Key Takeaways
- SDREC can investigate complaints, conduct hearings, and impose disciplinary actions
- Violations can result in license denial, suspension, revocation, or fines
- Common violations include misrepresentation, trust account violations, unlicensed activity, and disclosure failures
- Practicing without a license is a serious offense in South Dakota
- Licensees have due process rights including notice and hearing before disciplinary action
License Law Violations & Discipline
SDREC has authority to investigate complaints and take disciplinary action against licensees who violate the South Dakota Real Estate Licensing Act (SDCL 36-21A).
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 |
| Failure to reconcile | Not performing monthly three-way reconciliation |
| Failure to notify SDREC | Not reporting account changes |
Agency and Disclosure Violations
| Violation | Description |
|---|---|
| Disclosure failures | Failing to provide required property disclosures |
| Undisclosed limited agency | Acting for both parties without written 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 serious offense in South Dakota.
Disciplinary Process
Investigation
- Complaint filed with SDREC (or SDREC initiates investigation)
- Investigation conducted by SDREC staff
- Evidence gathered (documents, interviews, audits)
- Determination made whether to proceed
Hearing Process
If SDREC 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 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
SDREC 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 | Monetary penalty |
| 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 |
State Exam Content Areas
The South Dakota state portion of the exam tests three primary areas:
Exam Content Distribution
| Content Area | Percentage |
|---|---|
| Statutes Governing Licensee Activities | 80% |
| Commission Duties and Powers | ~10% |
| Licensing Requirements | ~10% |
Exam Tip: 80% of your state exam score comes from questions about statutes governing licensee activities. Focus your study on license law, agency, disclosures, and trust accounts.
Grounds for License Denial
SDREC may deny a license application for:
| Ground | Description |
|---|---|
| Criminal conviction | Crimes affecting fitness |
| Fraud on application | False statements or omissions |
| Previous revocation | License revoked in any jurisdiction |
| Incompetence | Demonstrated lack of ability |
| Untrustworthiness | Pattern of dishonest conduct |
Reinstatement After Revocation
| Requirement | Details |
|---|---|
| Waiting period | May vary based on violation |
| Application | Must reapply to SDREC |
| Education | May need to complete education again |
| Examination | May need to retake exam |
| Background check | New background check required |
Reporting Requirements
Licensees must report certain events to SDREC:
| Event | Reporting Requirement |
|---|---|
| Criminal conviction | Report to SDREC |
| Disciplinary action in another state | Report to SDREC |
| Trust account changes | Written notification |
| Address changes | Update with SDREC |
What percentage of the South Dakota state exam focuses on statutes governing licensee activities?
Which of the following is a trust account violation in South Dakota?
What rights does a South Dakota licensee have before SDREC takes disciplinary action?
Which action can SDREC NOT impose as a disciplinary measure?
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