A broker discovers a salesperson is committing license law violations. What is typically the broker's responsibility?

When a broker discovers (or has good reason to believe) a salesperson is committing violations, they have AFFIRMATIVE OBLIGATIONS to address it. The 'see no evil' approach is not acceptable and exposes the broker to failure-to-supervise charges. APPROPRIATE ACTIONS depend on severity but typically include: (1) IMMEDIATE INVESTIGATION: Talk to the salesperson, review documents, gather facts; (2) DOCUMENTATION: Record what was found, when, who was involved; (3) CORRECTIVE ACTION: Depending on severity — additional training, written warning, increased supervision, suspension of independent work, terminating the relationship; (4) REMEDIATION: Address the harm — if a client was misinformed, correct the information; if money was mishandled, return it; (5) REPORTING TO COMMISSION: For serious violations (fraud, theft, repeated violations, dual agency without consent, blatant misrepresentation), the broker may have a duty to report to the state commission. Some states require reporting; others allow it. Failure to report serious violations can be considered failure to supervise. (6) IF SALESPERSON IS TERMINATED: Notify state commission of license affiliation termination (usually required). The broker holds the salesperson's license until the commission is notified or the salesperson affiliates elsewhere; in some states the broker must return the license to the commission.

Protection for broker: (1) Document everything — what was discovered, what action was taken; (2) Consult legal counsel for serious matters; (3) Maintain office policies that make consequences of violations clear; (4) Conduct entry interviews/training that document agent's understanding of license law; (5) Carry errors and omissions insurance.

Common scenarios: (1) Salesperson advertised without brokerage name → corrective action (training, removal of ad); (2) Salesperson took an earnest money check without depositing it timely → immediate deposit, training; (3) Salesperson engaged in dual agency without disclosure → review the file, ensure disclosure is documented (if possible to cure), training; (4) Salesperson made misrepresentations → contact affected parties, document, possibly report; (5) Salesperson committed fraud or theft → report to commission AND law enforcement, terminate relationship, return any unjust gains.

Failure to supervise findings: The commission considers whether: the broker had adequate policies, conducted training, audited compliance, took action when violations were discovered, and corrected systemic issues. A broker who repeatedly hires problem agents or has a pattern of agent violations risks personal license discipline.

Insurance: Errors and omissions insurance typically covers UNINTENTIONAL violations, not intentional fraud. The broker should have a clear process for handling violations.