What document governs client money handing?
The RICS Professional Statement on Client Money Handling
The PS reinforces the importance of ensuring that RICS members and regulated firms comply with their professional requirements and that client funds are properly protected
How does the RICS Professional statement on Client Money Handling link to the Rules of Conduct?
Rules of Conduct for firms
- Rule 8
What are the objectives of ensuring good client money handling?
- Client money is kept safe
- Client money is used for appropriate purposes only
- RICS regulated firms have the appropriate controls and procedures to safeguard client money
Is a firm still responsible for client money if the money is held by a third-party on behalf of the company?
Yes, the firm and its principals remain responsible for holding client money securely in compliance with the professional statement
Must ensure that all records and information relating to client money are available to RICS upon request
What must a RICS regulated firm do in regards to holding client’s money?
- hold CM in a bank account of which the firm has exclusive control
- Ensure the CM account only holds client money
- Not hold office money in a CM account unless it is a receipt of mixed monies where the office money is awaiting transfer
- CM accounts include ‘client’ + ‘name of firm’ (discrete CM accounts to also include an identifier e.g. name of client or project)
- Ensure CM is immediately available on request (ensure request in writing from client); penalties for instant access are only paid from CM with instruction otherwise paid by office account
- Confirm operating conditions with bank in writing including acknowledgement that the CM is held seperatley and will not be used to pay any fees that the office is liable for
- Ensure if the client wants to open a shared account between C and firm, this is opened by the client
What must a RICS regulated firm do in regards to information to clients?
RICS regulated firms must provide the following information in writing to the client:
- Confirmation from the firm that the CM will be held in a CM account, CM account details, and who the CM account is in the name of (firm, third party, etc)
- Advice that fees paid in advance arent covered by the RICS Money Protection Scheme
- Disclosure of all commissions earned by the firm whilst managing CM
- How unidentified funds are dealt with
- A copy of the firms written procedures for handling client money
What must a RICS regulated firm do in regards to receipts of client money?
RICS regulated firms must:
- Ensure all money received is paid in to CM account promptly
- Mixed monies received is separated and paid promptly
- Upon request to hold part of a payment, the whole payment is transferred to account then paid out promptly
- Account for interest / other benefits accruing from client money to the client (unless agreed otherwise)
- Take prompt action to identify unidentified CM, after 3 years its paid to a charity (receipt and indemnity for all money paid to charity)
What if client money is unidentifiable?
I should take prompt action to try and identify the owner of the client money
Where the owner cannot be identified after 3 years from receipt and all avenues have been exhausted, pay this money from the CM account to a registered charity
Obtain a receipt and an indemnity for all client money paid to a registered charity that would reimburse the firm for payment of the monies if the beneficiary is identified
What must a RICS regulated firm do in regards to payments from a client money account?
RICS regulated firms must:
- use clients money only for the client’s matters
- Pay CM to client once there is no reason to hold it
- ensure all payments from CM account are made to or on behalf of the client
- When fees are due, send invoice to client before withdrawing funds
- Check that sufficient funds are held by client before making payments from CM account
- Obtain written permission for standing orders / direct debits
- Obtain written agreement from the client before bank costs are recharged to client bank accounts
What must a RICS regulated firm do in regards to accounting records and controls when holding client money?
RICS regulated firms must:
- keep all records and accounts of dealings with the client money
- Have appropriate systems in place to ensure payments to and transfers from client account are in accordance with pre-agreed instructions
- Complete regular client bank account reconciliations and demonstrate these are reviewed by a principal or senior staff member
- Publish written procedures for handling CM
- Prevent overdrawn balances by the firms systems and controls
- Have protection in place to protect accounting systems such as firewalls, back-ups and recovery systems
What must a RICS regulated firm do to ensure compliance with the client money handling procedures?
- ensure compliance with anti-money laundering legislation
- Ensure compliance with the RICS PS on B, C, ML and TF
- Obtain any certification required under legislation currently in force and follow the guidelines for display / publication
- Ensure investigation of any breach / prompt remedy
- Record any breach of the RICS PS in writing as well as consideration whether to inform RICS and whether any client has been affected
- Inform RICS and the insurers of the RICS regulated firm immediately if client money is misappropriated for any reason
What are the requirements for RICS members in relation to client money?
RICS members must:
- ensure compliance with PS on B, C, ML and TR
- ensure compliance with PS on Client Money
- ensure compliance with anti ML legislation
- follow RICS and company procedures
- not override any CM protection controls in place
- make appropriate disclosures to a senior member of the firm immediately if they become aware of a risk or actual misappropriation of client money and keep a written record of that disclosure
What accounting systems should a firm have in place for client money?
Accounting systems and procedures should be appropriate to the nature and volume of the client account transactions
Accounting records should include a cash book detailing all payments and receipts with a running balance for all client money accounts held
RICS regulated firms should retain copies of client money account statements, reconciliations and supporting documents (RICS recommends 6 years)
What if a RICS regulated firm holds more than 3 client bank accounts?
A central list of all client accounts should be maintained
How should a firm deal with cash and cheques received?
All cash and cheques received should be logged and there should be procedures in place to check that all funds received are banked
Upon cash being received directly from a client a receipt should be given
Appropriate systems to ensure cash and cheques are safe until they are banked
What does a firm need to do when holding clients money?
Firm’s systems in place
- qualified individuals to oversee client accounting
- Accounting systems to be secure, controlled and protected
- Computer systems to be backed up and have firewalls
- Ensure adequate cover if principal is away
Client bank account
- Client money held separately
- made available on demand
- Title includes ‘Client’ + name of firm
- Must inform client of bank details (codes, address)
- Must obtain written consent if the firm is to retain interest
Client Accounting
- Show details of all money received / paid
- Identify all receipts and payments from client ledgers
- Overdrawn balance to be avoided and rectified immediately if it does occur
- Funds held longer than 3 years may be donated
What if you donate unidentified money to a charity?
The charity should offer the firm an indemnity so that the money can be retrieved if the owner comes forward
Why might you be requested to hold client money?
- Arbitration fees
- Fee money taken in advance
- Tenant deposit
- Service charges
What are the written procedures that firms are required to publish under the Client Money Protection Scheme?
A requirement for firms under the Client Money Protection Scheme to publish written procedures on handling client money and to provide a copy to clients on request
The published written procedures should include a reference to the professional statement as well as references to:
- how and where client money is held
- restricted access to senior members / principals only
- timescales for payment of cash / cheques to account
- controls for authorisation of payments from account
- how interest and bank charges are handled
- information about reconciliation of accounts
- what information will be provided to clients and frequency of reports
The RICS firm should consider whether any other information is required in their written procedures to ensure clarity for the client
What is a reconciliation? How often should they be carried out?
Reconciliation of the cashbook, ledger and bank statement balances; any errors found must be rectified immediately
Reconciliations should be carried out once per calendar month and no later than 6 weeks after the date of the previous reconciliation
If there are only 1 or 2 transactions per month, a quarterly basis is enough
What is a client ledger?
A record of all the amounts owed or two a client
a record of all payments and receipts relating to a client in chronological order
Provides a running balance to show the amount of money held by the firm on behalf of the client at all times
What if there is a discrepancy between the RICS PS on Client Money and the Client Money Protection Scheme Rules?
Client Money Protection Scheme Rules takes precedence
What are RICS professional assurance auditors?
RICS members who carry out routine checks on firms handling clients money to ensure its held in accordance with Rule 8 and to provide advice and to help firms back to compliance wherever possible
What is the RICS Client Money Protection Scheme?
A scheme offered to RICS regulated firms to offer protection for clients’ money held by firms
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