A Maryland salesperson, Frank, represented a seller in a transaction. Without the seller's knowledge, Frank accepted a $2,000 gift card from the buyer's lender in exchange for referring the buyer to that lender. The seller later discovered this and filed a complaint with MREC. Under the Maryland Real Estate Brokers Act and applicable federal law, which of the following most accurately describes the nature and consequence of Frank's conduct?
Correct Answer
A) Frank violated his fiduciary duty to the seller and may also have violated RESPA's prohibition on kickbacks
Frank's acceptance of a $2,000 gift card from the buyer's lender as compensation for a referral constitutes a kickback prohibited under the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2607, which prohibits giving or receiving anything of value in exchange for referrals of settlement service business. Additionally, under the Maryland Real Estate Brokers Act (Md. Code Ann., Bus. Occ. & Prof. § 17-528), Frank's undisclosed acceptance of compensation from a third party while representing the seller is a breach of his fiduciary duty of loyalty. MREC may discipline Frank, and the conduct may also be referred for federal RESPA enforcement.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A tie-in arrangement is an illegal antitrust practice in which a seller conditions the purchase of one product or service on the buyer's agreement to purchase a separate product or service.
A trust account, also called an escrow account, is a separate bank account maintained by a broker to hold funds belonging to others, such as earnest money deposits, security deposits, or other client funds.
Advertising regulations govern how real estate licensees may market properties and services, requiring truthful, non-deceptive advertising that includes proper identification of the brokerage.
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