State RegulationsVA specificDifficulty 3/5
A licensed Virginia producer arranges her commission income in two ways: splitting a commission with an unlicensed friend who referred the client, and paying her full-time salaried office employee from the same commission income. How should these arrangements be characterized under Virginia law?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Va. Code § 38.2-1812 prohibits an agent from directly or indirectly sharing commissions or other compensation with any person not then licensed for the class of insurance involved, and bars the unlicensed person from receiving it. The same provision expressly states that it does not affect payment of the regular salaries due employees of the licensee. The line Virginia draws is between commission participation in the licensed activity, which the Virginia Bureau of Insurance confines to licensees, and ordinary payroll.
Why the other options are wrong
- A) The salary exception shows that commission-derived income may lawfully reach unlicensed people as wages.
- C) Earning the commission personally does not license the producer to share it with an unlicensed friend.
- D) The rule is the reverse: regular salaries to employees are unaffected, while sharing with unlicensed persons is barred.
Memory hook
Commissions split only with the licensed; salaries flow to employees freely.