Sound risk management principles suggest that processes and tools designed to detect fraud, material misrepresentation, and the adverse activity of non-compliant industry professionals, service providers, and participants are important elements of an effective compliance management system. In addition, the Consumer Financial Protection Bureau has recognized the importance of financial institutions developing collaborative relationships for detecting, assessing and reporting the illegal or improper use of a senior’s funds, property or assets.1 The NRMLA Code of Ethics. The fifth Value that the NRMLA Code of Ethics embraces is Diligence. Diligence under the Code of Ethics requires that NRMLA Members, “provide services to consumers with diligence and due care, promptly, thoughtfully, in a manner considerate of the interests of consumers and fully in compliance with applicable legal and regulatory requirements.” To that end, Rule 502 of the Code of Ethics requires NRMLA Members to provide their products and services to consumers with diligence and due care and in a manner considerate of the interests of such consumers. The sixth Value of the NRMLA Code of Ethics is Professionalism. Professionalism dictates that a NRMLA Member’s conduct, “should reflect positively on NRMLA, the profession and the industry.” In consideration of this Value, Rule 602 of the Code of Ethics requires that NRMLA Members neither accept nor condone actions or failures to act of other NRMLA Members that are inconsistent with the Code of Conduct and to report potential violations when NRMLA Members have knowledge of same. Together, these Values and Rules suggest that NRMLA members should incorporate appropriate systems, processes, and procedures for evaluating professional and service provider relationships and individual transactions in order to mitigate the risks associated with fraud and material misrepresentation. Discussion. There are a number of alternative methods for NRMLA members to address and promote their compliance with Rule 502 and Rule 602. Among such methods, NRMLA members are encouraged to utilize existing industry repositories and databases for verifying, credentialing and monitoring professionals and companies, including databases that contain combinations of industrycontributed non-public cases of contributor-verified misrepresentation and/or fraud, public disciplinary actions and licensing verification information for originators, realtors and appraisers. An example of such a database is the Mortgage Industry Data Exchange (MIDEX®) available through the LexisNexis® Mortgage Asset Research Institute. As of the date of this Ethics Advisory Opinion, NRMLA members are offered a discount on MIDEX licensing rates. Other repositories may be available that serve the same or similar functions. While NRMLA has entered into an agreement with LexisNexis® Risk Solutions to encourage participation by NRMLA members in MIDEX®, NRMLA members are encouraged to perform their own due diligence with respect to such services. In interpreting the Code of Ethics in this manner, the Committee is not intending to inhibit NRMLA Members from utilizing additional and/or alternative means of mitigating the risk of fraud and material misrepresentation. This Advisory Opinion simply encourages NRMLA members to consider 1 See Recommendations and Report for Financial Institutions on Preventing and Responding to Elder Financial Exploitation, Consumer Financial Protection Bureau, March 2016, Page 54. 80
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