A disciplinary meeting is due to be held tomorrow by the RICS involving Countrywide Residential Lettings.
The formal charges state that between 2008 and 2018, the firm transferred just over £10m of client funds that had not been claimed from the client account into the office account.
We have asked both the RICS and Countrywide for any further information they may have about the case at this time:
The full notice on the RICS website states:
Disciplinary Panel Hearing
Case of
Countrywide Residential Lettings Nottingham, NG15
On
Wednesday 30 October 2019 at 10:00 hrs
At
RICS, 55 Colmore Row, Birmingham, B3 2AA
The formal charges are:
- Between 2008 and 2018, the Firm transferred a sum of £10,093,866 of client funds, representing unclaimed and unidentified client balances that had not been claimed for six years or more, from the Firm’s client account into the Firm’s office account, when it was not permitted to do so. In doing so, the Firm failed to preserve the security of client funds
Contrary to Rule 8 of the Rules of Conduct for Firms 2007
- The Firm’s conduct at 1 above represented a serious and prolonged disregard towards the Firm’s professional obligations as set out in the RICS’ client money guidance document (“Clients’ money: General advice for firms (v2 w/e from 4 April 2011)”)
Contrary to the third limb of Rule 3 of the Rules of Conduct for Firms 2007
(i.e. the duty to: “….avoid any actions or situations that are inconsistent with its professional obligations”).
The Firm is therefore liable to disciplinary action in accordance with RICS Bye-Law 5.3.2(c)
Anyone wishing to attend should contact;
Jae Berry
Regulatory Tribunal Manager
e jberry@rics.org
[Comment removed as it breached posting rules.]
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Isn’t “unclaimed monies” funding the DPS? Or, am I wrong?
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Unclaimed DPS money can be designated to be sent to a charity after 7 years. I thought it was funded by the interest earned on the money held.
I’ve some older deposits on DPS that did earn interest so are showing a greater value than has been lodged, but they must date back to when there were high interest rates
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Wow………………. This has some serious ramifications outside of RICS.
Not only is this inadequate behaviour under the RICS laws, which is bad enough in itself, but isn’t holding these funds an issue with the city? Surely having in excess of £10m of funds in the company coffers that shouldn’t be there is misleading to share investors in the city, as well as to shareholders receiving dividend income on what little profit they are making? This is particularly an issue where such little money is being made on stock trades at such low margins. Would a potential speculator still make an acquisition of shares knowing that the capital balance was £10m less??? We aren’t talking Coca Cola or Apple numbers here are we…….?
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The rules on these “orphan funds” if that best describes them used to be quite clear (from both the regulator and auditors) and recommended that if the client to whom the money is owed (£10m+ is an awful lot of “lost” tenants/ clients) can not be traced, that the money should be donated to charity.
Maybe, in their current financial predicament, the Board of Directors consider that the company is a suitable charity!
Not great publicity and SURELY the company should do the honourable thing and now immediately give the money to a selection of suitable housing charities (if their bankers will allow them to write such a cheque)!
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I think the only “charity” these funds will be allocated to will be the company overdraft charity or Spicerhaarts recruitment planning fund (via ‘redundancy’ payments) as that’s where 90% of Countrywide’s top talent seems to go
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I think the use of ‘top’ is probably over selling some of those that made that switch and I’m sure that somewhere there was perhaps some talent as well.
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Absolutely right Harry…. We give any “unclaimed” client moneys (usually small bits of tenant deposit funds that have passed three months and been forgotten about) to homeless charities working in our local community every year. The value it adds to our local reputation exceeds any we might have secured by siphoning it off in breech of bye-law.
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3 months? That seems short period of time to hold it. How do you get it released to you?
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As long as it’s not that well-known housing charity ‘Shelter’!
I’d also like to know how you get it released after 3 months??
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The bad press this can generate, the fines, the already low share price is it too much to suggest this could be the end of CW?
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That on top of any sanctions imposed by the City for fraudulently inflating their asset value, you could be right! The PR element will no doubt do its own damage, add in the City distrust and the competitor malice (I’d use this on a lettings appraisal if I were in direct competition), could very well be the beginning of the end!
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If this is true and is upheld then some very senior heads at CW will shortly be ‘pursuing new opportunities’.
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There is already a sea of this behaviour on Linked In, please don’t tell me I am in for another bombardment!
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The money goes to “charity”.
It would be great to hear which charities benefit from such funding – promote some positive press!
I wonder if anyone in the client accounts department are qualified accountants with an awareness of such regulations or wether the press buttons on demand.
Will this be another CW failure swept under the rug with their underhand processes.
They certainly haven’t paid any fabulous redundancies but they do throw some great parties and awards ceremonies – whilst their senior team float round the world.
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In transferring these client funds to their own office account, would they have invoiced them as though they were fees in which case would they have paid VAT on them?
Or how else would they have converted them into revenue to the company?
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It just goes to show that large organisations that need many many people in compliance and back office functions are a thing of the past.
They can no longer charge enough money to support the supervisory functions required to run a squeaky clean and profitable firm.
Medium sized regional agents all the way up to corporate size are vulnerable. (Perhaps Connells are an exception).
It will be interesting to see how this plays out.
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Surely it’s not that difficult to comply – Client money is not the firms money
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Be interesting to see how it’s been accounted for in their company accounts. If they have overstated their income by £10 million over ten years that may prove to be very uncomfortable for all concerned.
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It beggars belief that there have been no fundamental changes in the makeup of the BODS
All they had to have done over the 7 years is turn up ,left their buying boots at home ,kept the cheque book in the drawer and let the various barnds carry on with normal business Today they would be sitting today with just a working overdraft
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It appears to be another troubled day in the continuing history of Countrywide. Already having been fined this year by HMRC for failing to comply with AML regulations, the financial and compliance control of the company must be seriously questioned. Despite the amount of £10m, in terms of Client money handled by Countrywide over a 10-year period (in excess of £600m), set against this background the sum seems less of a headlining amount.
As the alleged misappropriation of funds were unclaimed deposits and credit balance i.e. Clients’ money, these amounts correctly will not be recorded on any accounts as Assets, Income or Turnover. The whole point of the offence is that the money belongs to others and could not be used to benefit the company, Countrywide.
The concern is not only that Jim Clarke, who still serves on the Countrywide Board (paid over £200K P.A.) was the CFO for the vast period of time but also that this practice seemed to be continued by his successor Himanshu Raja, the CFO from June 2017.
Only a few people within Countrywide would have had the authority to transfer out these funds and the CFO would hold the accountability.
In the annual report 2018, Countrywide did “Upon legal advice” repay some £4.5m it has taken from its clients’ accounts, so the misappropriation of Client money has been known for some time.
Could this advice been given to mitigate the possibility of Criminal proceedings?
Not to prejudge the outcome, what sanctions would the RICS take if the complaint is upheld? With breaches of rules spanning a 10-year period, the length of time offending, is one of the key components in any consideration when deciding the penalty.
It will be interesting to see how Countrywide defend what appears to be substantial charges made against them Almost inevitably, I believe that Countrywide would be ordered to repay whatever amount of Client Funds that had not been repaid to date. With cash on hand of only £17.43m (2018) and a negative cash flow of £5m (2018), any penalty with fines nearing £10m would impact heavily on the business.
Would the RCIS be prepared to expel Countrywide from its membership?
As Countrywide nears the halfway point of the 3-year Turnaround Plan, how many more significant and public failures of Compliance can the company endure? “They say a creaking gate, never falls off its hinges” Only time will tell!
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£10,000,000?
That would buy a lot of biscuits for their Canteen
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Leave em alone… Honestly… horrid bunch.
I’m here if you need me CW.
In the meantime, spare a few minutes and visit http://www.give2ric.con “Supporting, Ric’s In Need” A UK registered Charity.
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And now every landlord and tenant who has had any dealings with them will be all checking their records…. still I wish I had a sofa that big, lucky to find a sweet wrapper behind ours ….
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It could be just resting in that account…
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