Avoid conflicts of interest. It’s good advice whether you are an investment agent or the soon-to-be-leader of the free world.
This week’s press conference staged to show that Donald Trump had dealt with his own conflicts was somewhat overshadowed by more lurid subject matter. Away from the headlines though was the not insignificant matter of the president-elect announcing he would hand control of his business empire to his sons before his inauguration on 20 January. That wasn’t enough for the director of the US Office of Government Ethics, who said Trump should have gone further – as his predecessors had.
Managing conflicts of interest – and being seen to do so – even caught up Theresa May this week. The prime minister, said some, had not done enough to demonstrate her decisions were above influence, even though she had moved her own investment portfolio into a blind trust.
Cast your mind back to the halcyon days of 2015, when all seemed certain in the world and conflicts of interest were less discussed on prime-time news. Lawyers and accountants had had their problems managing conflicts and regulators had come down hard to restore some degree of confidence.
Back then the RICS said it would take action on tackling potential conflicts of interest in the property industry when agents advise on both sides of a transaction. Double dipping would be addressed, said top brass, underpinned by a protocol established by the IPF a year earlier and endorsed by agents – including eight of the largest. Investors – including Hermes, Legal & General and Standard Life – were said to be supportive.
The IPF protocol was modest in scope, calling for greater transparency and early disclosure of potential conflicts. It stipulated that agents could act for multiple bidders only with client consent and only if they could maintain confidentiality through a barrier policy.
The RICS guidance, rightly, goes further. “Dual agency must not be undertaken under any circumstances,” runs the proposed wording.
“RICS members must only undertake multiple introductions for commercial investment real estate opportunities where both or all the clients have given auditable informed consent, confirmation of which is to be provided to the vendor on request.”
Furthermore, “terms of engagement must make it clear whether the agent is acting on an exclusive or non-exclusive basis”.
And members “must only provide incremental advice where: information barriers are in place to maintain confidentiality at all times; in the case of a purchase, the agent has obtained prior informed consent from any prospective buyer from whom the agent holds a pre-existing sole-buying mandate; and in the case of a disposal, the seller has been notified, although informed consent is not required”.
It’s sensible stuff and routinely followed by most. And while codifying the guidance is important; enforcing it is essential.
The guidance – and why not call it requirements – will be launched at MIPIM. Until then the RICS is inviting comments.
A word of caution should you be minded to question the need: as any lawyer or accountant will tell you, when it comes to regulation, it is better to embrace it before a disaster occurs than wait until one has happened. That is when a sledgehammer tends to fall.
An interesting trading statement this week from Savills. A strong performance in Asia-Pacific and Continental Europe, but flat in the US – where corporates have been deferring decision-making before the US election. It said that in the UK it increased market share in commercial transactions as a result of overseas interest after the referendum, with results better than expected in the residential market.
What to read into this? Well, don’t underestimate the impact of a currency play in 2017. It stands to heighten inward investor interest. And if you are reporting in pounds – and repatriating overseas earnings back to the UK – you have a head start on those reporting in dollars.
• To send feedback, e-mail damian.wild@estatesgazette.com or tweet @DamianWild or @estatesgazette
