S Kershaw & Sons
Manchester, M3
DETERMINATION
Findings with Reasons:
This case concerns the firm of S Kershaw and Sons of Manchester. The firm has been represented by one of its partners Mr Robert Wardell.
The Panel heard evidence from Mr Tom Day, Senior Forensic Accountant of the Institution and from Mr R Wardell on behalf of the firm.
Mr Wardell did not admit all of the facts in relation to the five elements of the first charge although he admitted that there was no evidence that bank reconciliations had been carried out monthly (element five).
The Panel considered the evidence in relation to the other elements of the first charge.
1. The Panel finds that there was no evidence that clients had been informed in writing of the details of accounts opened on their behalf. The Panel heard that the firm primarily has long term clients. Over the years, conditions and requirements change and it is the duty of the firm holding money on their behalf to ensure that its clients have up to date information.
2. The Panel finds that, as a matter of fact, confirmation of the operating conditions had not been obtained from the bank with respect to the client accounts. It is important that a firm is content that the bank is operating the accounts as client accounts in order to fulfil its duty to take care of clients’ money. The bank may treat the accounts incorrectly if it is not aware that they are client accounts. The Panel has noted the possible consequences which are set out on page 12 of the bundle.
3. The Panel finds as a fact that the firm did not have a copy of the Bank Mandate available for review on 5 February 2008. This is essential in order that it is clear to anyone who needs to know, what the rules are for the administration of client accounts. In the absence of the bank mandate any issues in respect of the signing of cheques may not be easily resolved.
4. Whilst Mr Wardell gave evidence that there was a system in place for keeping records of client accounts, in an Excel spreadsheet, the Panel finds that this does not amount to proper clients’ ledgers. These should have been kept in order for the firm to be confident that the clients’ monies were properly protected.
Overall the five findings of fact individually and therefore collectively amount to a breach by the firm of Rule 8 of the Rules of Conduct for firms which states that a firm shall preserve the security of clients’ money entrusted to its care in the course of its practice or business.
The Panel considers that each of these facts show a singular lack of processes or procedures that could give the Firm confidence that clients’ money was properly secure and clearly accounted for.
In relation to the second charge which was admitted by Mr Wardell on behalf of the firm, the Panel finds that the failure to register with an authorised tenancy deposit scheme is a breach of Rule 4 of the Rules of Conduct for Firms. That is a Firm shall carry out its professional work with due skill, care and diligence and with proper regard to the technical standards expected of it.
On the Housing Act 2004 becoming law S Kershaw and Sons should have immediately taken the requisite steps to comply with the requirements to protect both itself and its clients from potential claims and difficulties.
There are serious consequences for landlords and the deposit holder in circumstances where tenants can demonstrate that the Act has not been complied with. The low number of client deposits to which the Housing Act applies in no way removes the need to comply.
The Panel finds the firm liable for disciplinary action in relation to both breaches.
Previous:
No
Determination on Penalty:
The Panel considered the Sanctions Policy and the Guidance to the Sanctions policy in reaching its conclusion as to the appropriate sanctions in this case.
It first considered the seriousness of both breaches. The Panel accepted the evidence of Mr Wardell that there was no dishonesty or intention of dishonesty in respect of either of the breaches. This was also accepted by the Institution.
By not knowing the exact state of client accounts and by not registering in accordance with the Housing Act there was a risk of loss to clients. In a long established firm there is no excuse for such complacency. The Panel viewed the breaches as serious breaches of the Rules of Conduct for Firms.
The Panel considered the mitigating factors in relation to the breaches. It accepted Mr Wardell’s apology on behalf of the firm. It also noted that Mr Wardell had appeared today to represent the firm and to offer an explanation.
However, there are also aggravating factors in that until today, the Institution had received no substantive response in respect of the matters outlined in the report of the visit on 5 February 2008.
The Panel heard that there had been staffing difficulties at the firm which had contributed towards some if not all of the failures. Whilst the Panel understands that such difficulties may have been a factor, they are no excuse for failing to comply with the Rules and the law.
The Panel, in coming to its conclusions about the appropriate sanction, has considered proportionality in relation to the breaches as well as the potential risk to clients of the firm and the public interest. This includes the public perception of the profession if such breaches do not result in a liability to disciplinary action.
The Panel then considered the penalties available to it. It considered a caution entirely inappropriate given the seriousness of the breaches. In relation to both charges 1 and 2 the Panel issues a reprimand.
In relation to charge 1 the Panel considered whether it would be appropriate to ask for undertakings in relation to the future conduct of the firm. However in view of the firm’s lack of response since the inspection in February 2008 and the continuing non-compliance with the issues raised, the Panel considered that it would be insufficient to rely on any undertakings given by Mr Wardell on behalf of the firm.
The Panel therefore imposes the following conditions on the firm that:
1. The firm should comply with all the recommendations contained in the report of the visit which took place on 5 February 2008 (“the report”) by Mr Day, Forensic Accountant for the Royal Institution of Chartered Surveyors. This compliance must take place within 12 weeks of today’s date.
2. The firm shall submit to a Royal Institution of Chartered Surveyors regulatory review visit specifically to confirm compliance with all the recommendations in the report. This visit is to take place at the Institution’s convenience as soon as possible after the expiry of the 12 week period set out above. The costs of this visit are to be borne by the firm.
Failure to comply with these conditions will result in further disciplinary action.
The Panel decided not to impose a fine in this case. The Panel would prefer that sufficient resources are applied to the process of complying with the conditions.
In relation to the second breach the Panel is not imposing any further sanction as the firm will need to demonstrate compliance with part 3 of the report when complying with the conditions already imposed. The Panel also bore in mind that Mr Wardell indicated in his evidence today that the firm had in any event now complied with the Housing Act requirements.
Whilst this is not part of the sanction, the Panel would recommend that the firm should ensure that all Royal Institution of Chartered Surveyors members of the firm include within their life-long learning plans, provision to attend a suitable CPD accredited property accounting course within the next 12 months.
Determination on Publication and Costs:
Publication:
The Panel directs that its decision should be published in accordance with the Publication Policy (Supplement 3 to the Sanctions Policy).
Costs:
In relation to costs the Panel directs that S Kershaw and Sons should pay the costs relating to this hearing totalling £4,126.65.
This decision will take effect immediately.
The firm has a right to appeal this decision within 28 days in accordance with the Disciplinary, Registration and Appeal Panel Rules 2008.
