4.2 License Law Violations & Discipline
Key Takeaways
- AREC can investigate complaints, conduct hearings, and impose disciplinary actions
- Violations can result in license denial, suspension, revocation, or fines up to \$1,000 per violation
- Common violations include misrepresentation, commingling, unlicensed activity, and agency violations
- Practicing without a license is a criminal offense in Arkansas (Class A misdemeanor)
- Licensees have due process rights including notice and hearing before disciplinary action
Last updated: January 2026
AREC has authority to investigate complaints and take disciplinary action against licensees who violate the Arkansas Real Estate License Law.
Common Violations
Misrepresentation and Fraud
| Violation | Description |
|---|---|
| Material misrepresentation | False statements about important facts |
| Omission | Failing to disclose known material defects |
| Fraud | Intentional deception for personal gain |
| False advertising | Misleading marketing or claims |
Trust Account Violations
| Violation | Description |
|---|---|
| Commingling | Mixing client and broker funds |
| Conversion | Using client funds without authorization |
| Failure to deposit | Not depositing funds timely |
| Poor records | Inadequate documentation |
Agency and Disclosure Violations
| Violation | Description |
|---|---|
| Agency disclosure violations | Failing to provide required disclosures |
| Undisclosed dual agency | Acting for both parties without consent |
| Breach of fiduciary duty | Violating duties to clients |
| Undisclosed interest | Failing to disclose personal interest |
Unlicensed Activity
| Violation | Description |
|---|---|
| Practicing without license | Performing activities requiring a license |
| Practicing on expired license | Continuing to work after expiration |
| Paying unlicensed persons | Compensating unlicensed individuals for licensed activities |
Warning: Practicing real estate without a license is a Class A misdemeanor in Arkansas, punishable by fines up to $2,500 and/or up to 1 year in jail.
Disciplinary Process
Investigation
- Complaint filed with AREC (or AREC initiates investigation)
- Investigation conducted by AREC staff
- Evidence gathered (documents, interviews, audits)
- Determination made whether to proceed
Hearing Process
If AREC proceeds with disciplinary action:
| Step | Description |
|---|---|
| Notice | Licensee notified of charges |
| Hearing | Formal hearing before Commission |
| Evidence | Both sides present evidence |
| Decision | Commission issues written decision |
| Appeal | Licensee may appeal to circuit court |
Due Process Rights
Licensees have the right to:
- Notice of charges
- Hearing before adverse action
- Representation by attorney
- Present evidence and witnesses
- Appeal unfavorable decisions
Disciplinary Actions
AREC may impose various sanctions:
| Action | Description |
|---|---|
| Denial | Refuse to issue license |
| Suspension | Temporary loss of license |
| Revocation | Permanent loss of license |
| Reprimand | Formal warning |
| Fine | Up to $1,000 per violation |
| Probation | Conditional license with restrictions |
| Education | Required additional training |
Factors Considered
| Factor | Impact |
|---|---|
| Severity of violation | More serious = harsher penalty |
| Prior disciplinary history | Repeat violations = stricter |
| Harm to consumers | Consumer damage = more serious |
| Cooperation | Cooperation may reduce penalty |
| Rehabilitation | Remedial steps may help |
Grounds for Discipline
AREC may take action for:
| Grounds | Examples |
|---|---|
| Conviction of felony | Fraud, theft, violent crimes |
| Misrepresentation | False statements in application or practice |
| Violation of License Law | Any provision of Arkansas law |
| Violation of AREC rules | Any Commission regulation |
| Incompetency | Lack of skill or knowledge |
| Dishonest dealing | Fraud, deceit, bad faith |
| Failure to account | Mishandling client funds |
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Test Your Knowledge
What is the maximum fine AREC can impose per violation?
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Test Your Knowledge
What criminal classification is practicing real estate without a license in Arkansas?
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Test Your Knowledge
What rights does an Arkansas licensee have before AREC takes disciplinary action?
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Test Your Knowledge
Which of the following is NOT a disciplinary action AREC can impose?
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