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Federal Sentencing Guidelines Contain Insights For Broker Ethics Programs

Written by Posted On Monday, 06 August 2018 13:31

Chapter 8 of the Federal Sentencing Guidelines Manual deals with the sentencing of organizations. Its discussion of potentially mitigating factors contains useful food for thought for real estate brokerages. This is not because brokerages are particularly liable to be facing federal sentencing. Rather, it is because the Guidelines provide a structural outline for "the existence of an effective compliance and ethics program". This is of interest to anyone who wishes to promote, in the words of the Guidelines, "an organizational culture that encourages ethical conduct."

We note here some of the features of an ethics program, as described in the Guidelines.

  • The governing authority of the organization shall be knowledgeable about the content and operation of the program, and shall exercise reasonable oversight with respect to its implementation.
  • High-level personnel of the organization shall ensure that the organization has an effective program, and specific high-level personnel shall be assigned overall responsibility for the program.
  • Specific individuals within the organization shall be delegated day-to-day operational responsibility for the program.

The Guidelines recognizes that not every organization is so large as to have the layers of management personnel implied by these provisions. Small organizations may meet the requirements "with less formality and

fewer resources than would be expected of large organizations." Small organizations might use "available personnel, rather than employing separate staff" to carry out the ethics program.

Further provisions stipulate that:

  • The organization shall conduct training programs and otherwise "take reasonable steps to communicate periodically and in a practical manner its standards and procedures."
  • The organization will take steps to monitor and evaluate its programs.
  • The organization will have and publicize a system "which may include mechanisms that allow for anonymity or confidentiality, whereby … employees and agents may report or seek guidance… without fear of retaliation."

It's hard to find a real estate firm that does not claim that ethics is its highest priority. Major firms in all regions of the country proclaim their commitment to ethical conduct. And yet none -- that I know of, at least -- have any sort of program like the one described in the Guidelines. Why?

A number of possible answers present themselves, but there is one that deserves special consideration. That is, real estate firms don't conduct their own ethics programs because they believe it is the job of the Realtor® organizations to teach and promote ethical conduct.

This is understandable. For years the national, state, and local Realtor® organizations have represented themselves both to their members and to the public as, so to speak, the guardians of professional morality for the real estate industry. They have, with great sincerity, taken on the tasks of defining, teaching, and enforcing rules of professional ethics for real estate practitioners.

Perhaps this worked once. But it doesn't work now. For one thing, it is a plain, albeit regrettable, fact that the activities and priorities of the Realtor® organizations are far removed from the consciousness of most agents. Second, the mandatory ethical training required by the National Association of REALTORS® is simply too infrequent an occurrence to have a real impact on most members. (Currently, it calls for two and one-half hours of training every two years.) Finally, and of the greatest importance, questions of ethics are widely perceived to be "the Realtor® Board's issues", not those of the agent's firm.

The lesson is clear, and the federal guidelines are right on target. If a company really wants to promote "an organizational culture that encourages ethical conduct", it needs to institute and implement its own ethics program. Certainly, the Realtor® associations may be able to help in this regard. Chapter 8 of the sentencing guidelines provides some excellent structural suggestions for an ethics program, but it does not deal with content. That is where the national, state, and local Realtor® associations could provide useful resources.

The Realtor® organizations can help individual firms to institute ethics programs that will have an impact on their agents; but they can't do it for them.

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Bob Hunt

Bob Hunt is a former director of the National Association of Realtors and is author of Ethics at Work and Real Estate the Ethical Way. A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at

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