# What is a broker of record? A broker of record is the licensed broker answerable for a real estate firm, or the insurance broker a policyholder names by letter. Both, with worked numbers. --- A broker of record is the one broker a regulator, an insurer or a client treats as answerable for a piece of business. The term has two main meanings: in real estate, the broker of record is the licensed individual responsible for a brokerage firm and for everyone licensed under it; in insurance, the broker of record is the broker a policyholder has designated, usually by a signed broker of record letter, to represent them on a policy and to be paid the commission on it. The two meanings share one idea and almost nothing else. In real estate the role comes from licensing law and carries personal regulatory exposure for other people's work. In insurance the role comes mostly from industry practice and contract, and it moves from one broker to another with a single signed page. Rules differ by state, province and country, and the examples below name the jurisdiction each rule belongs to. This article is general information, not legal advice.
10 dayswritten notice, in calendar days, that a Louisiana insurer gives the current producer before a change of producer of record takes effect
2 dayscalendar days a Texas broker or delegated supervisor has to respond to a sponsored sales agent
$1,000expected compensation above which a broker to a US group health plan must disclose it to the plan fiduciary

Louisiana Revised Statutes, Texas Real Estate Commission rules and US Department of Labor guidance, each detailed in the sections below.

## What does broker of record mean in real estate? In real estate, the broker of record is the individual licensed broker whom the regulator holds responsible for a brokerage firm: its compliance with the licence law, the supervision of its agents and the handling of money held for clients. A brokerage is usually a company, and a company cannot sit an exam, supervise a transaction or answer a complaint in person, so the law attaches those duties to a named human being. New Jersey states the idea most directly. Its administrative code describes the broker of record as the authorized broker of a corporation or other entity licensed as a real estate broker, and puts that person in the same position as a broker who runs a sole proprietorship. The rule says every transaction in which the firm takes part as a broker is under the ultimate supervision of that individual, and that the Real Estate Commission will hold the individual responsible for violations of the licence law committed by the firm or by anyone employed by it or licensed through it. Ontario uses the same words. The Real Estate Council of Ontario, which administers the Trust in Real Estate Services Act, 2002, states that the broker of record has a legal obligation to ensure that the brokerage complies with its duties under the legislation, and a specific obligation to ensure the brokerage complies with the province's code of ethics regulation. Two things follow from the definition. First, the broker of record is a role, not a licence level: a firm may employ several people who hold a broker's licence, and only one of them is the broker of record. New Jersey's rule says so explicitly, excluding brokers who are licensed as broker-salespersons. Second, the role belongs to the firm, not to a deal. The broker of record may never meet your client and is still the person the regulator calls when the file goes wrong. ## Is a broker of record the same as a designated broker or a managing broker? A broker of record, a designated broker and a designated officer are the same job under different statutory names: the individual who answers to the regulator for a brokerage firm. A managing broker is often something else, a supervisor inside the firm who works under that individual. The names below were each read in the statute or rule of the jurisdiction. Other states use further variants, so check your own licence law before you use a title on a card or a filing. | Jurisdiction | Name used in the law | Who it is | | --- | --- | --- | | New Jersey | Broker of record | The authorized broker of a corporation or other entity licensed as a broker | | Ontario | Broker of record | The broker obliged to ensure the brokerage complies with the legislation | | Texas | Designated broker | The person responsible for the broker responsibilities of a licensed business entity | | California | Designated officer | The officer of a corporate broker responsible for supervision and control | | Washington | Designated broker | The owner of a sole proprietorship firm, or a person with a controlling interest designated by the entity | | Illinois | Designated managing broker | A managing broker with supervisory responsibility for one or more offices, appointed by the sponsoring broker | Washington shows why the titles cannot be swapped freely. Its statute defines three levels: a broker, who works for a firm under supervision; a managing broker, who works under the designated broker and may supervise others; and the designated broker at the top. Washington also requires the designated broker of an entity to hold a controlling interest in the firm, which is a condition not found in the Texas or New Jersey rules cited here. The difference between a broker and an agent, and the licences each needs, are subjects of their own. For this article the short version is enough: an agent or salesperson may act only under a broker, and the broker of record is the broker at the top of that chain. ## What is a broker of record responsible for? A broker of record is responsible for three things: that the firm follows the licence law, that the people licensed under the firm are supervised, and that money belonging to others is kept and paid out properly. The detail varies, and Texas publishes one of the most precise lists. Under the Texas Real Estate Commission's broker responsibility rule, a broker is responsible for the authorized acts of the broker's sales agents, although the rule does not require the broker to supervise each agent directly. Where the broker is a business entity, the rule says the designated broker is the person responsible. That person must keep written policies and procedures current, and the rule lists what they must cover: the scope of each agent's authority, competence, active licensing, compensation, notice of changes in the law, education, advertising, trust accounts and records. The same Texas rule sets measurable duties: - respond to sponsored sales agents within two calendar days; - deliver mail and correspondence from the Commission to agents within three calendar days of receipt; - keep records for at least four years from the closing, the termination of the contract or the end of the transaction; - put any delegation of supervision in writing, and report to the Commission within 30 days a delegation that has lasted or is expected to last more than three consecutive months; - make any licence holder who leads or manages a team a delegated supervisor. A broker may delegate tasks under that rule, but not the overall responsibility. That is the working definition of the role everywhere: the tasks can be shared, the accountability cannot. Money held for others is the second pillar. New Jersey's rule requires the individual broker to make sure a separate account is kept for the funds of others, and that none of those funds is disbursed or used without the broker's express authorization and knowledge. In California, where a corporation holds the broker licence, the Business and Professions Code makes the designated officer responsible for the supervision and control of the activities conducted on behalf of the corporation, including the supervision of salespersons licensed to it. ## How far does the broker of record's liability go? A broker of record's exposure is regulatory first: the regulator can discipline the individual for a breach committed by someone else in the firm. Civil liability to a client is a separate question, decided by agency law, the firm's contracts and the facts of the supervision. The regulatory side is written into the rules already quoted. New Jersey's Commission holds the individual broker responsible for violations by anyone employed by or licensed through the firm, wherever those licensees act in pursuit of the brokerage business. Texas goes one step further than an agent's authorized scope: its rule makes the broker responsible for activities the broker permits beyond that scope. Three practical points follow for anyone offered the role. - The role is personal. A broker of record who lends a licence to a firm they do not actually oversee carries the same responsibility as one who is in the office every day. - The written policy is the defence. Rules such as the Texas one are built around documented procedures, so a broker of record who can show the policy, the training record and the review of the file is in a different position from one who cannot. - Leaving the role is a filing, not a handshake. Until the change is reported under the procedure of that jurisdiction, the outgoing broker may still be the name on the record. ## How does commission flow through the broker of record? In real estate, commission is paid to the brokerage, not to the agent who did the work, and it reaches the agent only through the broker. The broker of record is the person responsible for that flow being lawful. Two statutes show the rule. In California, the Business and Professions Code says no real estate salesperson shall accept compensation for activity requiring a licence from any person other than the broker under whom they are licensed, and that a salesperson may pay compensation to another licensee only through that broker. In Texas, the Commission's rule requires that any compensation paid to a sales agent for licensed services goes through the sponsoring broker or is paid with the sponsoring broker's written consent. A client who writes a cheque to the agent personally has paid the wrong party under both rules, however good the intention. A worked example shows the order. The figures are illustrative, not market rates: a sale at $640,000, a listing-side commission of 2.5%, a referral fee of 25% owed to a brokerage in another city that sent the seller, an agent split of 70/30 and a flat transaction fee of $350 charged by the firm to the agent.
One listing-side commission, from closing to the agentIllustrative: $640,000 sale, 2.5% commission, 25% referral, 70/30 split, $350 transaction fee
  1. The commission is paid to the brokerageAt closing, 2.5% of $640,000, which is $16,000, is paid to the firm. The listing agreement was signed in the firm's name, so the firm is the creditor.
  2. The referral fee leaves, brokerage to brokerage25% of $16,000, which is $4,000, goes to the referring brokerage, not to the referring agent. That agent is paid by their own broker. $12,000 remains.
  3. The split is appliedThe agent's 70% of $12,000 is $8,400 and the firm's 30% is $3,600.
  4. The firm's fee is deductedThe $350 transaction fee comes off the agent's share: the agent receives $8,050 and the firm keeps $3,950.
  5. The file is closed and keptThe firm records who was paid what. $4,000, $8,050 and $3,950 add up to the $16,000 received.
Every payment in that sequence starts or ends at a brokerage, so one firm's books show the whole commission, and the broker of record is the person who must be able to open those books. How splits and referral percentages are negotiated is a separate subject; what matters here is who authorizes the movement. ## What does broker of record mean in insurance? In insurance, the broker of record is the broker a policyholder has designated to represent them with an insurer on a given policy, and the broker the insurer pays commission to on that policy. Some states and many carriers say agent of record or producer of record for the same thing. Unlike the real estate role, this one is not usually created by a licensing statute. The New York Department of Financial Services, in an opinion of its Office of General Counsel issued in 2006, described a broker of record letter as a written statement signed by an insured telling an insurer that a particular broker will act as the insured's representative, and said in terms that such a letter is not a creation of statute or regulation but a practice developed by the insurance industry. The same opinion noted that New York has no laws or regulations on the procedure for such letters, and that questions such as notice to the former broker depend on the agreements between broker and insured and between broker and insurer. The broker of record on a policy is the party the insurer deals with: it receives the policy documents, renewal terms and loss information the insured is entitled to share, it negotiates on the insured's behalf, and it is the name on the commission statement. The insured stays the policyholder throughout. Naming a different broker of record does not, by itself, change the insurer, the coverage or the premium. Licensing still frames the role. The Producer Licensing Model Act of the National Association of Insurance Commissioners, which states adopt in their own versions, provides that an insurer or producer may not pay a commission to a person who is required to be licensed and is not, and that such a person may not accept it. A broker of record letter in favour of someone who cannot be licensed or appointed for that line of business therefore achieves nothing. ## What does a broker of record letter change, and when? A broker of record letter changes who represents the insured before the insurer and who is paid commission, from the date the insurer gives it effect. It does not rewrite the policy. The date and the commission consequences depend on the state and on the carrier's contracts. A letter normally carries six things: the insured's legal name as it appears on the policy, the insurer, the policy number and line of coverage, the name of the broker being appointed, the date from which the appointment applies, and the signature of someone with authority to bind the insured, on the insured's letterhead. A letter that does not identify the policy, or whose signatory the insurer cannot tie to the insured, invites a query and a delay. Louisiana is one of the states that has put the procedure into statute, in its Revised Statutes on producers of record, and it shows what a complete rule looks like. - An insurer writing property, casualty, accident, health or bond coverage must honour the producer of record that the owner or first-named insured selects in writing. - For a change requested during the policy term, the insurer must give the existing producer written notice ten calendar days in advance of the change. A request made in the last ten days of the policy period still requires the notice, and the change then takes effect at the inception of the renewal policy. - A letter given on a new application entitles the new producer to a quote from the insurer, whatever other quotes are pending. - The insurer is not required to do business with a producer it has not appointed or otherwise qualified. - The rule does not apply to a producer who is an employee of the insurer or who represents only one insurer or one group of affiliated insurers. The notice gives the incumbent producer time to speak to the client before the change is final. Whether such an interval exists, and how long it is, is set by state law where there is one and by the carrier's own procedure where there is not, so ask the carrier before you promise a client a date. For brokers to employer health plans in the United States, a change of broker of record also triggers a federal disclosure. Under a provision added to the Employee Retirement Income Security Act by the Consolidated Appropriations Act, 2021, a person providing brokerage or consulting services to a group health plan who reasonably expects $1,000 or more in direct or indirect compensation must disclose that compensation to the responsible plan fiduciary. The Department of Labor's Field Assistance Bulletin 2021-03 says the disclosure is generally due reasonably in advance of the contract or arrangement being entered into, and that the rule covers insured and self-insured plans alike. ## Who earns the commission after a broker of record change? After a broker of record change, the commission already earned and the commission still to come are divided by state law where one exists and otherwise by contract; there is no single rule. Louisiana's statute and New York's case law give two clear reference points. Louisiana separates two families of business. Commission on property, casualty and bond policies is paid to the producer of record at the inception of the policy for the full policy term; on a policy longer than one year or continuous until cancelled, it passes to the new producer from the anniversary rating date. Commission on accident, health or benefits business is paid to the current producer of record and changes whenever the producer of record changes. New York has no statutory rule. The Department of Financial Services opinion cited above reports the position in New York case law: absent an agreement to the contrary, a licensed broker earns its commission when it brings about the relationship of insurer and insured. Everything else is left to the broker's agreements with the insurer and with the insured, which the Department does not regulate. Two illustrative policies show how far the outcomes diverge. The first is a commercial property policy with a $48,000 annual premium and a 12% commission, which is $5,760 for the term, or $480 a month. The insured signs a broker of record letter that takes effect after eight months. The second is an employer's group health plan with a $30,000 monthly premium and a 4% commission, which is $1,200 a month or $14,400 over twelve months, where the change takes effect after five months. | Case | Outgoing broker | Incoming broker | | --- | --- | --- | | Property policy, commission stays with the producer at inception for the full term (the Louisiana rule) | $5,760 | $0 until renewal | | Property policy, commission follows the change by contract, pro rata | $3,840 for 8 months | $1,920 for 4 months | | Group health plan, commission follows the producer of record (the Louisiana rule for health and benefits) | $6,000 for 5 months | $8,400 for 7 months | On the property policy, the same letter on the same date is worth nothing or $1,920 to the incoming broker in the remaining term, depending only on which rule governs. In the first case the incoming broker services the account for four months unpaid and is paid from renewal. Both brokers should read the carrier agreement before acting on a mid-term letter. ## How do the two meanings compare? The real estate broker of record and the insurance broker of record differ on who appoints them, what they answer for and how the role ends. Set side by side, they are two different jobs under one name. | Criterion | Real estate | Insurance | | --- | --- | --- | | Who designates | The brokerage firm, on its licence | The policyholder, policy by policy | | Source of the role | Licensing statute and regulator's rules | Industry practice and contract, with statutes in some states | | Answerable for | The firm's compliance, its agents and client funds | Representing one insured on one policy | | Commission | Paid to the firm, then to agents through the broker | Paid by the insurer to the broker on record | | How it changes | A filing with the regulator | A signed letter accepted by the insurer | ## What should you check before becoming, or changing, the broker of record? Before taking on either role, check what you will answer for, what you will be paid for, and from what date. The questions differ by side. If you are asked to become the broker of record of a real estate firm: 1. Read the rule of your jurisdiction that defines the role, and note any ownership condition, such as Washington's controlling interest. 2. Review the firm's written policies against your regulator's list, if it publishes one. 3. Inspect the accounts holding client money and confirm who can authorize a disbursement. 4. Get the list of every person licensed through the firm, team leaders included. 5. Agree in writing how the firm will file your replacement if you leave. If you are an insurance broker receiving a broker of record letter: 1. Confirm you are licensed and appointed with that insurer for that line. 2. Check the letter names the policy, the effective date and a signatory with authority. 3. Ask the carrier for its procedure and any notice interval, and check whether your state has a statute. 4. Read your carrier agreement on mid-term changes, so you know whether you are paid before renewal. 5. If the client is a group health plan in the United States, prepare the compensation disclosure before the arrangement starts. If you are the client signing the letter, one check matters more than the rest: the letter appoints a representative, so read what authority it gives and to which policies it applies before you sign it.