and have clear reasoning before making a decision. Ultimate test is whether you would be content to have your decision / actions made public RICS Regulation Confidential Hotline offers assistance with any ethical issue Complaints Handling Procedure (CHP) Complaints Handling Procedure (CHP RICS firms must have a published CHP Stage One (in house) Should be inlcuded in ToE CHP should be issued on receipt of a complaint from valid PII insurance should be notified if a complaint is complainant who firm owes duty of care received as could lead to claim for negligence procedure must be quick clear and transparent and impartial Complaints log must be maintained to show details Detail nominated person who will investigate the compliant progress and outcome of all complaints (Complainst Handling Office) Must include RICS Approved Alternative Dispute Complaint must be made in writing Resolution (ADR) mechanism Procedures and strict timescales for investigation should be recorded Complaint should be acknowledged in 7 days and investigated in 28 days Stage Two - ADR if complainant not happy with the review, second stage is uding an independent redress scheme that the firm has chosen name of teh appropriate redress mechanism must be provided to the complainant - eg, The Centre of Effecte Dispute Resolustion (CEDR), The Property Redress Scheme, and the RICS Dispute Resolution Service. RICS will only become involved if a member fails to respond to the complainant or prevtns access to a redress scheme Sole practictioner is advised to nominate a surveyor in another firm to act as their complaints handling officer PROFESSIONAL INDEMNITY INSURANCE MANDATORY for surveyors working in practice Protects clients surveyors and third parties agianst negligence claims where a duty of care was breached and a claim for damages arises RICS PROFESSIONAL INDEMNITY INSURANCE REQUIREMENTS (effective April 2022) Members must ensure adequate and appropriate level of insurance in place for each instruction have considered potential liabilities All policies must be underwritten by an RICS approved insurer, found on the RICS wesbite Current min. requirements based on turnover: Firms turnover in Min. level of PII required preceding year for each and every claim £100k or less £250,000 £100,001 to £200,000 £500,000 £200,001 + £1,000,000 Firms have to consider likely risk profile of negligence claims when deciding upon level of insurance needed. The above are only minimum requirements If a new business, estimate teh turnover and adjust accordingly, in due course Maximum level of uninsured excess required by RICS: Firms turnover in preceding year Max. uninsured excess Up to £10mil The greater of 2.5% of sum insured, or £10,000 Over £10mil No set limit The policy should be fully retroactive PII policies work on a claims made basis - policies cover claims made during the period of insurance regardless of when the negligent act occured PII certificate to be set to RICS on an annual basis as part of firms annual return to RICS Early notification to insurers is required when potential claim arises PII cover is needed for pro-bono (unaid) work RICS assigned risk pool is available at a cost for members who cannot arrange cover RICS runs a Members Support Service (MMS) for members facing claims for work carried out by an employer who has gone into administration - help, advice and further support Most firms aim to cap their liability with clients for individual instructions "Adequate and appropriate" RUN OFF COVER is required following cessation of trading: For consumer claims, a min. of £1mil of aggregate cover over a period of 6 years For commercial claims, firms must consider what is adequate for a min. of 6 years Firms that are unable to obtain run-off cover from their incumbent insurer or the open market will be able to apply for coverage to the RICS Run-off Pool RICS Practice Information - Risk, Liability and Insurance 2021 Recommends use of liability caps to manage risks associated with professional work Be aware of third party reliance - make it clear that advice can only be relied upon by the client named in the terms of engagement NEGLIGENCE Duty of care to clients and third parties - using reasonable care and skill When there is a breach, resulting in a loss, a claim for damages arises Yianni V Edwin Evans (1981) - case established a resi valuer instructed by motgagor lending institution could ow a duty of care in tort to a mortgagee purchaser relying on a valuation Scullion V Bank of Scotland (2010) - a breach of duty of care owed to Mr Scullion in relation to a valuation report prepared for a flat in Cobham, Surrey. Court of Appeal held that a surveyor who provides advice on value to a lender in respect of a buy to let purchase does not owe a duty of care to the borrower who is seeking funding to purchase the property. It over-turned original decision in the case of a "commercially astute" borrower Limitation Act 1980 Current limitation periods are: Contract - 6 years from date of negligent act, breach of contract, or omission. Section 14A provides alternative limitation period of 3 years from date of knowledge of teh damage subject to the 15 years longstop from the negligent act or omission Tort - 6 years from date the claimant suffered the loss Avoidance of Negligence Clearly understand client objectives and confrim precise instructions in writing in terms of engagement Ensure they are competent to undertake the instruction Undertake the work in accordance with RICS advice Make detailed file notes and pictures Keep up to date with maret knowledge and undertake CPD Cap professional liability excess on PII policy in the terms of engagement ETHICS & RULES OF CONDUCT LEVEL 3 Hospitality, promotional and other low value business expenditure which genuinely promotes and improves business image is an ecceptable and key part of doing busines, by the first in caccordance with their anti-bribery procedures BRIBERY ACT 2010 BRIBERY ACT 2010 aims to reduce bribery in business in UK and abroad Based on 6 Principles: DEFINTION: A bribe can be the giving, offering, 1) Proportionality promising or receiving of an advantage such as a 2) Top level commitment payment, gift or service for an action which is 3) Risk assessment illegal or a breach of trust 4) Due diligence 5) Communication 6) Monitoring and review BRIBERY ACT 2010 BRIBERY ACT 2010 Companies are responsible for their employees The 4 offences are: corrupt acts unless they had adequate policies and 1) Bribing procedures in placeto combat bribery 2) Receiving a bribe Certain forms of lavish corporate entertainment can 3) Bribing a foreign public official be classed as bribery. 4) Failing to prevent a bribe Must be reasonable and proportionate and must be recorded in a gift/hospitality log Companies must meet criteria to prove they have taken steps to prevent bribery: BRIBERY ACT 2010 ID of potential risks Penalties: staff training Act is policed by the Serious Fraud Office clear policies Individuals: Max penalty of 10 years in prison & an regular reviews unlimited fine There is a defence is you can show adequate Companies: unlimited fine procedures are in place to combat bribery MONEY LAUNDERING MONEY LAUNDERING, TERRORIST FINANCING AND TRANSFER OF FUNDS (INFORMATION ON THE PAYER) REGULATIONS, 2017 (AS AMENDED 2023) DEFINTION: When proceeds of criminal activities are disguised or converted and then realised as legitimate assets MONEY LAUNDERING Key provisions of the Regs: Written Money Laundering and terrorist financing risk assessment systems policies and procedures to address money laundering and terrorist financing risks and to meet the requirements under the regs Adopts appropriate internal controls Comply with new customer, enhanced and simplified DD requirements Comply with requirments around politically exposed persons (PEPS) Apprpriate record keeping, policies and procedures AML checks to confirm ID of proposed purchaser of property and check purchaers source of funds by vendors agent before contracts are exchanged When assessing need for enhanced DD, include additional high-risk factors and seek additional information in some cases, eg. where transactions between 2 parties based in high-risk third countries MONEY LAUNDERING MONEY LAUNDERING Estate agents legal obligations: Firms must have polices in place to identify and scrutise Letting agents to register with HMRC if they let individual transactions which are: properties for more than the equivalent of 10,000 euros or complex or unusually large more contain unusual patterns of transactions Gov guidance "Estate agency business guidance for money are without apparent economic or legal purpose laundering supervision", updated n Jun 21 also includes sales agents requirements Firms must have group wide procedures to share information Companies and individuals to be approved and remain and to train anyone capabale of identifying or preventing registered to trade money laundering risks DD checks on vendors purchasers landlords and tenants Enhanced DD if red flags occur (eg. high risk countries)  LEVELS OF DUE DILIGENCE 1) CUSTOMER DUE DILIGENCE ID the client and verify their ID with reliable independent source (eg. passport, driving licence) Reasonable endeavours to ID any beneficial owners of the client - & to verify the ID or person responsible for managing if not able to do so from teh 'Persons of Significant Control' option on Companies House Company - name address and company number is required Names of directors unless company is listed on a regulated market (london stock exchange) Obtain info on purpose and intended nature of the business relationship and propsoed fundign arrangements as appropriate 2) ENHANCED DUE DILIGENCE Additional procedures are required for any transaction or business relationship involving a person in an established 'high risk third country' or a politically exposed person (PEP), a PEP family membe or business associate. EDD requires additional evidence and monitoring PEP describes someone who has been entrusted with a prominent public function PEP presents higher risk for involvement in briberyand corruption by virtue of their position and influence Detailed examination of the background and purpose of the transaction and increased monitoring required Other key requirements of the Regs: PENALTIES There is a limited of 10,000 Euros for acceptance of cash Max 14 yrs prison sentence and/or unlimited fine for Ongoing business relationship with client should be assisting woth money laundering monitored Max 5 yrs prison sentence and/or unlimited fine for Detailed records kepts of the procedures in place tipping off a person by informing them that they are Senior member of staff / Board member must be appointed under suspicion for money laundering or for failing to to take responsibility for all compliance report suspicion Nominated person (the Money Laundering Reporting Officer) appointed to report any suspicions (Suspicious Activity Report (SAR)) to National Crime Agency RED FLAGS Firm must maintain records for min. 5 years and to report to Inability/unwillingness to provide ID Docs Companies House any discrepancies between info firm Changes to parties involved in transactions holds on their clients vs. info held on Companies House Unusual transaction feautures - unescpected urgency, Register potential loss making etc Payment fo fees, purchase or rental monies in unusual currencies Type of organisation Evidence of constitution required Public Limited Company London Stock Exchange Listing Publicly accountable body Government ownership / cotrol Cert. of incorporation Full name, registered number, business adress Private Limited Company Names of all directors & shareholders with 25% or more holding ID of higher risk client Copy of passport or driving licence with photo Private individual Bank statement credit card bill etc to show evidence of address, not more than 3 months old Other relevant legislation SANCTIONS & ANTI MONEY LAUNDERING ACT 2018 Under this legislation, wider sanctions have been issued in light of geopolitical acticities such as the Ukraine war RICS provides guidance in RICS ANTI MONEY LAUNDERING SANCTIONS UPDATE 2022 PROCEEDS OF CRIME ACT 2002 Provides powers for enforcement authorities in the UK to recover (in criminal and civil proceedings) money and other assets which are deemed to be proceeds of crime Creates a set of criminal offences intended to combat AML offences  REVISION TIP Can you describe / explain how you would undertake DD prior to and during instructions? Can you explain your firms anti-bribery procedures / gift register requirements / AML procedures If asked about the acceptance of cash/gifts etc, consider the follwing: Bribert Act 2010 RICS Professional Standard Your firms procedures Professionalism, objectivity, transparency (RICS Rules) Proportionality Sanctions If asked about AML, consider: MONEY LAUNDERING, TERRORIST FINANCING AND TRANSFER OF FUNDS (INFORMATION ON THE PAYER) REGULATIONS, 2017 (AS AMENDED 2023) RICS professional Standard (but law comes first) DD procedures (inc. for estate agents) Red flags RICS PROFESSIONAL STANDARD: COUNTERING BRIBERY, CORREUPTION, MONEY LAUNDERING AND TERRORIST FINANCING, 2019 Sets out mandatory requirements for RICS members and firms divided into 3 parts: 1) Mandatory requirements 2) Guidance setting out good practice for the above 3) Supplementary guidance on some of the concepts set out in Parts 1 and 2 PART 1 BRIBERY AND CORRUPTION (B&C) RICS Regulated firms must : Not offer or accept anything that could be considered a bribe Have procedures in place that comply with the law Report suspicion to the relevant authority Act with due diligence, perform periodic written evaluations of the risks the firm faces Retain records to show how the firm has met the requirements of the Professional Standard MONEY LAUNDERING AND TERRORIST FINANCING (ML & TF) Firms must : Not Facilitate or be complicit in ML or TF have systems in place to comply with the law Report suspicion Evaluate and review the risks to the firm Use thrid party reliance for checks only when there is confidence for the quality of information provided by the third party Take appropriate measures to understand the client and purpose of the instruction Verify client with basic ID checks Retain records to show how the firm has met the requirements of the Professional Standard PART 2 GUIDANCE Have a written policy in place and senior management to take control of procedures Publish a code of behaviour and provide staff training Encourage transparency Set up a gifts register Keep up to date with legislation PART 2 SUPPLEMENTARY GUIDANCE Establishing a risk based approach - consider the three W's when assessing risk: WHO you act for WHAT are you doing WHY you are asked to do something Dealing with PEP's - they are higher risk - enhanced DD required Need to ID beneficial owners of a company (Cert of Incorporation, Annual Return, Companies House)