KNOW YOUR CODE
INSIDE IREM
ARTICLE 7: CONFLICT OF INTEREST Real estate
managers must be diligent in acting in the best interest of clients
EILEEN CONWAY,
CPM, ARM, IS A
REGIONAL VICE
PRESIDENT AT
CHANCELLOR
PROPERTIES, IN
PHILADELPHIA.
Real estate managers run into conflicts of
interest with vendors, condo board members,
employees and on occasion, management companies. The IREM Board of Ethical Inquiry
receives many complaints citing conflict of
interest. Article 7 of the IREM Code of Professional Ethics states:
“A Member shall not represent personal or
business interests divergent from or conflicting
with those of the client or employer and shall
not accept, directly or indirectly, any rebate,
fee, commission, discount, or other benefit,
monetary or otherwise, which could reasonably be seen as a conflict with the interests of
the client, employer or firm, unless the client
or employer is first notified in writing of the
activity or potential conflict of interest, and
consents in writing to such representation.”
Here are several examples of conflict of interest
complaints and how they were resolved:
records and argued that the interest rightfully
belonged to the firm because if the funds were
kept in a separate account, the amount would
The expectation that the real
estate manager is acting in the best
interests of the client when it comes
to handling the client’s funds must
always be met.
not be large enough to earn interest.
Misappropriation of equipment. A CPM
Member misappropriated equipment and failed
to account for funds. The CPM denied any
wrongdoing, saying that the equipment was
only borrowed. The IREM Ethics Hearing and
Discipline Board terminated membership. The
CPM appealed the decision which was upheld
by the Ethics Appeal Board.
SEC Rules Violation. A CPM Member was
terminated for violating SEC rules and Article
7 of the IREM Code. The CPM was found to
have engaged in practices relating to real estate
investments, including conversion of funds. As
the CPM violated SEC rules three times over
a four-year period, his IREM membership was
terminated and he was ultimately expelled from
NASD.
A CPM Candidate was suspended for soliciting clients from the employer to start a new
management business. The candidate had proposed a business plan to the employer suggesting dividing the management into two firms.
Although this plan was not formally accepted
by the employer, the candidate moved ahead
with formation of a second firm and contacted
clients to move to the new firm.
The expectation that the real estate manager
is acting in the best interests of the client when it
comes to handling the client’s funds must always
be met. Any apparent conflict of interest or real
conflict of interest must be disclosed to the client.
If the real estate manager is diligent in their
understanding of their client’s intent as to
the handling of their funds, adheres to strict
accounting requirements, uses recommended
insured institutions, keeps the client informed
as to the status of their funds and discloses to
the client any possible conflicts of interest, there
should no violations of Article 7 of the Code. n
