Cash-Back Ad, Referral Fee, and an Unlicensed Assistant
A salesperson runs an Instagram ad: “Buy with me and get $10,000 cash back at closing!” The ad shows only the salesperson’s name and cell number, not the brokerage’s registered name. The salesperson also receives a $1,500 referral fee from a mortgage broker for each client who uses that broker, but does not disclose it. An unlicensed assistant answers direct messages, tells a buyer “you can comfortably afford $700,000,” and drafts social-media ads. The assistant’s profile says “Real Estate Team - Buyer Specialist.” A competing salesperson files a complaint with the brokerage. Two buyers have already asked whether the $10,000 is paid at closing or applied to the deposit, and one says she chose the salesperson because of the ad. The brokerage’s policy manual requires all advertising to include the brokerage name and requires written disclosure of referral fees. The broker of record asks for a compliance review and a written remediation plan.
1. Identify the compliance issues in the ad, the referral fee, and the assistant’s conduct.
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Several compliance issues arise. The Instagram ad omits the brokerage’s registered name, which Ontario advertising rules require; it also presents a $10,000 cash-back inducement without conditions, so it risks being misleading if payment depends on closing, lender use, or other fine print. The $1,500 referral fee from the mortgage broker is remuneration connected to the trade and must be disclosed in writing to the client; not disclosing it is a conflict-of-interest problem. The unlicensed assistant is doing more than administration: telling a buyer “you can comfortably afford $700,000” is providing a real estate service/opinion, and the “Buyer Specialist” profile holds the assistant out as if licensed. Drafting ads may be administrative only if supervised and not client-facing advice. The broker of record must correct the ads, stop the assistant’s client-facing advice, and review supervision and recordkeeping.
2. What must the salesperson disclose and correct, and what tasks may the assistant perform?
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The salesperson should revise every ad to include the brokerage’s registered name and the salesperson’s registered name, and state the cash-back conditions clearly-amount, timing, eligibility, and whether it is contingent on using a particular lender. The $1,500 referral fee must be disclosed to each client in writing, preferably before the client commits, and the client should acknowledge it. The assistant’s title and profile must be changed so there is no impression of licensure; the assistant should handle only administrative tasks such as scheduling and file assembly, not affordability advice, price opinions, or negotiation. The salesperson should also correct any buyer who relied on the ad and document what was promised. The brokerage should keep copies of corrected ads and disclosure acknowledgements.
3. What should the broker of record include in the written remediation plan?
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The broker of record should treat this as a supervision and advertising-compliance file: audit all social-media posts and team profiles, pull the referral-fee disclosure documents, and interview the assistant about client interactions. The remediation plan should include written advertising rules (brokerage name, registered names, no misleading inducements), a standard referral-fee disclosure form, a clear unlicensed-assistant job description, training, and a review of the same-brokerage/team supervision structure. The brokerage should correct or remove non-compliant ads promptly, document the corrections, and consider whether the conduct must be reported to RECO. The salesperson should receive written direction and a follow-up audit; repeat violations should lead to discipline. The goal is not just fixing one ad but showing the brokerage has systems to prevent recurrence.