What is the most likely initial step for a brokerage deciding to clean out its files?

The most appropriate initial step for a brokerage that wants to clean out its files is to review the firm's and KREC's (Kentucky Real Estate Commission) record retention and disposal rules. This step is crucial because it ensures that the brokerage complies with legal and regulatory requirements regarding how long records must be kept and the proper methods for disposing of them.

By understanding these rules, the brokerage can avoid any legal repercussions that may result from improper file handling. Each state may have specific guidelines concerning the retention of records related to real estate transactions, which can include anything from client agreements to transaction documentation. In order to protect clients' privacy and the firm's integrity, it is essential to follow these protocols before taking any further action.

Other options do not serve as the logical first step in the process. Notifying all clients may be necessary further down the line but would not be appropriate without prior knowledge of the regulations governing record retention. Burning outdated files poses significant risks, such as potential non-compliance or damage to sensitive information. Hiring an external auditor can be valuable for ensuring compliance and thoroughness but is also a subsequent step rather than an initial one. Therefore, reviewing the relevant rules provides the necessary foundation for any further actions regarding file management.