What happens if a licensed entity does not stop apparent agency from occurring?

If a licensed entity does not take steps to prevent apparent agency from occurring, it can indeed lead to the creation of apparent agency. Apparent agency arises when a principal's actions lead a third party to reasonably believe that an agent has the authority to act on behalf of the principal, even if the actual authority does not exist.

In this context, if the principal or licensed entity fails to clarify the boundaries of an agent's authority or does not actively manage how their representatives engage with the public, the agent may be seen as having the power to act, thereby binding the principal to the agent's actions. This can create legal implications for the principal, as they may be held responsible for the acts of the agent, based solely on the third party's perception of the relationship, regardless of any internal agreements or contracts.

Understanding this dynamic is crucial for both agents and principals to manage their representations effectively and prevent unintended legal liabilities that may arise from the appearance of authority.