The broking code compliance committee has issued nine breach determinations and referred two brokers to the corporate regulator following a review of strata insurance arrangements.

The review, which examined seven brokers with 1088 strata representatives, found weaknesses in agreements, remuneration disclosure, conflict of interest management, and oversight of conduct and compliance.

All seven breached the requirement to ensure representative agreements include specific code commitments, including reporting potential breaches within five days and immediately reporting breach-related complaints. Broad clauses referencing “relevant law” fell short of standards.

The review also found one breach of the commitment to ensure remuneration information is disclosed to the client and one breach of rules on identifying, disclosing and engaging clients on conflicts of interest.

Code committee chair Oscar Shub says owners’ corporations rely on brokers and strata managers to support complex, high-value decisions, and accountability cannot stop at the point where the broker hands work to a representative.

“The code requires brokers to be specific about what representatives must do,” he said. “If those obligations are not clearly set out, brokers cannot effectively monitor conduct, identify problems early or hold representatives accountable.”

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Two brokers were referred to the Australian Securities and Investments Commission for consideration of non-compliance with Corporations Act conflict management requirements.

Concerns were also raised with NSW Fair Trading, which has engaged with strata managers.

Two brokers with 498 representatives had agreements requiring strata managers to promote and protect only the interests of the broker. Managers have legal duties to act in the best interests of the owners’ corporation – their client.

“We raised this issue with both brokers, and both acknowledged it and amended their agreements to remove the provisions in their agreements,” the committee says in a report.

The review identified one case in which the broker was owned by the strata management company and had a profit-share arrangement but disclosure around management of the conflict was inadequate.

The report says brokers must have arrangements to ensure remuneration disclosures given to strata managers are passed to owners.

“The commitments in the code are to the client,” it says. “In the case of strata insurance, the client is always the owners of the apartments, often represented by an owners’ corporation.

“A strata manager is never a broker’s client.”

The compliance committee expects brokers to strengthen practices based on the findings and will examine responses in a review of conflict management practices.

See the report here.