13.5 The TREC Canons of Professional Ethics & Conduct

13.5 The TREC Canons of Professional Ethics & Conduct

Exam Focus: Section 13.4 covered the NAR Code of Ethics — a private trade association code. The Texas state law outline tests something different under Standards of Conduct: Professional Ethics and Conduct means the Canons of Professional Ethics and Conduct adopted by TREC in 22 TAC Chapter 531. Standards of Conduct carries 9 of the 50 scored state items, so this is a high-weight area, and candidates who studied only the NAR Code will answer these items wrong.

1. Canons vs. Code: The Distinction That Drives the Items

The single most testable consequence: a Texas license holder who belongs to no association is fully subject to the Canons. Conversely, an association expelling a member does not touch that member's TREC license. Two different systems, two different sanctions.

Chapter 531 contains seven sections: § 531.1 Definitions, § 531.2 Fidelity, § 531.3 Integrity, § 531.4 Competency, § 531.18 Consumer Information, § 531.19 Discriminatory Practices, and § 531.20 Information About Brokerage Services. The first four are the "Canons" proper; the last three are conduct rules housed in the same chapter.

Note the numbering trap: the three core Canons are 531.2, 531.3, and 531.4 — not 531.1, 531.2, and 531.3. Section 531.1 is the definitions section.

2. § 531.2 — Fidelity

The rule opens by fixing status: "A license holder, while acting as an agent for another, is a fiduciary." From that status it imposes three specific obligations:

1. Primary duty and transparency of role. The primary duty of the license holder is to represent the interests of the client, and the license holder's position "should be clear to all parties concerned in a real estate transaction." However, in performing duties to the client, the license holder shall treat other parties to a transaction fairly.
2. Faithfulness to trust. The license holder must be faithful and observant to trust placed in the license holder, and be "scrupulous and meticulous" in performing the license holder's functions.
3. No self-dealing. The license holder "shall place no personal interest above that of the client."

How Fidelity Is Actually Tested

• The dual obligation. Fidelity is not "loyalty at any cost." The same Canon that demands primary loyalty to the client demands fair treatment of the other party. A fact pattern where an agent misleads the unrepresented buyer "to protect my seller" violates § 531.2, not just § 531.3.
• Clarity of role is the textual hook for the IABS and the § 1101.558 representation disclosure: the licensee's position must be clear to all parties, which is why disclosure of who you represent happens at first contact.
• No personal interest above the client's is the Canon behind the net listing restriction (Rule 535.16(b)), the § 535.144 requirement to disclose in writing when acting on your own behalf or for a relative, and the prohibition on steering a client to a service provider from whom the licensee expects compensation without disclosure.
• Intermediary practice sits on top of this Canon. A broker acting as intermediary must not act so as to favor one principal over the other — the statutory expression of "no personal interest above the client's" applied to two clients at once.

3. § 531.3 — Integrity

The rule is a single sentence and is worth memorizing close to verbatim:

A license holder has a special obligation to exercise integrity in the discharge of the license holder's responsibilities, including employment of prudence and caution so as to avoid misrepresentation, in any way, by acts of commission or omission.

• "By acts of commission or omission" is the operative phrase. Saying something false violates the Canon; staying silent where a material fact should be spoken violates it equally. This is the ethics-rule counterpart to the disclosure duties in Section 9.4.
• "Prudence and caution" imposes a standard of care, not merely a bar on lying. A licensee who repeats an unverified square footage from an old MLS sheet has not exercised prudence and caution, even without intent to deceive.
• Integrity is the Canon most often paired with TRELA § 1101.652(b)(3) (making a material misrepresentation) and (b)(4) (failing to disclose a material fact) in a disciplinary order.

4. § 531.4 — Competency

Section 531.4 establishes that it is the obligation of a license holder "to be knowledgeable and competent as a real estate brokerage practitioner," and then specifies four requirements. The license holder must:

1. Be informed on local market issues and conditions affecting real estate in the geographic area where the license holder provides services to a client;
2. Be informed on national, state, and local issues and developments in the real estate industry;
3. Exercise judgment and skill in the performance of brokerage activities; and
4. Be educated in the characteristics involved in the specific type of real estate being brokered for others.

The Broker-Level Reading of Competency

Requirement (4) is the one with teeth for a broker exam. It is the rule behind "practice within your scope of expertise":

• A residential agent taking a first commercial industrial listing without competent assistance is squarely in a § 531.4 problem, regardless of how the transaction turns out.
• A licensee who takes a farm and ranch listing without understanding mineral reservations, surface leases, rollback taxes, or the differences in Form 25-17 is not "educated in the characteristics involved in the specific type of real estate."
• The accepted cure is association with a competent licensee or referral, disclosed to the client — not self-study during the transaction.
• Requirement (2) is why a broker cannot ignore statutory change: a broker still teaching agents the repealed Recovery Trust Account balance thresholds or the pre-2026 experience-point standard is not "informed on state issues and developments."

Competency also constrains the broker's supervision. Rule 535.2(e) permits a broker to delegate supervision only to a person with the required level of experience and expertise; delegating to an unqualified supervisor is a competency failure attributable to the broker.

5. The Companion Rules in Chapter 531

§ 531.18 — Consumer Information

The license holder must provide the Consumer Protection Notice, TREC No. CN 1-5, by:

• displaying it in a readily noticeable location in each place of business the broker maintains; and
• linking to it in a readily noticeable place on the homepage of each business website, labeled either "Texas Real Estate Commission Consumer Protection Notice" (minimum 10-point font) or "TREC Consumer Protection Notice" (minimum 12-point font).
• On social media, the link may sit on the account holder profile or on a separate page reachable through a direct link.

§ 531.19 — Discriminatory Practices

A license holder may not inquire about, respond to, or facilitate inquiries about, or make a disclosure of, an owner, previous or current occupant, potential purchaser, lessor, or potential lessee that indicates or is intended to indicate a preference, limitation, or discrimination based on a protected class. This is the state-rule mirror of the federal Fair Housing Act treated in Section 13.1 — a broker can face both a HUD complaint and a TREC disciplinary action on one set of facts.

§ 531.20 — Information About Brokerage Services

Houses the IABS delivery and website-link requirements analyzed in Section 3.2 and Section 2.3.

6. Enforcement: Why the Canons Have Real Teeth

The Canons are rules of the Commission. Under TRELA § 1101.701, TREC may impose an administrative penalty on a person who violates "this chapter or a rule adopted or order issued by the commission under this chapter," and § 1101.702 caps that penalty at $5,000 per violation. Where the same conduct also breaches the Act itself, § 1101.652(a)(8) and (b)(33) - disregarding or violating the chapter - support suspension or revocation. That produces three consequences worth memorizing:

1. No consumer judgment is required. Unlike a Recovery Trust Account claim, a Canon violation needs no civil suit, no judgment, and no proof of monetary loss.
2. TREC may act on its own motion. The Commission does not need a signed consumer complaint to open an investigation.
3. The broker is exposed through the agent. A complaint filed against a sponsored sales agent is also treated as a complaint against the broker for the purpose of determining the broker's involvement and whether the broker properly supervised — so an agent's Canon violation becomes a supervision question for the broker under Rule 535.2.