Resolving PMA conflicts

The Companies Act and Financial Services Authority rules permit a property management agent - as a company or an individual member of staff - to be a company secretary of a residential management company (RMC) or a property-owning company and conduct their business through the insured business as a customer. This is provided that all insurance activities are undertaken within the position of company secretary.

The FSA has indicated that, while this is permissible, there are potential conflicts of interest that would need to be addressed. In the view of the FSA, these conflicts are likely to make it difficult for the PMA to properly carry out a company secretary role.

The PMA must be the registered company secretary and this should be confirmed on headed company paper. It would also be prudent to check the Companies House website that this is the case. All communication with and from the company secretary must be in the RMC or property owner's name. If the company secretary is an individual, no work can be delegated by them to any other person within the PMA. Bank accounts must be in the name of the RMC or property owner (and compliant with current landlord and tenant legislation), not a client account at the PMA.

Members should also avoid a conflict of interest. It is difficult to see how the PMA could continue to receive commission if it is acting as company secretary. However, it is not uncommon for PMAs acting in this role to receive an agreed fee. Freeholder companies sometimes have a member of the PMA's firm as a director and a similar situation could arise with a company secretary. If the PMA acts as company secretary and, therefore, sits outside of FSA regulation, it would have to act in this capacity for any new RMC or property owner it dealt with or it would be required to seek authorisation.

It might be prudent to obtain written confirmation from the RMC or property owner that they agree that the PMA is acting as company secretary for the purpose of all insurance mediation activity. Members might wish to consider using a declaration signed by the PMA to collect the relevant information.