Professional Conduct, Ethics and Regulatory Obligations
What this domain tests
This domain tests whether you can apply the registrant's legal duties - honesty, disclosure, competence, and record-keeping - to concrete situations on a residential file. Expect scenario questions about conflicts of interest, multiple representation, handling other people's money, and the consequences of a breach.
Core rules
- Fiduciary duty runs to your client: loyalty, confidentiality, full disclosure, obedience to lawful instructions, and accounting. It is owed to the client, not the customer.
- Disclosure of interest in trade: if you or a related person has an interest in the property or the transaction, disclose it in writing before the client commits.
- Conflict of interest and multiple representation require informed written consent from all parties, plus a demonstrated ability to remain impartial, and typically a recommendation that the parties obtain independent legal advice.
- Commissions and referral fees must be disclosed; undisclosed compensation from a third party (e.g., a lender, contractor, or another brokerage) is a breach.
- Advertising and identification must be truthful and must identify the brokerage; personal branding cannot obscure the brokerage relationship.
- Records: retain transaction records, trade records, and trust records for the period the regulator prescribes; make them available on request.
- Reporting: self-report charges, discipline findings, and trust shortages as your regulator requires.
Worked example
A salesperson lists a duplex. The buyer is the salesperson's cousin. The salesperson does not tell the seller.
Reasoning: a family relationship that creates a personal interest in the trade is a disclosable interest. The failure is not cured by the cousin paying market price. The correct steps are written disclosure to the seller before any agreement is signed, and the seller's informed consent; the salesperson should also recommend independent legal advice. If the salesperson cannot remain objective, they should refer the client elsewhere. The mark is lost by answering only "the salesperson should disclose" without stating in writing, before commitment, with consent.
Traps that cost marks
- Treating "customer" and "client" as interchangeable - fiduciary duties attach only to clients.
- Assuming consent to dual representation can be implied from conduct; it must be informed and in writing.
- Confusing a conflict of interest (personal stake) with multiple representation (two clients in one trade).
- Forgetting that a commission reduction offered to one party can itself be a disclosure issue if it creates an undisclosed benefit.
- Answering that a breach is "unethical" without naming the specific duty and the required remedy.