             THE    ATTORSEI-   GESERAL
                       OP TEXAS


                        October 18, 1990



Mr. Wallace Collins               Opinion No.   JM-1236
Administrator
Texas Real Estate Commission      Re:   Authority of the Texas
P. 0. Box 12188                   Real Estate    Commission  to
Austin, Texas   78711-2188        adopt a rule permitting   on-
                                  site audits    of   Mandatory
                                  Continuing Education
                                  (RQ-2057)

Dear Mr. Collins:

     You ask about the validity of a rule promulgated by the
Texas Real Estate Commission    [hereinafter the commission]
concerning continuing education courses.    The 71st Legisla-
ture added section 7A to the Real Estate License Act     [here-
inafter the act] to require that, in order to renew or apply
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 or applying for licenses on or after August
31, 1991, must provide proof of having met the statutory
requirements, the commission must provide the means 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       manda-
tory continuing    education   requirements.    V.T.C.S.    art.
6573a, 5 7A(d). Subsection     (a) details specific    statutory
requirements regarding the content      of required  continuing
education courses (m,     the rules of the commission,      fair
housing laws, agency laws, antitrust laws) and requires the
commission to approve real estate related       topics for the
remainder of the course work. Id. 5 7A(a). Subsection         (a)
also establishes   the minimum   and maximum   hours for daily
course work.    The section also allows the commission         to
provide   for   the substitution     of commission      approved



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Wr. Wallace Collins - Page 2   (JM-1236)




correspondence courses for classroom work and prohibits   it
from requiring   examinations,  except for   correspondence
courses.

     You ask whether the act permits the commission to adopt
the following rule concerning continuing education   courses
offered pursuant to the act:

        Commission   employees  may conduct    on-site
        audits of any course offered by an approved
        MCE   [mandatory continuing education]    pro-
        vider. Audits    shall be conducted without
        prior notice to the MCE provider, and com-
        mission 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 the provider or instructor concerned
        and shall be referred to the enforcement
        division for appropriate resolution.

22 T.A.C. 5 535.73(c).

     When the rule was proposed, section 5(h) of the act was
cited as the authority for its adoption.  14 Tex. Reg. 5716
(Oct. 27, 1989). Section    5(h) gives the commission    the
authority to make and enforce all rules necessary "to insure
compliance with the provisions of this Act." V.T.C.S.   art.
6573a, 5 5(h).

     The rule, which  is only one of several,   is aimed at
ensuring compliance with section 7A of the act.     Specifi-
cally, you ask whether   section 15B(a) of the act, which
restricts undercover investigations, precludes the adoption
of the rule. Section 15B(a) reads as follows:

        Notwithstanding any other provision    of the
        Act, there shall be no undercover or covert
        investigations conducted by authority 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 the purposes of this Act.      No
        investigations   of licensees or any other
        actions against licensees shall be initiated
        on the basis of anonymous complaints   whether
        in writing   or otherwise but shall be in-
        itiated only upon the commission's own motion
        or a verified written complaint.     Upon the



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Mr. Wallace Collins - Pagi 3   (JM-1236)'




        adoption of such motion by the 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).

     It has been suggested     that the proposed   unannounced
audits violate the restriction on undercover investigations.
We read the prohibition found in section 158 to apply only
to investigations of licensees and not to assessments of the
course content   of mandatory   continuing education  courses,
providers, or instructors.    The prohibition found in section
15B was originally   adopted along with revisions to educa-
tional licensinq requirements.     Acts 1981, 67th Leg., ch.
71, 5 5, at 158, 161. The bill analysis for Senate Bill 484
describes the then new section 158 as:

        Allow[ing] the Texas Real Estate Commission
        to make   a motion  in a public meeting   to
        investigate a licensed real estate broker
        or licensed real estate salesman. Also pro-
        vides the Commission the right to probate  a
        license.

Bill Analysis, S.B. 484, 67th Leg. (1981).

     There is no indication     that the prohibition on under-
cover investigations applies to anyone other than licensees.
In fact, we believe that the proviso 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 in section     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
of the circumstances and determination by the commission
that such measures are necessary to carry out the purposes
of this Act." V.T.C.S.       art. 6573a, 5 lSB(a). Since the
state began regulating     real estate dealers1 and salesmen,
the licensing authority       has had express authority      to




      1. We use the generic term "dealers" because that was
 the term used in the 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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Mr. Wallace Collins - Page 4     (JM-1236)




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 15B reinforces   our
conclusion,   inasmuch  as   both allow investigations      of
licensees upon the commission's own motion    or a verified,
written complaint.   By contrast,  the audit permitted   under
the commission   rule is an examination    or review   of the
course content or, possibly, the hours of courses offered to
satisfy statutory continuing education requirements.

     We think, given the detailed requirements of section 7A
and the section 5(h) authority to ensure compliance with the
act, that it is reasonable   for the commission to allow   its
employees to audit, without notice, continuing      education
classes to ensure that the requirements of section 7A of the
act are being met.

                       SUMMARY

          Article 6573a, section 15B, V.T.C.S.,   pro-
       hibits 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 con-
       tinuing education requirements of the act.

                                     Very truly Y    ,

                                 J        4     ivik
                                     JIM     MATTOX
                                     Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
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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