The Increasing Cost of Misconduct #544
CATEGORY: Legally Speaking
TAGS: BC Financial Services Authority BCFSA Discipline Misconduct Monetary Penalties Real Estate Practice
Prior to September 30, 2016 the Real Estate Service Act (Act) limited monetary penalties for brokerages and licensees to $20,000 and $10,000 respectively. However, as of September 30, 2016, the Legislature amended section 43(2)(ii) of the Act to allow for monetary penalties of up to $500,000 in the case of brokerages and $250,000 in any other case. In previous articles, I wondered when we would start to see the impact of these increased penalty limits. A review of the most recent discipline decisions of the BC Financial Services Authority (BCFSA) (formerly the Real Estate Council of BC) suggests that time is now.
Here is a list of some of these recent decisions revealing significant monetary penalties, suspensions and license cancellations:
- A licensee, by way of consent order, was given a six month suspension with a discipline penalty of $16,268 and enforcement expenses of $1,500.1
- A licensee’s license was cancelled with a prohibition against reapplying for a minimum of two years.2 In addition, the licensee was ordered to pay their clients $17,015 in commissions received and a further $1,500 in enforcement expense.
- A licensee whose licence had already been under suspension for four years was prohibited from re-applying for a new license for an additional year, was required to pay a discipline penalty of $45,000 and $50,000 in enforcement expenses.3
- A licensee had their license cancelled with no ability to reapply for five years, a discipline penalty of $23250 and enforcement expenses of $51,563.4
What can be learned from these decisions?
The enforcement expenses of the last two examples were significantly higher because they went to a full hearing rather than resolution by consent order. In the latter two cases, the Discipline Committee posted written reasons for the sanctions and penalties imposed which provide some insight into how appropriate sanctions and penalties are arrived at.
Although the facts and circumstances of each individual discipline case differ, the BCFSA has published Sanction Guidelines which assist individual Discipline Committees in their deliberations and decisions.
The Sanction Guidelines make it clear that the overriding principle behind licensee discipline is the protection of the public by:
- Discouraging misconduct
- Preventing future misconduct by specific licensees through
- corrective measures
- punitive measure
- Preventing future misconduct by other licensees through example
The Sanction Guidelines also suggest that a Discipline Committee may consider a variety of aggravating and mitigating factors including:
- Licensees age and experience
- Discipline history
- Nature and gravity of misconduct
- did misconduct involve fraud, dishonesty or deception
- vulnerability of affected persons
- was conduct knowingly, recklessly or wilfully blind to rules or standards
- duration or pattern of misconduct (ie. isolated or repeated, pervasive or systemic)
- if and to what extent licensee has obtained or attempted to obtain a financial benefit
- Extent of harm to client or public
- If licensee relied on legal or professional advice
- If the licensee has
- acknowledged and accepted responsibility
- voluntarily taken measures to compensate or mitigate impact on others
Consequences are not just monetary
In addition to the discipline cases cited above, there were several qualification hearings where an applicant must convince the BCFSA that they were “of good reputation and suitable to be licensed.” It is apparent from these decisions that becoming licensed again after a period of cancellation is by no means a certainty. One was refused5, and one was accepted on their second attempt with a series of significant restrictions6 (ie. direct supervision, weekly reporting to their managing broker, prior approval of managing broker before providing some real estate services and quarterly reports from managing broker to BCFSA).
It is apparent from these recent decisions that the cost of misconduct is increasing. Of course, the simplest way of avoiding disciplinary problems and the possibility of significant fines, suspensions or even license cancellation is to know the law, the Act and the Real Estate Rules, to keep abreast of changes to BCFSA guidelines and policies and to always conduct yourself in a manner that is beyond reproach, particularly with vulnerable clients and consumers. In addition, it might be instructive to review the BCFSA discipline decisions as they are released to give you an idea of what conduct is unacceptable and what sanctions and penalties you might expect if you engaged in such conduct. Remember that one of the underlying principles of licensee discipline is so that licensees might learn from the mistakes of others.
Finally, if you are found to have conducted yourself inappropriately, acknowledge and accept responsibility for your actions and hope that BCFSA will choose to address your misconduct through corrective rather than punitive measures.
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