Trust FundsIntermediateCalifornia Exam

A broker places a client's $50,000 earnest money deposit into a money market account earning interest. The broker does NOT inform the client or credit the interest to the client. This is:

AAcceptable because money market accounts are FDIC-insured
BA violation because the client's interest was not credited to the clientCorrect
CAcceptable as long as the principal amount is safe and available
DRequired by California law to maximize returns on trust funds

Why A violation because the client's interest was not credited to the client Is Correct

Answer B: A violation because the client's interest was not credited to the client

Interest earned on trust funds belongs to the client, not the broker, unless there is a written agreement to the contrary. Using client funds to earn interest for the broker's benefit — without the client's knowledge and consent — is a misuse of trust funds and a violation of fiduciary duty.

Exam Tip: Trust Funds

Trust fund questions test the rules for handling client money. Know the deadlines for depositing trust funds, what constitutes commingling vs. conversion, and the penalties for violations.

Key Trust Funds Terms in This Question

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