We reported, in the last edition of the Property Professionals’ Liability briefing, on some of the key recommendations made by Sir Bryan Carsberg following his review of the regulatory regime of RICS. In this article we focus on one of those proposals, that is the move towards principles-based regulation, in respect of which RICS has firmly grasped the nettle.
Sir Bryan recommended that RICS should adopt a principles-based approach to regulation, providing supporting (non-mandatory) guidance where appropriate. The concern underlying this recommendation (and this is a concern no doubt shared by a number of members) is that the existing rules are unduly rigid and detailed and do not reflect modern working methods. In particular, there has been a concern among members that the application of the rules has also been somewhat rigid and there is little scope for discretion when dealing with minor lapses. In other words, there is too much "stick" and insufficient "carrot".
From RICS’ perspective, Sir Bryan recognised that it cannot always be costeffective to spend a great deal of time and effort in pursuing members for minor breaches of the rules and, significantly, breaches which present little or no risk to the consumer. The new regime is intended to provide a great deal more flexibility and, it is hoped, will result in more efficient and costeffective regulation.
RICS has produced two sets of draft rules; one regulating the conduct of firms and the other dealing with the conduct of individual members. The draft rules really are brief, and are supported by guidance which is intended to assist members in understanding their obligations. The guidance is nonmandatory and sets out the ways in which firms and individual members are likely to be able to show that they satisfy the rules.
As suggested by the introduction of formal rules governing the conduct of firms, it is intended that the focus is, to some extent, taken off individual members and that the focus of regulation should be the firms so far as possible. Each firm would be required to nominate a compliance principal who would be the principal point of contact with RICS and would have responsibility for ensuring the firm’s compliance with the rules. Firms will be expected to be pro-active in taking any necessary remedial action. Although it is intended that any sanction for a breach by a firm would be made against the firm (rather than an individual member), any disciplinary action could and would focus on the individual member or members involved should the conduct be sufficiently serious to warrant this.
A significant difference in terms of enforcement is that breaches or potential breaches will be assessed initially on an administrative level, with only breaches which are considered serious enough to warrant a disciplinary sanction being passed into the disciplinary process. Further, the disciplinary process will be in several tiers and only the more serious breaches will be referred to a Disciplinary Panel. It is envisaged that simple failures and minor breaches of the rules will be dealt with by fixed penalties and "consent orders" respectively. Members will no doubt welcome the proposal that minor breaches will not automatically be publicised, especially if the firm or member agrees to the fine or condition proposed by RICS.
RICS is keen to stress that this is not to say that regulation generally will be less effective and provide less protection for consumers. Rather, it is intended that the focus will be on the more serious problems which reflect a risk to consumers.
RICS is, quite sensibly, taking great care to consult with members as regards the proposals, and recently published its response to the feedback received from members. Following this, in July it announced that its Governing Council has approved the development of detailed selfregulator reform proposals for consideration by the membership. The proposal to move to principles-based regulation certainly seems to have the support of the members in general terms. One of the concerns raised by members, however, is whether it will be sufficiently clear, from the broad principles supplemented by the non-mandatory guidance, what they should and should not do, and whether some clarity will be lost. In response, RICS has provided assurance that the rules will be clear, that guidance remains guidance and that "regulatory creep" must be avoided. Members are also keen that great care be taken as regards the definition of a "firm", which definition will determine the entities which fall within the regulatory regime. The response from members to the proposals generally has demonstrated differing opinions in this area, with some members favouring a narrow definition of "firm" whilst others were keen that as many firms as possible be brought within the regime. RICS is to consider this further, having thus far made clear that its intention, in principle, is to create a good practice regime designed to appeal to those firms not strictly caught by the requirements (for example firms where chartered surveyors are in a minority) such that they will wish to opt in in any event.
It certainly seems as though the move to principles-based regulation will proceed (members have been invited to vote on the new regime at an EGM in October) and RICS will need to ensure that sufficient guidance and support for members is available. The increased flexibility, and the intention to focus on improved education and support as opposed to the historical "stick", should hopefully provide the right environment for members to feel their way in the early stages and become entirely comfortable in time with the new system.
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