RES exam question on Ethics & Professional Conduct: CEA's Code of Ethics and Professional Client Care
A salesperson discovers mid-way through a transaction that she is related to the seller (her cousin) — a fact she did not disclose at the time of listing. She is acting as the seller's exclusive agent. Under CEA's Code of Ethics and Professional Client Care, what is the CORRECT course of action?
- AShe may continue acting without disclosure because the relationship is collateral (cousin, not immediate family) and does not constitute a material conflict of interest under CEA guidelines
- BShe must immediately disclose the relationship in writing to the buyer, her client's counterparty, so that the buyer can negotiate with the seller on equal terms
- CShe must immediately withdraw from the transaction and refer the seller to another agency without disclosing the reason, to avoid embarrassment to either party
- DShe must disclose the relationship in writing to her seller-client once she becomes aware of it, obtain the client's informed written consent to continue, and report it to her KEO
Show answer & explanation
Answer
D. She must disclose the relationship in writing to her seller-client once she becomes aware of it, obtain the client's informed written consent to continue, and report it to her KEO
Explanation
The CEA Code of Ethics requires salespersons to disclose any actual or potential conflict of interest to their client promptly and in writing. A familial relationship with the client (even a cousin) is a material personal interest that could — consciously or not — compromise the salesperson's independent professional judgment in negotiating or advising. The correct steps are: (1) Disclose the relationship to the seller-client (her principal) in writing immediately upon discovery; (2) Obtain the client's informed written consent to continue the engagement; (3) Notify her KEO (who is responsible for supervising all estate agency activities and managing conflicts within the agency). She does not need to disclose the relationship to the buyer — her fiduciary duty runs to the seller, and the disclosure obligation to the buyer is limited to avoiding active deception, not revealing the agent's personal relationships. Withdrawal is an option only if the client does not consent to continuation after disclosure.
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