Key Takeaways
- Indiana brokers must work under a managing broker who sponsors their license and supervises all activities
- The managing broker is legally responsible for the actions of affiliated brokers
- Indiana license types: Broker (entry-level), Managing Broker (can supervise others), and Broker Company
- Brokers must maintain written supervisory policies and procedures
- All commissions must be paid through the managing broker - never directly to affiliated brokers
Indiana License Types and Broker Supervision
Indiana recognizes several types of real estate licenses with specific requirements and authorities.
License Types
Individual Licenses
| License Type | Authority | Supervision Required |
|---|---|---|
| Salesperson | Must work under broker | Yes - by sponsoring broker |
| Broker | Can operate independently | No - supervises others |
| Managing Broker | Manages brokerage office | Supervises affiliated licensees |
Salesperson
A broker (entry-level) is licensed to perform real estate activities but must work under a managing broker. Affiliated brokers cannot:
- Operate independently
- Receive compensation directly from the public
- Supervise other licensees
- Operate their own real estate company
Broker
A managing broker can operate independently and supervise affiliated brokers. Indiana managing brokers may:
- Operate their own real estate company
- Supervise affiliated brokers
- Collect and distribute commissions
- Operate branch offices
Broker Sponsorship Requirement
Critical Rule: In Indiana, you cannot obtain or maintain a broker license without managing broker sponsorship (unless you are a managing broker yourself).
Sponsorship Process
- Find a broker willing to sponsor you
- Broker submits activation request to IREC
- License becomes active upon approval
- Broker supervises all licensed activities
Without Sponsorship
| Status | Consequence |
|---|---|
| New applicant | Cannot receive license without broker |
| Licensed broker loses managing broker | License goes INACTIVE |
| Inactive status | Cannot perform any licensed activities |
| To reactivate | Must find new sponsoring broker |
Broker Supervision Requirements
Indiana law places significant responsibility on brokers for supervising their affiliated licensees.
Written Policies Required
Brokers must establish and maintain written policies covering:
- Supervision of all licensed activities
- Trust fund handling procedures
- Advertising and marketing guidelines
- Transaction review processes
- Record retention requirements
Broker Responsibilities
| Responsibility | Description |
|---|---|
| Supervision | Ensure affiliated brokers follow all laws and rules |
| Training | Provide guidance on procedures and compliance |
| Review | Review transactions and advertising |
| Trust Funds | Oversee all trust account activity |
| Records | Maintain records for required retention period |
Broker Liability
The broker is responsible for:
- Actions of affiliated brokers acting within scope
- Trust account compliance
- Advertising compliance
- Proper handling of client funds
- Timely response to complaints
Key Point: Even if a managing broker was unaware of an affiliated broker's misconduct, the managing broker can be held responsible if the conduct resulted from inadequate supervision.
Commission Payment Rules
The Cardinal Rule
Affiliated brokers can ONLY receive compensation from their managing broker.
| From | To | Permitted? |
|---|---|---|
| Client | Sponsoring Broker | Yes |
| Broker | Salesperson | Yes |
| Client | Salesperson directly | NO |
| Cooperating Broker | Salesperson directly | NO |
| Other Broker | Salesperson directly | NO |
Consequences of Direct Payment
An affiliated broker who receives compensation directly from anyone other than their managing broker:
- Violates Indiana license law
- Subject to disciplinary action
- May face license suspension or revocation
Transferring Between Brokers
When an affiliated broker changes managing brokers:
- Notify current broker of intent to transfer
- Current broker releases the license
- New broker submits activation to IREC
- Salesperson cannot practice during the gap
- License reactivates when new broker completes process
Important: Any pending transactions should be addressed before transfer.
In Indiana, what happens to a broker's license if their managing broker terminates the relationship?
An Indiana real estate broker (affiliated) may receive commission payment from: