UK Construction Professions New Euro Regulations

The European Insurance Directive marks a new step in the regulation of UK construction professions.

The consultation period having run its course, Sir Bryan Carsberg, appointed by the RICS to review its role in regulating the surveying profession, should now be better informed about the views of the membership and users of their services on the issues identified in the consultative document published at the start of the exercise.

As the RICS put it, they enlisted Sir Bryan's help to ensure that they would stay ahead of the regulatory game.

He is well qualified for the task: a chartered accountant, one-time Dean of the Faculty of Economic and Social Studies at Manchester University, and Professor of Accounting at the London School of Economics, he was appointed Director-General of the former telecommunications regulator Oftel in 1984, Director-General of Fair Trading in 1992, and Secretary-General of the International Accounting Standards Committee from 1995 to 2001.

In one respect however the regulatory game is already overtaking the RICS.

In mid-January, by what has been described as one of the United Kingdom's biggest changes in property management, chartered surveyors are to be regulated by Britain's Financial Services Authority in that part of their business dealing with insurance products and making insurance claims.

The regulatory regime would for example bear on the work of building surveyors involved in negotiating insurance claims with loss adjusters.

Drawing the chartered surveyors into the regulatory net in this manner might well be seen as a move towards closer regulation of the construction professions.

It arises under a recently approved European Directive, by which the Financial Services Authority becomes responsible for regulating firms that carry on general insurance business.

From 2005-01-14 such enterprises must be directly authorised by the FSA, or act as appointed representatives of an authorised firm.

The RICS executive has deplored this development as government taking on the role of regulator for thousands of professional people providing insurance services as part of their practice, a job the institution itself would much prefer to carry out.

One way this might be done is by becoming a Designated Professional Body as are counterpart institutions in the legal and accounting professions, which status would give RICS powers to regulate its own members in matters otherwise regulated directly by government agencies.

The RICS has been consulting with the Treasury and the FSA over this but even if it was agreed, the earliest this status could be brought into effect is 2006.

But chartered surveyors would not thereby be exempted from the new insurance regulations.

It would simply transfer the regulatory role to their professional institution which itself would be regulated for these purposes by the FSA.

And RICS warns that this form of regulation might well cost firms more than direct regulation.

The question of whether to seek Designated Professional Body status will no doubt be considered in Sir Bryan Carsberg's report.

In his consultative paper Sir Bryan says that the review was commissioned in response to encroaching regulation by government and others of various activities carried out by surveyors.

As he says, the existing regulatory regime within the RICS was developed for small partnerships and does not easily deal with major corporate entities.

Also, he mentions discontent among some RICS members about what are perceived as disproportionate, oppressive and over zealous disciplinary rules and processes.

Such discontent, he adds, could lead to resignations from RICS and/or develop into barriers to the employment of RICS members by major commercial organisations.

Sir Bryan alerted to EGM dispute One member of the RICS who has disclosed the subject on which he addressed the Carsberg consultation is Jeremy Hackett, chairman of the 'Stop the Rot' Action Group.

In his latest bulletin he says he has written to Sir Bryan alerting him to the potential embarrassment of what he alleges are the double standards arising from the Extraordinary General Meeting of May 2003 and the refusal of RICS to hold an EGM as requisitioned by the membership in January 2004.

Mr Hackett's submission was made with the support of counsel's opinion which found that RICS broke its own regulations during the May 2003 vote on increasing subscription fees, and again breached its rules when it refused the requisition for second EGM.

Since Sir Bryan has taken on the issue of discontent among the membership, and has recognised the dangers for the institution if his investigations indeed justify the description of the regulatory regime as disproportionate and oppressive, one of the most valuable products of this inquiry would be modifications in the regime which pacify the dissidents as well as benefit the general membership.

As Sir Bryan said, in commissioning this review, the RICS is taking the initiative.

It wants, he says, to demonstrate the best practice in the regulatory arena, offering a cost effective regulatory system which should protect the public interest and enhance the reputation of members.

This is important because what may flow from the present discontents if they are not assuaged would hardly be a timely demonstration of institutional capacity for self-regulation.

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