Letting Agents - requirement for audit of clients accounts

Letting Agents - requirement for audit of...

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Been approached by existing client who operates Debt Management schemes and is looking, with partners, to open an Estate Agents and Letting Agency business.

Has anyone any experience of what level of financial supervision is required by the professional bodies which he may belong to - Nat'l Assn Estate Agents and Assn of Residential Letting Agents etc.  He has mentioned that an audit may be required of the clients account but we are struggling to see whether this is the case or just him using the word "audit" to mean "overview".

Any advice welcomed

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By johngroganjga
27th Mar 2015 11:39

ARLA

If it's ARLA it's not an audit (and you don't need to be a registered auditor to carry out the work either).

Everything you need is on the ARLA website.

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By SQUIRE
27th Mar 2015 13:17

check the arla
I seem to recall there was a requirement that the accountant giving the initial report to arla to say the company has systems in place needs to be a registered auditor, to support the arla application. After that an accountant can do the usual annual report to arla.

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By DMGbus
27th Mar 2015 13:49

RICS

I believe that if the letting agents are RICS qualified / members then RICS rules might come into play, (unless other more recent regs superceed RICS own rules) here's a quote from RICS a few years ago:

The organisation has clarified its Client Money Protection policy in the wake of the collapses of a number of residential letting firms.

Diane Telford, RICS director of regulatory operations, said: “There is currently a lack of regulation in the lettings market, leaving consumers unprotected against the actions of agents who are not chartered, and sadly, instances where client money is lost at the hands of an agent makes this void all the more apparent.
 
“RICS Regulation is responsible for ensuring that our members and firms meet the requirements of RICS Rules of Conduct which define expected professional, ethical and business standards to mitigate risk in the profession and thereby protect consumers and the general public.

“RICS members or firms who do not meet our standards will be subject to investigation by our independent regulatory arm.
 
“RICS rules say that firms regulated by RICS shall preserve the security of clients’ money entrusted to them. Client money held by an RICS regulated firm will be held separately from the firm’s own money in a bank or building society account which is clearly marked as a ‘client’ account.

“As such, client money is ring-fenced from any funds belonging to the firm or the firm’s owners, and will always be available for repayment to the firm’s clients, including tenants for whom the firm holds deposits.
 
“Clients’ funds cannot be offset against any debts of the firm or its owners by a liquidator or an administrator. Additionally, RICS regulated firms are required to be members of a tenants’ deposit protection scheme which also protects tenants’ deposits.

“RICS also states that any client money can only be used for purposes which have been agreed between clients and the firm. Furthermore, any money entrusted to a firm that is regulated by RICS will be covered by the Clients’ Money Protection Scheme, which provides limited long-stop compensation.
 
“A member can’t resign from RICS if they are subject to regulatory investigation, and if we thought there was an outstanding problem with a firm that wants to de-register, a customer would still be covered by the Client Money Protection Scheme.

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Replying to atleastisoundknowledgable...:
By johngroganjga
27th Mar 2015 14:21

RICS?

DMGbus wrote:

I believe that if the letting agents are RICS qualified / members then RICS rules might come into play, (unless other more recent regs superceed RICS own rules) here's a quote from RICS a few years ago:

The organisation has clarified its Client Money Protection policy in the wake of the collapses of a number of residential letting firms.

Diane Telford, RICS director of regulatory operations, said: “There is currently a lack of regulation in the lettings market, leaving consumers unprotected against the actions of agents who are not chartered, and sadly, instances where client money is lost at the hands of an agent makes this void all the more apparent.
 
“RICS Regulation is responsible for ensuring that our members and firms meet the requirements of RICS Rules of Conduct which define expected professional, ethical and business standards to mitigate risk in the profession and thereby protect consumers and the general public.

“RICS members or firms who do not meet our standards will be subject to investigation by our independent regulatory arm.
 
“RICS rules say that firms regulated by RICS shall preserve the security of clients’ money entrusted to them. Client money held by an RICS regulated firm will be held separately from the firm’s own money in a bank or building society account which is clearly marked as a ‘client’ account.

“As such, client money is ring-fenced from any funds belonging to the firm or the firm’s owners, and will always be available for repayment to the firm’s clients, including tenants for whom the firm holds deposits.
 
“Clients’ funds cannot be offset against any debts of the firm or its owners by a liquidator or an administrator. Additionally, RICS regulated firms are required to be members of a tenants’ deposit protection scheme which also protects tenants’ deposits.

“RICS also states that any client money can only be used for purposes which have been agreed between clients and the firm. Furthermore, any money entrusted to a firm that is regulated by RICS will be covered by the Clients’ Money Protection Scheme, which provides limited long-stop compensation.
 
“A member can’t resign from RICS if they are subject to regulatory investigation, and if we thought there was an outstanding problem with a firm that wants to de-register, a customer would still be covered by the Client Money Protection Scheme.

All good stuff I'm sure, but the question seems to be about NAEA or ARLA members, whose holding of client money is regulated by those bodies, not the RICS. Had the OP's client been a member of the RICS we would probably have been told. 

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By johngroganjga
27th Mar 2015 13:50

ARLA

There used to be a requirement for the reporting accountant to be a registered auditor but that requirement was removed several years ago.

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By NHGlos
27th Mar 2015 14:48

Accounts

For the report, the accountant will need to be chartered, certified or AAPA qualified. An auditor will have to complete the accounts report if there are activities subject to the Estate Agents Act - the act itself states the qualification required, I believe.

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By DMGbus
27th Mar 2015 14:49

RICS

My understanding is that if RICS members wish to retain their status as members then they must follow the RICS rules which might be more stringent than those of the other bodies mentioned, unless RICS have said that they have surrendered supervision to these other bodies.

I personally would therefore ask the client if they are bound by RICS rules as well as (or instead of) other bodies' rules.

It's been quite a few years since I've dealt with RICS estate agents, but the lasting memory is of balancing up client accounts to satisfy RICS requirements. 

I'd be surprised if RICS were to give up supervision to arguably lesser bodies.  RICS is an organisation with high standards to uphold, possibly higher (= more stringent) than NAEA or ARLA.

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By johngroganjga
27th Mar 2015 15:14

RICS

Many of us are well aware of the requirements the RICS places on its members, but you seem to suggesting that they regulate non-members as well. If so, that's news to me, and if it is true I stand corrected..

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By DMGbus
27th Mar 2015 16:34

RICS only regulate RICS members, very clear.

So RICS members will be regulated by RICS.

Non RICS members will be regulated by other bodies as RICS do not regulate them.

Fairly straightforward - so step one - ascertain if the letting agency is regulated by RICS because of RICS membership/rules, failing which other agencies' ruiles to ber complied with.

It would be a serious mistake to not mention RICS in this contect just in case the client is RICS reqistered.

 

 

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By johngroganjga
28th Mar 2015 14:08

Yes of course the OP needs to find out which body or bodies his client is to be regulated by and proceed accordingly.

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