Kai's Instagram: Lapsed License, Referral Fees, and an Unlicensed Assistant
Kai is a licensed Hawaii salesperson whose license is held by principal broker Makoa at Aloha Shores Realty. Her license lapsed on March 31; she renewed it 22 days later, but during the gap she hosted four open houses for her own listing and negotiated one counteroffer. Her Instagram account, 'Kai Sells Hawaii,' shows her personal cell number and photo, and no firm name. She has a verbal arrangement with a mortgage loan officer: $500 to Kai for each buyer she sends who closes a loan. Her unlicensed assistant, Dev, screens buyers, quotes the seller's bottom-line price, and drafts counteroffers for Kai's signature. Makoa has never reviewed her advertising, and the firm's policy manual says nothing about referral fees or assistants.
1. Identify every compliance problem in this fact pattern and state who is responsible for each.
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1. Practicing while unlicensed. A license is the authority to perform brokerage acts for compensation. Hosting open houses and negotiating a counteroffer during the 22-day lapse is unlicensed activity. Renewal is prospective; it does not retroactively validate acts performed during the gap. If that counteroffer ripened into a contract and Kai was paid, the transaction carries a compensation defect and insurance exposure.
2. Advertising. A licensee's advertising must identify the brokerage firm; a personal brand with no firm name misleads the public about who employs her. The principal broker is responsible for the firm's advertising and for supervising licensees' advertising.
3. The $500 referral arrangement. A salesperson may not accept compensation for brokerage activity from anyone other than her principal broker, so the payment itself is a violation even before federal law is considered. Separately, a mortgage loan officer paying for the referral of settlement-service business violates RESPA Section 8. A compliant affiliated business arrangement would require a written AfBA, actual services performed, and payments not measured by referrals - none of which exists here.
4. Dev's activities. Unlicensed staff may not perform acts requiring a license. Quoting the seller's bottom-line price and drafting counteroffers are licensed activities. Scheduling, delivering documents, and gathering factual information are clerical and permitted.
5. Supervision. Makoa is accountable for the acts of licensees in his firm. No advertising review, no policy on referral fees, and no policy on assistants is a supervisory failure that implicates both licensees.
2. What should Makoa do now, and how will the Commission evaluate his supervision?
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Immediate corrective steps (document every one):
- Pull every file Kai touched during the 22-day lapse and determine whether any transaction was initiated, negotiated, or closed. If one closed, unwind the compensation or refer the file to the broker and consider self-reporting.
- Stop the loan-officer arrangement in writing; return any $500 payments received and confirm in writing that no further payments will be accepted.
- Correct the advertising to include the firm name and ensure all social accounts are under firm policy.
- Retitle Dev's role: no pricing, no negotiation, no advising. Give him a written scope of duties.
- Adopt written social-media, advertising, referral-fee, and unlicensed-assistant policies; notify the E&O carrier of the lapse period.
How the Commission will look at it: The Commission's disciplinary toolkit includes reprimand, fines, suspension, revocation, and practice conditions, and it can act against a principal broker for failing to supervise. Aggravating facts: an actual transaction during the lapse and any money paid for unlicensed or improper activity. Mitigating facts: prompt self-correction, cooperation, no consumer harm, and remedial policies. Makoa's best posture is a documented, immediate, firm-wide correction rather than a claim that he did not know.
3. Assuming Dev keeps working for Kai, what may he do and what may he not? How should the $500 be handled going forward?
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Draw the clerical/licensed line and put it in writing.
Permitted: answering phones, scheduling showings, delivering documents, gathering factual information about a property, coordinating inspections, managing the CRM, and clerical file assembly.
Not permitted: quoting or suggesting price, interpreting contract terms, advising on strategy, negotiating any term, holding open houses or showing property alone, or being paid a percentage of commission or any transaction-based fee. Compensation to an unlicensed person tied to a transaction is itself a violation and creates a strong inference of unlicensed activity.
The $500: Kai must decline and return it. Not because the amount is small, but because (a) a salesperson may accept compensation for brokerage only through her principal broker, and (b) the loan officer's payment for a referral of settlement-service business is a separate federal problem. She should put her refusal in writing to the loan officer, copy Makoa, and not participate in any 'marketing services' workaround unless a compliant affiliated business arrangement is papered with counsel. If the loan officer persists, escalate to the broker rather than solving it one payment at a time.