What charter and sales brokers should do

A broker is trusted to act in the client's interest. That is the whole value of the role. It is also what makes any undisclosed payment from the other side a breach.

The principle

Your commission is lawful when it is in the contract and the client knows it. Anything else you are paid on that client's deal must be disclosed to them before they decide.

In practice

• Put your commission in the contract. Name the percentage or the basis for working it out. Co-broker splits too.
• Disclose other benefits in writing, before the decision. If a supplier, yard, agent or event organiser offers you a fee, discount, gift, trip or credit connected to the client's spend, tell the client, in writing, and let them decide.
• Ask who else is being paid. When a supplier is recommended to you, ask whether anyone is receiving a fee. If the answer is "yes, you", the client must be told.
• Do not hide commission in a supplier's price. A supplier who adds a margin to pay you, and shows the client the higher figure as the "price", has put you in a conflict the client cannot see.
• Be especially careful with the APA. If you control part of it, the standard is that of any person handling a client's funds: itemised spend, comparable quotes, and every credit passed on.
• Pay to the firm, not to a person. Commissions that are lawful and disclosed are paid to the brokerage on its books, not to an individual's private account.
• Refuse non-disclosure clauses. A supplier asking you to sign something that stops you telling the client is asking you to join a hidden arrangement. Decline, and say why.

At shows and events

Industry shows are where introductions are made and, too often, where offers are made. If a supplier proposes a commission arrangement:

1. Ask whether it is disclosed to the client. If it is not, decline.
2. Ask for their written anti-bribery policy. A supplier without one is a risk to you.
3. Do not sign anything that stops you telling your client or your employer.

For brokerage principals

Ask yourself, and write down the answers:

• Have any of our brokers accepted a payment or benefit from a supplier that we did not disclose to the client?
• Do we have a written policy that says what brokers may accept, and who they tell?
• Do we train people on it, test understanding, and audit the practice?
• Is there a way for a broker to raise a concern that they trust?
• Would we be comfortable if a client saw our supplier arrangements tomorrow?

Wealthy clients who feel deceived do not usually complain quietly. The protection is in the practice, and it costs very little. Use the broker disclosure template.

General information, not legal advice. See the disclaimer.