Professional Practice, Trust Funds, and Ethics

Licensing law is state-specific

Know which activities require a licenseLicense In property use, permission distinct from an estate; in professional regulation, authorization to practice. See Chapter 5, Chapter 19. Glossary, who may perform them, and which exemptions apply. Commonly tested activities include selling, buying, leasing, negotiating, advertising, and managing property for others for compensation, but statutory definitions differ. A clerical assistant's permissible tasks are not identical to a licensed agent's tasks.

For Colorado licensing, status, compensation, supervision, and discipline, use Chapters 22, 23, and 27. Do not assume that obtaining a license independently authorizes practice without required affiliation or activation. REALTOR® identifies membership in a particular trade association; it is not the legal name of every licensed real estate agent. S01 S02 S37

Trust money is not business revenue

ComminglingCommingling Improper mixing of trust funds with personal or business funds. See Chapter 19. Glossary is improperly mixing trust funds with personal or operating funds. ConversionConversion Unauthorized use or appropriation of another person's funds or property. See Chapter 19. Glossary is unauthorized use or appropriation of another person's funds. Conversion can occur even when the agent intends to replace the money tomorrow. Some states permit a small amount of broker money in a trust account for specified bank charges; that narrow allowance is not permission to deposit routine business revenue there.

Record funds promptly, identify the owner and transaction, deposit and disburse under the correct rules, preserve documentation, and reconcile. Do not memorize one nationwide earnest-money deposit deadline: the triggering event and required period vary. S12 S01

A three-way reconciliationThree-way reconciliation A comparison of adjusted bank balance, trust-account book balance, and the total of individual beneficiary or property ledgers. Glossary compares the adjusted bank balance, the trust-account journal or control balance, and the total of individual clientClient A represented principal in a brokerage relationship. See Chapter 8. Glossary ledgers. The account may appear balanced in total while one client's ledger is improperly negative. One client's money cannot finance another client's closing.

Example: Client A has $4,000 on deposit and Client B has $6,000. A $5,000 disbursement charged solely to A is not justified by the account's total $10,000 balance. A has only $4,000 available under those facts. The individual ledger matters.

Advertising and representations

Advertising should be truthful and satisfy state identification rules for the brokerage, licensee, team, and licenseLicense In property use, permission distinct from an estate; in professional regulation, authorization to practice. See Chapter 5, Chapter 19. Glossary information where required. A blind advertisementBlind advertisement An advertisement omitting required brokerage or licensee identification. See Chapter 19. Glossary conceals required brokerage or licensee identification. Digital platforms do not eliminate these obligations.

Obtain appropriate authority to advertise, respect property access and image rights, disclose material personal interests where required, and do not exaggerate qualifications or verified results. “Coming soon,” altered images, square footage, incentives, and sold-property claims all require accurate presentation. A disclaimer cannot reliably cure a deliberately false headline. S01 S12

Antitrust traps

Price fixing includes competitor agreements about compensation or components of price. Market allocation involves competitors dividing territories or customersCustomer A person receiving services without necessarily being represented. See Chapter 8. Glossary. A group boycott can involve concerted refusal to deal used to exclude competition. Certain tying arrangements also raise antitrustAntitrust Laws protecting competition, including prohibitions on specified competitor agreements. See Chapter 19. Glossary issues, though not every package of services is unlawful.

A firm's independent decision differs from an agreement among competing firms. Do not discuss “getting everyone to charge the same” at an association meeting. Trade-association membership is not immunity. Compensation is negotiable; an exam question giving a rate supplies a calculation assumptionAssumption Taking responsibility for an existing loan under the governing arrangement. See Chapter 15. Glossary, not an approved industry rate. S38 S58

Telephone and email marketing

Federal telemarketing rules include Do Not Call requirements, restrictions on calling hours, and rules for honoring requests not to be called. Under the FTC framework, ordinary outbound telemarketing calls are generally restricted to 8 a.m. through 9 p.m. at the recipient's location, and covered calling lists require appropriate National Registry checks at least every thirty-one days. Exceptions have conditions and do not broadly override a person's company-specific opt-out. Automated calls, texts, and state laws add separate requirements. S39

Commercial email is subject to CAN-SPAM requirements, including accurate routing information, nondeceptive subjects, required identification and postal information, and a functional opt-out process. Opt-outs generally must be honored within ten business days. Hiring a marketing vendor does not necessarily eliminate the sender's responsibility. S40

Risk management and professional judgment

Maintain records, protect confidential data, use secure access controls, document important advice and instructions, and report problems promptly. Errors-and-omissions insurance concerns covered professional liability; it is not a guarantee that fraud, intentional misconduct, every cyber incident, or every contractual loss is insured.

Ethical standards and licensing law overlap but are not identical. Conduct can be lawful yet inconsistent with an association's ethical obligations, while an association's permission cannot legalize prohibited conduct. Follow lawful clientClient A represented principal in a brokerage relationship. See Chapter 8. Glossary interests, disclose conflicts, practice within competence, and refer specialized issues appropriately. S12 S01