When a licensee pays or receives a referral fee, what must be done?

When a licensee pays or receives a referral fee, what must be done?

• A. Be transparent about referral fees, follow fair dealing practices, and disclose terms to clients as applicable.
• B. Hide referral fees from clients.
• C. Refer only within your brokerage without disclosure.
• D. Referral fees are not allowed.

Answer: (A)

Transparency about referral fees and fair dealing in client representation are essential. When a licensee pays or receives a referral fee, there is potential for a conflict of interest, so clients must be informed about the fee arrangement and how it affects the service provided. Disclosing the existence and terms of the referral helps the client understand any incentives behind recommendations and allows informed decisions. The disclosure should occur as applicable, often in writing or as part of the client agreement, so the client has clear guidance on any financial relationships involved. Hiding referral fees or avoiding disclosure undermines trust and ethical duties; acknowledging that referral fees exist is not the issue—the important part is being open about them so the client remains fully informed.

Transparency about referral fees and fair dealing in client representation are essential. When a licensee pays or receives a referral fee, there is potential for a conflict of interest, so clients must be informed about the fee arrangement and how it affects the service provided. Disclosing the existence and terms of the referral helps the client understand any incentives behind recommendations and allows informed decisions. The disclosure should occur as applicable, often in writing or as part of the client agreement, so the client has clear guidance on any financial relationships involved. Hiding referral fees or avoiding disclosure undermines trust and ethical duties; acknowledging that referral fees exist is not the issue—the important part is being open about them so the client remains fully informed.