Ca Broker Ab2992 Liability

AB 2992 — Broker Liability for Supervised Licensees ## Overview California AB 2992 (effective January 1, 2023) clarified and strengthened the conditions under which a broker may be held civilly liable for the conduct of supervised salespersons and associate brokers. Prior case law created ambiguity about when a broker's supervisory failure exposed them to personal liability versus when liability remained with the salesperson alone. --- ## Core Liability Standard Under AB 2992, a broker is liable for the acts of a supervised licensee when: 1. The broker had actual or constructive knowledge of the conduct or of facts that should have put a reasonable broker on notice. 2. The broker failed to supervise adequately given the nature and risk of the supervised licensee's activities. 3. The harm was a foreseeable consequence of the supervisory failure. Constructive knowledge is critical: if red flags existed (complaints, unusual transaction patterns, unexplained account activity) and the broker ignored them, courts may find constructive knowledge even absent direct awareness. --- ## Exam Focus Areas Supervision defined: Brokers must maintain a written supervision plan, review contracts and correspondence, conduct periodic check-ins, and maintain accessible office policies. AB 2992 reinforced that supervision must be active — not theoretical. Independent contractor status does not shield brokers: Even when a salesperson is treated as an independent contractor for tax purposes, the broker retains full supervisory responsibility under DRE regulations. AB 2992 made explicit that the IC label does not limit broker liability for DRE-required supervision. Written policies required: Brokers must maintain and distribute a written office policy manual addressing advertising, document handling, trust accounts, fair housing compliance, and client communication. Absence of a written policy is evidence of…