The risks of outside activities: how to make sure your agents and brokers aren’t putting your brokerage at risk

As highlighted in the previous article, brokerage oversight is a foundational expectation under the law. For principal brokers and brokerage leadership, this includes actively supervising agents’ and brokers’ concurrent and outside business activities. These activities, if not properly managed, can introduce conflicts of interest, supervisory gaps and consumer harm that ultimately expose the brokerage to regulatory risk and potential contraventions under MBLAA.

Principal brokers are expected to take reasonable steps to ensure that any outside business activity performed by its agents or brokers does not jeopardize the integrity of the brokerage’s business. This includes personal lending by brokers or agents, operating personal mortgage administration businesses separate from the brokerage, mortgage advisory services, credit counseling, or other “side gigs” that may intersect, even tangentially, with mortgage transactions or clients.

Effective oversight begins with clear policies that define what types of concurrent business activities are permitted by brokerages for their agents and brokers and which are not. Just as important are documented procedures that describe how individuals are required to notify the brokerage of outside activities and how those activities are assessed, approved or restricted.

However, policies alone are not sufficient. Compliance review processes should incorporate controls designed to identify, disclose, and manage conflicts which may arise from concurrent business activities.

Where a transaction involves a broker or agent with a personal interest or a related outside role, the brokerage should ensure that this relationship is clearly disclosed and that risks are mitigated. This may include enhanced due diligence, independent reviews, or additional documentation to demonstrate that the transaction is suitable and keeps the clients’ interests top of mind. The goal is not simply disclosure, but meaningful mitigation of risk.

Ongoing oversight also matters. FSRA expects brokerages to periodically validate that approved concurrent business activities continue to operate within established limits. This can take many forms. Some brokerages use annual attestations to reconfirm outside activities.

Others apply risk-based spot checks, focusing on riskier transactions such as private lending, related-party arrangements, or repeat transactions involving the same individuals. These measures help ensure that activities approved at one point in time have not evolved into something materially different that may increase risks for the brokerage and for clients.

Recent enforcement actions illustrate the consequences of weak supervision when concurrent business activities are not properly monitored. While each case depends on its facts, deficiencies often stem from the same root causes: insufficient policies, lack of visibility into outside activities, and inadequate follow-up once risks emerge.

Remember that from a regulatory perspective, responsibility for supervision ultimately rests with the brokerage. Supervision must be proactive, ongoing and risk based. Brokerage policies, approval processes, and periodic follow-up are essential tools to prevent small oversight gaps from becoming significant regulatory issues.