### THE ATTORSEI- GESERAL OP TEXAS

October 18, 1990

Mr. Wallace Collins Opinion No. JM-1236 Administrator Texas Real Estate Commission Re: Authority of theTexas P. 0. Box 12188 Real Estate Commission to Austin, Texas 78711-2188 adopt arule permitting onsite audits of Mandatory Continuing Education (RQ-2057)
Dear Mr. Collins:
You ask about thevalidity of arule promulgated by the Texas Real Estate Commission [hereinafter the commission] concerning continuing education courses. The 71st Legislature added section 7Ato theReal Estate License Act [hereinafter the act] to require that, inorder to renew orapply for licenses, certain applicants for real estate licenses and certain licensees provide the commission with proof of having met statutory continuing education requirements. Acts 1989, 71st Leg., ch. 169, 5 6, at 561, 568. Section 7A becomes effective on August 31, 1991, and applies only to licenses issued or renewed on or after that date. Id. § 17(b). Given the extensive duties, outlined below, that have been conferred on the commission and the fact that persons renewing orapplying for licenses on or after August 31, 1991,must provide proof ofhaving met the statutory requirements, the commission must provide themeans whereby those licensees and applicants may fulfill the requirements. Section 7A implicitly requires the commission to approve- continuing education courses and providers of those courses. It also grants the commission specific authority to adopt rules to implement the section's mandatory continuing education requirements. V.T.C.S. art. 6573a, 57A(d). Subsection (a)details specific statutory requirements regarding the content of required continuing education courses (m, the rules ofthe commission, fair housing laws, agency laws, antitrust laws) and requires the commission to approve real estate related topics for the remainder of the coursework. Id. 57A(a). Subsection (a) also establishes theminimum andmaximum hours for daily course work. The section also allows the commission to provide for the substitution of commission approved

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correspondence courses for classroom work andprohibits it from requiring examinations, except for correspondence courses.
You askwhether the actpermits the commission to adopt the following rule concerning continuing education courses offered pursuant tothe act:

Commission employees may conduct on-site audits ofany course offered by an approved MCE [mandatory continuing education] provider. Audits shall be conducted without prior notice to theMCE provider, and commission employees may enroll and attend an MCE course without identifying themselves as employees of the commission. An audit report indicating noncompliance with these sections shall be treated as a written complaint against theprovider or instructor concerned and shall be referred to the enforcement division forappropriate resolution.
22T.A.C. 5 535.73(c).
When the rulewasproposed, section 5(h) of the actwas cited asthe authority for itsadoption. 14Tex. Reg. 5716 (Oct.27, 1989). Section 5(h) gives the commission the authority tomake and enforce allrules necessary "to insure compliance with theprovisions ofthisAct." V.T.C.S. art. 6573a, 55(h).
The rule,which isonly one of several, isaimed at ensuring compliance with section 7Aof the act. Specifically, you askwhether section 15B(a) of the act, which restricts undercover investigations, precludes the adoption ofthe rule. Section 15B(a) readsas follows:

Notwithstanding any otherprovision of the Act, there shall be noundercover or covert investigations conducted byauthority of this Act unless expressly authorized by the commission after due consideration of the circumstances and determination by the commission that such measures are necessary to carry out thepurposes of thisAct. No investigations of licensees or any other actions against licensees shallbe initiated on thebasis of anonymous complaints whether inwriting or otherwise but shall be initiated onlyupon the commission's ownmotion or a verified written complaint. Upon the

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adoption of suchmotion bythe commission or upon receipt of such complaint, the licensee shall be notified promptly and in writing unless the commission itself, after due consideration, determines otherwise.
V.T.C.S. art. 6573a, 5 155(a).
Ithas been suggested that the proposed unannounced audits violate the restriction onundercover investigations. We read theprohibition found insection 158to apply only to investigations of licensees andnot to assessments of the course content ofmandatory continuing education courses, providers, or instructors. Theprohibition found in section 15Bwas originally adopted alongwith revisions to educational licensinq requirements. Acts 1981, 67th Leg., ch. 71, 55, at 158, 161. The bill analysis forSenate Bill 484 describes the then new section 158as:

Allow[ing] the Texas Real Estate Commission tomake a motion ina public meeting to investigate a licensed real estate broker or licensed real estate salesman. Also provides the Commission the right toprobate a license.
Bill Analysis, S.B. 484, 67th Leg. (1981).
There isno indication that theprohibition on undercover investigations applies to anyone other than licensees. In fact,we believe that theproviso found in section 15B, "Notwithstanding any other provision of this act," was inserted in recognition of the commission's express authority to investigate licensees, found insection 15(a). Section 15B makes it clear that the section 15(a) investigatory authority does not include authority to conduct undercover investigations without "due consideration ofthe circumstances and determination by the commission that suchmeasures are necessary to carry out the purposes of this Act." V.T.C.S. art. 6573a, 5lSB(a). Since the state began regulating real estate dealers1 and salesmen, the licensing authority has had express authority to

1. Weuse the generic term "dealers" because that was the term used inthe 1939 act. The statutory designation was changed to "real estate brokers" by a 1955 amendment. Acts 1955, 54th Leg., ch. 383, at 986.

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investigate the actions of licensed dealers and salesmen. See Acts 1939, 46th Leg., 55 5(c), 11,at 560, 563, 569.
A comparison of sections 15(a)and 15Breinforces our conclusion, inasmuch as licensees upon the both allow investigations of commission's ownmotion or a written complaint. verified, By contrast, the audit permitted under the commission rule isan examination or review of the course content or, possibly, thehours of courses offered to satisfy statutory continuing education requirements.

We think, given the detailed requirements of section 7A and the section 5(h) authority toensure compliance with the act, that it isreasonable forthe commission to allow its employees to audit, without notice, continuing education classes to ensure that the requirements of section 7A of the act arebeing met.
SUMMARY

Article 6573a, section 15B,V.T.C.S., prohibits undercover and covert investigations of licensees under the Real Estate License Act. That section does not prohibit unannounced audits of courses offered to satisfy the continuing education requirements ofthe act.
Very truly Y ,

J ivik

4 JIM MATTOX Attorney General of Texas
MARY KELLER First Assistant Attorney General
LOUMCCREARY Executive Assistant Attorney General
JUDGE ZOLLIE STEAELEY Special Assistant Attorney General
RENEA HICKS Special Assistant Attorney General
RICK GILPIN Chairman, Opinion Committee Prepared by Karen C.Gladney Assistant Attorney General

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