Licensee Responsibilities and Prohibited Conduct
What to know
This domain is about the fiduciary and statutory duties a licensee owes: loyalty, disclosure, accounting, confidentiality, and reasonable care. Candidates should be able to name the specific prohibited conduct categories - misrepresentation, false promise, fraud, dishonest dealing, commingling, conversion, and undisclosed dual agency. Understand agency disclosure timing and the difference between a single agent, dual agent, and transaction coordinator role.
Traps
- Commingling vs. conversion: commingling is mixing client funds with personal or brokerage funds; conversion is actually using client funds for another purpose. Questions test the distinction.
- Disclosure timing: disclosure must generally occur before the client commits, not after.
- Confidentiality survives termination of the agency relationship for information acquired during it.
- A licensee may not act for both parties without informed written consent.
Rule of thumb
If the conduct involves money or information belonging to a client, assume the strictest standard applies: separate accounts, written authorization, and prompt accounting.
Worked example
A licensee deposits a client's earnest money into the brokerage's operating account "temporarily." Even if the money is later moved to trust, the initial deposit is commingling and is prohibited. The correct answer choice will identify commingling, not conversion, because the funds were not yet used for another purpose.