1.3 Indiana License Types and Broker Supervision

The Two Individual Tiers

Forget the salesperson/broker/broker-of-record ladder from the national course. Indiana uses just two individual tiers plus an entity license:

An affiliated broker (an entry-level broker working under a managing broker) cannot:

• Operate independently or open a brokerage
• Hold an escrow/trust account
• Be paid directly by the public
• Supervise other licensees

A managing broker may operate a company, run branch offices, hold trust funds, and collect and distribute commissions to affiliated brokers.

Sponsorship: The Activation Switch

In Indiana a broker license has no value until a managing broker flips the activation switch.

1. The applicant finds a managing broker willing to sponsor
2. The managing broker submits the activation request to IREC/PLA
3. The license becomes active upon approval
4. The managing broker supervises every licensed act

What happens when the relationship ends is heavily tested:

Exam Tip: Termination does not revoke or suspend the license — those are disciplinary outcomes. It simply renders the license inactive. The broker keeps the license but cannot practice until re-sponsored. Distractors that say "automatically revoked" or "can work independently for 90 days" are wrong.

Supervisory Duties of the Managing Broker

Indiana law makes the managing broker the compliance backbone of the firm. The managing broker must establish and maintain written policies covering:

• Supervision of all licensed activities
• Trust/escrow fund handling and reconciliation
• Advertising and marketing review (including team and social media ads)
• Transaction file review and document retention
• Complaint handling and reporting

Day-to-day responsibilities map onto those policies:

Liability: Inadequate Supervision

Key Point: Even if a managing broker did not know about an affiliated broker's misconduct, the managing broker can be disciplined when the misconduct flowed from inadequate supervision. "I didn't know" is not a defense if the policies and oversight were missing.

Worked scenario: An affiliated broker commingles an earnest-money deposit into their personal account. The managing broker never trained staff on escrow handling and never reconciled the account. IREC can discipline both — the affiliated broker for the act, the managing broker for failed supervision.

The Cardinal Commission Rule

Affiliated brokers may be compensated only by their own managing broker. Trace the money in any fact pattern:

An affiliated broker who pockets a check directly from a client or co-op broker violates the License Law and faces discipline up to revocation. Commission splits, referral fees, and bonuses must all route through the managing broker.

Transferring Between Firms

When an affiliated broker moves to a new managing broker:

1. Notify the current managing broker of intent to transfer
2. The current managing broker releases the license
3. The new managing broker submits the activation to IREC
4. The broker cannot practice during the gap
5. The license reactivates when the new sponsorship is approved

Important: Pending listings and contracts belong to the firm, not the departing broker. Resolve commission entitlements on open transactions before transferring, because the new firm cannot claim work performed under the old sponsorship.

The Broker Company License

An Indiana brokerage that operates as a corporation, LLC, or partnership holds a separate company (entity) license. The exam tests the linkage between the entity and an individual managing broker:

Exam Tip: A company cannot operate without a managing broker of record. If the only managing broker dies or resigns, the firm cannot lawfully conduct brokerage until a qualified managing broker is designated. Answer choices implying affiliated brokers can keep the office running alone are wrong.

Advertising Supervision in Practice

Advertising is one of the most frequently disciplined areas, and supervision of it falls squarely on the managing broker. Indiana rules require that:

• All advertising identifies the brokerage firm, not just the individual broker.
• An affiliated broker may not advertise property in their own name as if independent.
• Team names and social media posts are advertising and must include the firm.
• The managing broker must review and approve advertising policy and content.

Worked scenario: An affiliated broker runs a Facebook ad listing a home with only their personal cell number and no firm name. This is a violation, and because the managing broker's policies failed to catch it, IREC can cite both. Always tie advertising compliance back to the supervising managing broker.

Why Supervision Is Centralized

Indiana funnels authority, money, and liability through the managing broker for a reason: it gives consumers a single accountable party and a deep-pocket supervisor who must maintain escrow controls and records. When you see a fact pattern about misconduct, ask two questions — what did the affiliated broker do, and did the managing broker's supervision and written policies prevent or enable it? That dual lens is the key to the supervision questions on the state portion.