Professional Ethics, Conduct and Risk Management
What this domain tests
This domain tests how a registrant should behave when duties collide: honesty, confidentiality, disclosure, competence, and the management of risk for the brokerage and the client. Questions are scenario-based and often have one answer that satisfies both the rules and the client's interest.
Core rules and concepts
- Honesty and fair dealing. A registrant must not misrepresent facts, must not conceal material defects, and must not pressure a party to act against interest.
- Disclosure of material facts. Latent defects known to the registrant that affect value or use must be disclosed, even when the seller prefers silence. The duty is to disclose the fact, not to diagnose it.
- Confidentiality protects the client's information; it does not permit hiding a known material defect from the other side.
- Competence. A registrant should not accept work outside their knowledge without obtaining assistance or referring the client.
- Conflicts and referrals. Disclose any interest, referral fee, or relationship. Do not accept undisclosed compensation from a third party.
- Money handling. Deposits and rents go to trust; keep records and account for funds accurately.
- Advertising and social media must be accurate, identify the brokerage, and respect privacy and consent.
- Risk management includes written agreements, documenting instructions, recommending inspections and legal advice, and avoiding unauthorized practice of law or appraisal.
Worked example
A seller tells the listing agent that the basement floods every spring but asks that it not be mentioned because "the buyer can figure it out." The buyer asks directly whether the basement is dry.
Reasoning: the agent must not lie. A known latent defect that materially affects use must be disclosed. The agent should tell the seller that the law requires disclosure, and if the seller refuses, the agent should decline to continue representing the seller or act in a way that conceals the defect. Answering the buyer's direct question with a false assurance is a misrepresentation and a discipline risk. The correct response is to disclose the known defect factually and recommend the buyer obtain an inspection.
Traps that cost marks
- Believing confidentiality to a seller permits concealing a known material defect.
- Giving legal or appraisal opinions instead of referring the client.
- Accepting a referral fee without written disclosure.
- Treating a client's instruction as a defence to a dishonest statement.
- Relying on verbal instructions without documenting them.