The following is for study only and has NOT been approved by the Professional Standards Committee, the Executive Committee or the Board of Directors.
The San Diego Association of REALTORS® asked the C.A.R. Professional Standards Committee to examine whether a Responsible Broker should be named as respondent in a disciplinary action where the Broker’s salesperson is alleged to have violated the NAR Code of Ethics or other membership duty. CaliforniaLaw California Business and ProfessionsCode Section 10177 states: “The commissioner may suspend or revoke the license of a real estate licensee, or may deny the issuance of a license to an applicant who has done any of the following…:
… (h) As a broker licensee, failed to exercise reasonable supervision over the activities of his or her salespersons, or, as the officer designated by a corporate broker licensee, failed to exercise reasonable supervision and control ofthe activities of the corporation for which a real estate license is required….” Thus, under California law, a Broker is held responsible for the actions of his or her agents. NAR Policy NAR Statement of Professional Standards Policy Applicable to Ethics Proceedings paragraph 11 states: “The REALTOR® principal with whom a REALTOR® nonprincipal or REALTOR-ASSOCIATE® is affiliated shall not be automatically joined in any ethics complaint against the REALTOR® nonprincipal or REALTOR-ASSOCIATE®. (Revised 4/95) However, the REALTOR® principal may be joined as a respondent in the complaint by action of the complainant, by review of the Grievance Committee, or by determination of the Hearing Panel prior to the commencement of the hearing based on the facts of the complaint….” Accordingly, NAR allows a REALTOR® principal to be named as a respondent. C.A.R. RulesCalifornia Code of Ethics andArbitration Manual defines a Responsible Broker as follows: “"Responsible Broker" means the broker designated in the records of the Department of Real Estate to be responsible for the conduct of individuals affiliated with his or her office(s) or licensed or certified individuals who are sole proprietors, partners, officers, or shareholders of a corporation, or office managers acting on behalf of principals of a real estate firm who are authorized to bind the principals in arbitration.”A Designated REALTOR® is defined:“"Designated REALTOR®" means the member designated in Association records to be responsible for the conduct of individuals affiliated with the office(s) and accountable to the Association for all duties and obligations of membership.”Finally, with regard to the Association’s authority to take disciplinary action against amember, Section 3 states:“After a hearing as provided below, the Directors may take disciplinary action against any member:(a) For violation by the member of any duty of membership including a violation of the NAR Code of Ethics while a member of an Association of REALTORS®.
…(c) For any violation of subsection (a) by another who is also a member, affiliated with the member, provided the member was the Designated REALTOR® for that person at the time the alleged violation occurred. In such instance, both may, but are not required to be joined as respondents in anyproceeding. Therefore, under C.A.R. rules, the Designated REALTOR® for a salesperson may, but is not required to, be named as a respondent to an ethics complaint against that salesperson. The C.A.R. Model Bylaws,which have been adopted by most local associations in California define a Designated Broker, in Article V, as follows: “Each firm shall designate in writing one “Designated REALTOR®” member who shall be responsible for the conduct of individuals affiliated with the firm and accountable to the A.O.R. for all duties and obligations of A.O.R. membership, including, but not limited to, certification as set fort in Article VI, Section 11. The "Designated REALTOR®" must be the sole proprietor, partner, corporate officer or an office manager acting on behalf of the firm’s principal(s) and must have the authority to bind the firm in arbitrations and must meet all the other qualifications for REALTOR® membership set forth in Article V, Sections 2.1 of the Bylaws.” Therefore, the Designated REALTOR®, under C.A.R. definitions, may be, but is not necessarily, the same person as the Responsible Broker. The Designated REALTOR® can be the person appointed by the Responsible Broker to be accountable to the association for his or her salespeople – such as an office manager. Conclusion Recognizing that large Responsible Brokers are frequently named in ethics complaints against their agents, even when the Broker has no knowledge of the conduct, C.A.R. has made its Disciplinary Complaint, Form D-1 (attached) neutral on the issue. The Complaint doesnot guide the complainant to name the Responsible Broker, the Designated REALTOR® or anyone else in particular as a respondent. Of course, the complainant is free to name anyone they believe may be responsible for the conductcomplained of. Named respondents may, but need not, include both the Responsible Broker (because of the supervisory duty imposed by state law) and the Designated REALTOR® (because if the Designated REALTOR® is someone other than the Responsible Broker, C.A.R. rules allow for him or her to be named as a respondent). That complies with state law, NAR policy and C.A.R. rules. Form D-1