A new mandatory RICS professional standard places new obligations on members regarding conflicts of interest.
Since January 1, all SCSI/RICS members and regulated firms are mandated to comply with the RICS professional standards and guidance ‘Conflicts of interest (1st edition)’. Conflicts of interest must be avoided unless informed consent is provided by the affected parties, and then only if it is in their best interests. Conflicts of interest are defined at paragraph 4.2 as the following:
a) Party conflict – where the duty of a member or a regulated firm is to act in the interests of a client or other party in a professional assignment, but where there is a duty owed to another client or party in relation to the same or a related professional assignment. Other parties include a court or tribunal when acting as expert witness. Conflict arises where there is a duty of impartiality owed, such as appointments to act as arbitrator, adjudicator, mediator, conciliator, independent expert, or in a statutory decision-making appointment.
b) own interest conflict – where the duty of a member or a regulated firm to act in the interests of a client or other party in a professional assignment conflicts with the interests of the same RICS member/regulated firm (or of any of the individuals within the firm).
c) Confidential information conflict – where the duty of the rICS member/regulated firm is to provide material information to one client and where the member/firm’s duty to another client is to keep that same information confidential.
The codes of professional conduct standards for quantity surveyors and building surveyors under the Building Control Act 2007 define a conflict of interest as where a surveyor “is in a position of trust which requires the exercise of judgement on behalf of a person for whom he is acting and also has either private or business interests or obligations of a sort that might interfere with the exercise of his judgement”.
Consent to act
Members or regulated firms must not advise or represent a client where doing so would involve a conflict of interest or a significant risk of such (paragraph 1.2), other than where those who are or may be affected have provided their prior informed consent. Informed consent may be sought only where you are satisfied that proceeding despite a conflict of interest is in the interests of all of those who are or may be affected. You must also ensure that continuing is not prohibited by law, and that the conflict will not prevent the provision of competent and diligent advice to the affected parties.
The party giving informed consent must have demonstrated to you that they:
- understand that a conflict of interest or a significant risk of conflict of interest has arisen;
- have been informed fully of the facts known to you that are material to the conflict;
- know what the conflict is or may be; and,
- understand that it may affect your ability to advise or act fully in their interests.
Informed consent should not be sought just because your or your firm’s interests are served by so doing. Agreeing to put an information barrier in place may assist a client or other party in giving informed consent to a party conflict or assist in resolving a confidential information conflict.
The prospect of future work and referrals can sometimes present own interest conflicts and they may have to be disclosed and informed consent obtained.
A professional assignment that is contentious or has a reasonable prospect of becoming contentious is unlikely to be an adequate basis on which to manage a party conflict. The prospect of future work and referrals can sometimes present own interest conflicts and they may have to be disclosed and informed consent obtained. If for some reason the prospective client cannot be told about the prospect of future work/referrals then this may mean the instruction has to be declined.
You must maintain confidential information as such unless disclosure is required or permitted by law, or consent to disclosure can be demonstrated before it was made. Every member/registered firm must provide all the information that is material to the client’s professional assignment of which the member/firm has knowledge.
You must identify and manage conflicts of interest in accordance with the professional statement and keep records of the decisions made in relation to whether to accept or continue individual professional assignments, the obtaining of informed consents and any measures taken to avoid conflicts of interest. RICS-regulated firms must have appropriate and effective systems and controls in place to manage their and their employees’ compliance (paragraph 3.1). Members must consider their obligations under this standard. Records should show consideration and implementation of systems and controls appropriate to the firm, and observance of these in the context of individual professional assignments. In respect to non-regulated firms, individual members are subject to paragraphs 1.2, 3.1 and 3.2 of the professional statement, and the systems and controls of the firm should be commensurate with the extent and nature of their regulated work.
It is essential in providing a valuation that the valuer is able to act independently and objectively. There is a serious risk that acting with a conflict of interest would undermine the valuer’s ability to do so. Likewise, a regulated firm that accepts an instruction to act for the seller of a property as the selling agent should exercise caution accepting an instruction to advise a potential buyer about the same property. In April 2018, the RICS plans to publish an additional practice statement for the UK banning the practice of dual agency in the UK commercial property investment market.
In conclusion, avoiding conflicts of interest is an essential part of the make-up of a professional service provider and is why the public should be able to place their trust in that professional. In following the new RICS standard and managing conflicts of interest correctly, we can fulfil that obligation to our clients and the public.
Chair of the Dispute Resolution Standing Committee