Texas Real Estate Standards of Conduct and Discipline

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Texas standards of conduct is where the exam asks:

Would a competent, honest Texas license holder do this?

That sounds simple. It is not always simple in a fact pattern.

A sales agent knows the seller will reject a low offer and decides not to present it. A broker holds earnest money in the wrong account. A license holder advertises a ranking without objective criteria. A sales agent writes a custom legal clause for a buyer. A license holder buys property for themselves and forgets to disclose license status. A license holder accepts a referral fee from a title company or other settlement-service provider.

Those are standards of conduct questions.

They are not just morality questions. They are license-law questions.

The best way to study this topic is to organize it into three layers:

Character -> conduct -> consequence

Character means honesty, trustworthiness, integrity, fidelity, competence, and fair dealing.

Conduct means what the license holder actually does: disclose, respond, supervise, present information, handle money, advertise, fill forms, receive compensation, and avoid legal advice.

Consequence means the conduct can lead to TREC discipline if it violates TRELA or TREC rules.

That is the entire article in one sentence:

Texas conduct questions test whether the license holder acted honestly, competently, and within the limits of license law.

What the Texas Real Estate Exam Is Testing

Pearson VUE's current Texas Sales Agent state-law outline assigns 9 of the 40 scored state-law items to Standards of Conduct. It does not publish an item count or cognitive split within the seven rows.

The section overlaps with several other state-law areas:

• TREC authority.
• TRELA.
• Complaints and investigations.
• Broker supervision.
• Trust money.
• Unlicensed activity.
• Agency disclosure.
• IABS.
• Intermediary practice.
• TREC forms.
• Seller disclosure.
• Advertising names.
• Compensation.

The exam can test this as a direct rule:

A broker or sales agent must respond to a party within what time?

It can also test it as judgment:

A license holder receives information that would affect the seller's decision but decides not to mention it because the offer is inconvenient.

The second question is harder because it asks you to apply the rule, not repeat it.

The Conduct Map

Use this table as your mental map.

If a question feels confusing, identify the conduct area first.

A. Professional Ethics and Conduct

Fidelity

TREC's Canons of Professional Ethics and Conduct state that a license holder acting as an agent for another is a fiduciary.

For exam purposes, fiduciary means more than "be nice."

It means the license holder's primary duty is to represent the client's interests, while still treating other parties fairly.

The exam version:

Represent the client loyally, but do not lie, hide material facts, or mislead other parties.

TREC's fidelity rule also says a license holder should be faithful to the trust placed in the license holder and place no personal interest above the client's interest.

That creates several exam traps.

Trap: personal interest over client interest

A listing agent wants a quick closing because the agent needs commission income. A lower offer is easier and cleaner than a higher offer with more contingencies. The agent quietly discourages the seller from looking at the higher offer.

The issue is not just strategy.

The issue is fidelity.

The agent cannot put personal convenience above the principal's interest.

Trap: client loyalty as permission to be dishonest

A buyer's agent wants to help the buyer get a good deal, so the agent says something false about the seller's property condition.

The issue is not "strong representation."

It is dishonesty.

Fidelity to a client does not authorize unfair or dishonest treatment of others.

Integrity

TREC's integrity rule says a license holder has a special obligation to exercise integrity, including prudence and caution to avoid misrepresentation by acts of commission or omission.

That phrase matters.

Misrepresentation can happen two ways:

The exam likes omissions because they feel less obvious.

Example:

The license holder knows about a drainage problem but avoids mentioning it because the buyer did not ask the exact right question.

That is not safe exam logic.

When a known fact is material, the question is not whether someone said the perfect magic words. The question is whether the license holder handled the information honestly and properly.

Integrity also connects to:

• False promises.
• Exaggerated claims.
• Selective facts.
• Fake urgency.
• Misleading advertising.
• Concealing license status.
• Hiding compensation.
• Omitting facts from applications or renewals.

The safest answer usually tells the truth early, clearly, and within the license holder's role.

Competency

TREC's competency canon says a license holder must be knowledgeable and competent as a real estate brokerage practitioner.

The rule expects the license holder to be informed about:

• Local market issues and conditions where the license holder provides services.
• National, state, and local real estate industry issues and developments.
• Judgment and skill in brokerage activities.
• The characteristics of the specific type of real estate being brokered.

The exam may test competency in a quiet way.

Example:

A residential agent with no farm-and-ranch experience agrees to advise a buyer on water rights, mineral issues, agricultural exemptions, and access without broker guidance or outside help.

The problem is not that a license holder can never learn a new area.

The problem is pretending to be competent without the needed knowledge, supervision, or professional support.

Competency also connects to broker responsibility. TREC's broker responsibility rule says brokers must maintain written policies and procedures to ensure sponsored sales agents are competent for authorized activities, including geographic market competence, and must provide coaching and assistance when a sales agent performs a type of brokerage activity for the first three times.

Exam translation:

Competence is not optional, and broker supervision matters.

Applying the Canons to Honesty and Fair Dealing

TREC Rule 535.156 says a license holder must put the principal's interest above the license holder's own interest. It also says the license holder must deal honestly and fairly with all parties, while representing only the principal and owing fidelity to that principal.

This is one of the most important Texas exam rules.

It separates loyalty from dishonesty.

A license holder can advocate for a client.

A license holder cannot lie for a client.

A license holder can negotiate hard.

A license holder cannot hide known material facts that must be disclosed.

A license holder can protect confidential client information.

A license holder cannot invent facts or mislead the public.

The exam will often give you an answer choice that sounds loyal but is actually dishonest.

Do not pick it.

Applying the Canons to Disclosure Duties

Disclosure is the backbone of this topic.

Texas conduct questions ask what the license holder knew, when the license holder knew it, who needed it, and whether it was disclosed properly.

Significant information to the principal

TREC Rule 535.156 says a license holder has an affirmative duty to keep the principal informed at all times of significant information applicable to the transaction.

That is why offer-presentation questions matter.

If the information would affect the principal's decision, the safe answer usually involves informing the principal unless a specific rule or written instruction changes the duty.

Accurate information to the public

The same rule says a license holder has a duty to convey accurate information to members of the public with whom the license holder deals.

This is why "I only represented the seller" is not a license to mislead the buyer.

License-holder self-interest

TREC Rule 535.144 says a license holder acting on their own behalf, or in certain capacities involving spouse, parent, child, controlled business entity, or trust, must disclose in writing that they are a licensed real estate broker or sales agent before entering into a sale or rental contract. The rule also says the license holder may not use their expertise to the disadvantage of the person they deal with.

Exam translation:

If the license holder is personally on the other side of the deal, disclose license status in writing and do not exploit license expertise.

IABS and consumer notices

TREC Rule 531.20 covers the Information About Brokerage Services notice. It requires the completed IABS at the first substantive communication as required under the statute and explains acceptable delivery methods. It also says a link to the IABS cannot be buried in an email footnote or signature block.

TREC Rule 531.18 covers the Consumer Protection Notice, including display in a broker's place of business and links on business websites.

The exam point is not web-design trivia.

The exam point is:

Texas uses required notices to protect consumers and clarify brokerage relationships.

B. Grounds for Discipline

Grounds for discipline are the behaviors that can trigger TREC enforcement.

TRELA and TREC rules include many specific grounds. For exam prep, organize them by family:

Do not study this as a list of scary words.

Study it as:

What conduct would make TREC question honesty, competence, disclosure, trust money, supervision, or consumer protection?

C. Unauthorized Practice of Law

A Texas license holder must use a form approved for mandatory use when Rule 537.11 applies, subject to the exceptions written into that rule. A license holder may add informational items and explain their meaning without giving legal advice. The license holder may not draft or recommend language affecting legal rights, give legal-effect or title-validity opinions, discourage attorney use, or obtain legal advice for a principal.

Unauthorized practice of law is inside the Standards of Conduct outline.

The testable rule is:

Use the right authorized form and add factual informational items. Do not invent legal language, interpret legal consequences, or give title opinions.

Typical traps:

• Writing a custom clause that changes legal rights.
• Explaining whether a contract is valid or void.
• Advising a party whether to sue.
• Interpreting legal effect of title exceptions.
• Telling a party how probate, divorce, estate, or bankruptcy law applies.
• Changing a promulgated form in a way that requires legal drafting.

Rule 537.11 has a narrow nuance: at a principal's specific written instruction, a license holder may add or strike language if the change is conspicuous. That is not permission to invent the wording or advise on its legal effect.

Safe exam answer:

Use the correct form within license authority and refer legal questions to an attorney.

This is not weakness. It is professionalism.

D. Trust Accounts

A Texas sales agent does not maintain a trust account and must immediately deliver trust money to the sponsoring broker. Unless the principals agree otherwise in writing, the broker must deposit trust money in a trust account or deliver it to an authorized escrow agent not later than the close of business of the second working day after receiving it, and must not commingle it with personal or non-trust money.

Pearson lists trust accounts under Standards of Conduct.

What Rule 535.146 counts as trust money

TREC Rule 535.146 says trust money includes a client's money, earnest money, rent, unearned fees, security deposits, or money held on behalf of another. It says trust money accepted by a broker is held in a fiduciary capacity and must be maintained in a designated broker trust account or delivered to an authorized escrow agent according to the agreement of the principals.

Key exam rules:

• A sales agent does not maintain a trust account.
• Trust money received by a sales agent must be immediately delivered to the sponsoring broker.
• Unless the principals agree otherwise in writing, trust money received by the broker must be deposited in a trust account or delivered to an authorized escrow agent not later than the close of business of the second working day after the broker receives it.
• A broker must not commingle trust money with personal or non-trust money.
• Placing trust money in a broker's personal or operating account can be evidence of commingling.
• Paying operating expenses or making improper withdrawals from a trust account can be evidence of commingling.
• A reasonable broker-owned amount may remain only to cover bank service fees, with detailed records. The rule states no fixed dollar cap.
• Trust-account documentation must be kept for four years.

This is not a minor bookkeeping topic.

Why trust money escalates to discipline

Trust money is one of the fastest ways for a conduct question to become a discipline question.

E. Splitting Fees

Under TRELA §1101.651(a) and TREC Rule 535.147, a broker or sales agent generally may not share a commission or fee with an unlicensed person who performed acts requiring a license. An expected referral for valuable consideration is itself licensed activity under Rule 535.20. Its examples of valuable consideration include money, rent bonuses, discounts, and merchandise worth more than $50.

Pearson lists splitting fees and rebates in the same Standards of Conduct section.

TREC Rule 535.147 says, with exceptions, a broker or sales agent may not share a commission or fee with a person who performs acts requiring a license if that person is not actively licensed as a broker or sales agent.

That means the exam will ask:

Who got paid, what did they do, and were they actively licensed?

One compensation rule belongs here even when the stem never says "fee split": TRELA §1101.651(b) says a sales agent may accept transaction compensation only from the sponsoring broker or the broker who sponsored the agent when it was earned. Rule 535.3 also requires written broker consent for a sales agent to receive or pay valuable consideration, but that consent does not authorize the sales agent to accept client payment directly.

F. Rebates

TREC Rule 535.147 allows a rebate or payment of part of a fee or commission to a party when its conditions are met. For a sales agent, the sponsoring broker and the represented party must give written consent. A payment to a party the license holder does not represent also requires the represented party's written consent. The payment may not mislead a broker, lender, title company, governmental agency, or anyone evaluating the buyer's resources or obligations.

TREC Rule 535.148 covers undisclosed commissions or rebates. A license holder may not receive a commission, rebate, or fee from someone other than the person represented without disclosing the intent to the client and obtaining the client's consent.

Exam translation:

Compensation questions are about license status, broker consent, client consent, disclosure, and whether the payment misleads someone.

Rule 535.148 creates an important separate rule. A license holder may not pay or receive a thing of value to or from another settlement-service provider for a referral, preferred-list placement, or similar arrangement. The rule includes inspectors, lenders, mortgage brokers, title providers, appraisers, attorneys, settlement agents, and other settlement-service providers. Disclosure does not cure that prohibited payment. Market-rate payment for actual goods or services and normal promotional or educational activity not conditioned on referrals are different facts.

Do not answer fee questions from vibes.

Answer them from structure.

G. Advertising

Pearson lists advertising as part of Standards of Conduct.

Core ideas:

• An advertisement must include the license holder or team name placing the ad.
• It must include the broker's name in a readily noticeable way.
• The broker's name must be at least half the size of the largest contact information for any sales agent, associated broker, or team name in the ad.
• A sales agent's ad cannot imply that the sales agent is responsible for operating the brokerage.
• A team name must end in "team" or "group," cannot imply independent brokerage, and must be registered by the broker before use.
• A license holder cannot mislead the public about license status, property status, service-provider compensation, rankings, or involvement in a transaction.

Advertising is really a truthfulness topic.

The question is:

Could a member of the public be misled about who is responsible, who is licensed, what is being offered, or what compensation exists?

If yes, be careful.

Failure To Respond

TREC Rule 535.157 requires a broker or sales agent to respond to the principal, another broker or sales agent representing another party, or an unrepresented party within two calendar days. Weekends and holidays count. TREC says an acknowledgment can satisfy the rule when the full answer is not yet available.

The complaint-processing rule uses a different clock. It defines a reasonable time to respond to a TREC staff request for information as 14 days from receipt.

Keep these separate:

Do not blend them.

Two days is a transaction communication rule.

Fourteen days is the complaint-response context in the TREC rule.

Decision Tree

When a Standards of Conduct question feels messy, use this:

1. Who is the license holder representing?
2. Is the person a client, customer, principal, other license holder, or member of the public?
3. What did the license holder know?
4. What did the license holder say, omit, write, advertise, receive, pay, draft, or hold?
5. Was money, a document, an ad, a legal clause, or a material fact involved?
6. Did the conduct require broker consent, client consent, written disclosure, or attorney involvement?
7. Does the answer protect the client without misleading anyone else?
8. Does the answer keep the license holder inside TREC rules and TRELA?

If you are stuck between two answers, choose the one that is more precise about:

• Authority.
• Timing.
• Disclosure.
• Broker supervision.
• License status.
• Consumer protection.

Worked Examples: TREC Ethics and Conduct

Case 1: The withheld offer

A listing agent receives a low backup offer after the seller has accepted another contract. The seller did not give written instructions to stop submitting offers after acceptance. The agent assumes the seller will not care and does not tell the seller.

The tempting answer:

The agent can decide what the seller wants.

The better answer:

The agent should keep the principal informed of significant transaction information unless a specific rule or written instruction changes the duty.

This is fidelity and disclosure.

Case 2: The custom legal clause

A buyer asks the sales agent to write a clause that changes default remedies if the seller defaults.

The tempting answer:

The agent should draft whatever helps the buyer.

The better answer:

The agent should avoid drafting legal rights and recommend attorney help for legal language.

This is unauthorized practice of law.

Case 3: The side referral fee

A title company offers a license holder a fee for sending buyers to that title company. The license holder does not disclose the fee to the client.

The tempting answer:

The payment is fine if the title company is happy.

The better answer:

A title-company referral fee is a compliance problem, not just a disclosure problem.

TREC Rule 535.148 prohibits a thing of value to or from another settlement-service provider for referrals, preferred-list placement, or similar arrangements. Disclosure does not cure that Texas prohibition. RESPA Section 8 and Regulation X can create a separate federal prohibition for settlement-service referrals involving a federally related mortgage loan.

Case 4: The operating account

A broker receives security deposits and places them in the brokerage operating account, then uses the same account to pay office rent.

The tempting answer:

It is fine if the broker tracks the amount in a spreadsheet.

The better answer:

Trust money must be handled as trust money. Commingling and improper use are serious conduct issues.

This is trust-account discipline.

Common Traps

The safer answer is usually not the most aggressive answer.

It is the answer that protects the client, tells the truth, follows the broker structure, and avoids making the license holder a lawyer.

How To Study This Topic

Use a four-pass method.

Pass 1: Memorize FIC

Write:

Fidelity. Integrity. Competency.

Then add:

Honesty and fair dealing to all parties.

That gives you the ethics core.

Pass 2: Attach the seven Pearson subtopics

Write the outline from memory:

Ethics, discipline, UPL, trust accounts, fee splitting, rebates, advertising.

If you can write that, you know the section.

Pass 3: Drill money, forms, and advertising

These are the easiest to turn into exam questions:

• Earnest money.
• Security deposits.
• Operating account versus trust account.
• Custom contract clauses.
• Referral fees.
• Rebates.
• Broker name in ads.
• Team names.
• License-holder self-interest.

Pass 4: Explain the wrong answer

When you miss one, finish this sentence:

The wrong answer sounded right because...

Maybe it sounded loyal. Maybe it sounded efficient. Maybe it sounded like a real-world shortcut. Maybe it sounded more helpful to the client.

That sentence shows you the trap.

Test Your Understanding

Use the free subtopic checkpoint below after reviewing the checklist. Its questions cover all seven official Standards of Conduct rows and report which row needs more work. The answer choices are designed around plausible rule distinctions, not unrelated distractors.

If you miss a question, explain why the tempting answer fails before moving on. That is where the exam skill develops.

Final Checklist

Before you leave this topic, make sure you can explain each line.

If any line feels fuzzy, this is a good topic for mixed practice. Standards questions rarely stay in one neat bucket.

How This Connects To Other Texas Topics

Standards of conduct connects to:

• Complaints, investigations, hearings, and appeals, because conduct problems can become complaints.
• Penalties, unlicensed activity, and the Recovery Trust Account, because discipline flows from violations.
• Trust accounts, earnest money, and commingling, because trust money is one of the highest-risk conduct areas.
• Splitting fees, rebates, and who may be paid, because compensation rules sit inside Standards of Conduct.
• Unauthorized practice of law, because contract drafting and legal advice are common traps.
• Advertising rules, because misleading ads are conduct issues.
• IABS and agency disclosure, because disclosure is part of public protection.

Use this page as the conduct map, then open the narrower lesson when a rule family needs more work. Standards of Conduct is not an isolated topic. It is the lens the exam uses for honesty, competence, money handling, compensation, advertising, and professional boundaries.

Frequently Asked Questions

Is Standards of Conduct on the Texas real estate exam?

Yes. Pearson's Texas Sales Agent state-law outline gives Standards of Conduct 9 scored items. It includes professional ethics and conduct, grounds for discipline, unauthorized practice of law, trust accounts, splitting fees, rebates, and advertising.

What are the main TREC ethics canons for Texas license holders?

For exam prep, remember fidelity, integrity, and competency. Fidelity means the license holder acting as an agent is a fiduciary. Integrity means avoiding misrepresentation by statement or omission. Competency means being knowledgeable and skilled for the brokerage activity being performed.

Does loyalty to a client allow a Texas license holder to mislead another party?

No. A license holder represents the principal and owes fidelity to the principal, but must still deal honestly and fairly with all parties and convey accurate information to the public.

What are common grounds for discipline?

Common exam families include fraud, misrepresentation, false promise, material omission, negligence, incompetence, failure to disclose, trust-money mishandling, improper compensation, unauthorized practice of law, misleading advertising, and failure to comply with TREC rules or requests.

What is the two-day response rule?

TREC Rule 535.157 says a broker or sales agent must respond to the principal, a broker or sales agent representing another party, or an unrepresented party to a real estate transaction within two calendar days. Weekends and holidays count. TREC explains that an acknowledgment can satisfy the response requirement; the rule does not require the license holder to resolve the issue or force a party's decision within two days.

Can a Texas sales agent maintain a trust account?

No. TREC's trust-money rule says a sales agent shall not maintain a trust account. Trust money received by a sales agent must be immediately delivered to the sponsoring broker.

Can a license holder receive an undisclosed fee or rebate from a service provider?

No. Rule 535.148 prohibits paying or receiving a thing of value to or from another settlement-service provider for referrals, preferred-list placement, or similar arrangements. Disclosure does not cure that prohibition. A different third-party fee may require disclosure and consent when it is not independently prohibited.

Is advertising part of Standards of Conduct?

Yes. Pearson lists advertising under Standards of Conduct. Texas advertising rules test broker name, team name, assumed name, sales-agent identity, property status, service-provider compensation, rankings, and whether an ad misleads the public.

Do I need to memorize every statute number?

Usually no. It is more useful to know the conduct families and the exam triggers. You should recognize the role of TRELA, TREC rules, fiduciary duty, honesty, competence, trust money, compensation, and advertising.

Can I practice Standards of Conduct in the Pass Texas web or mobile app?

Yes. Start in the web app for Texas-focused questions and explanations without installing anything. Use the iPhone, iPad, or Android app when you want the same study option on your phone. The questions are original and are not copied from the live exam. Pass Texas is not affiliated with TREC or Pearson VUE and does not replace the 180-hour qualifying education requirement.

Primary-source verification, September 5, 2026: This article was checked against Pearson VUE Texas Real Estate Content Outlines #094401, effective January 1, 2026; Texas Occupations Code Chapter 1101, including the 2026 amendment to §1101.652; and current TREC Rules in 22 TAC Chapters 531, 535, and 537. The official state-law outline publishes seven Standards of Conduct subtopics but no item split within them. Regulated facts can change, so verify current requirements before applying them to a transaction.

Sources and Methodology

This article is written for Texas real estate sales agent exam candidates. It uses official Texas and Pearson VUE source material first, then translates the topic into plain-English exam prep, original examples, and original practice questions. It does not use copied exam questions and does not claim to reproduce the live exam.

Use it for study purposes only. For real-world discipline, advertising, trust accounts, broker supervision, compensation, legal advice, license status, complaint, hearing, appeal, or transaction questions, verify the current official source and consult the right qualified professional.

This post is exam preparation content for the Texas Real Estate Sales Agent exam. It is not legal, tax, financial, lending, appraisal, brokerage, insurance, title, closing, disciplinary, trust-account, advertising, administrative-hearing, or professional advice.

Sources:

• Pearson VUE Texas Real Estate Content Outlines
• TREC Rules, current courtesy display
• TREC: How to Comply With the Two-Day Response Rule
• Official Texas Administrative Code, Title 22, Part 23
• TREC: How to File a Complaint
• Texas Occupations Code Chapter 1101
• CFPB: RESPA Regulation X, 12 CFR 1024.14 (referral fees and kickbacks)