In NSAR practice, what distinguishes a client from a customer, and what fiduciary duties attach to representing a client?

• A. A client is the party represented by a licensee under a representation agreement; a customer is unrepresented; fiduciary duties to the client include loyalty, confidentiality, disclosure of material facts, obedience to lawful instructions, accounting for funds, and using reasonable care and skill.
• B. A client is the party to whom the broker owes no duties; a customer is the party represented by the licensee.
• C. A client is the seller only; a customer is the buyer; fiduciary duties include only disclosure of known defects.
• D. Client and customer are the same; fiduciary duties do not apply beyond standard duties of care.

Answer: (A)

In NSAR practice, the relationship hinges on whether there is a representation agreement. A client is the party who signs a representation agreement with the broker, and the broker owes fiduciary duties to that client. These duties mean putting the client’s interests first and handling information and funds with a heightened standard of care. A customer, on the other hand, is unrepresented and does not trigger fiduciary duties—the broker’s obligations to that person are the general duties of honesty and fair dealing, not the heightened fiduciary duties owed to a client.

The fiduciary duties to the client include loyalty (prioritizing the client’s interests in negotiations and decisions), confidentiality (protecting the client’s information, even after the relationship ends), disclosure of known material facts (informing the client of significant issues that could affect decisions), obedience to lawful instructions (following the client’s legitimate directions), accounting for funds (accurate handling and reporting of funds in trust), and using reasonable care and skill (performing competently). The option that describes these distinctions and duties accurately reflects how NSAR treats client and customer relationships and the associated fiduciary obligations.

In contrast, descriptions that suggest no duties to the client, restrict the client’s role to a seller or buyer only, or claim that client and customer are the same, don’t fit how the agency relationship and fiduciary duties are understood in NSAR practice.