Trust Funds
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 client✓ Correct
CAcceptable as long as the principal amount is safe and available
DRequired by California law to maximize returns on trust funds
Explanation
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.
Related California Trust Funds Questions
- A broker's trust fund records must be retained for how long after the transaction closes or the funds are disbursed?
- Which California law specifically governs a real estate broker's obligations with respect to trust funds?
- Interest earned on funds held in a broker's trust account generally belongs to:
- Under California law, a DRE auditor examining a broker's trust fund records has the right to inspect those records:
- Which of the following records is a broker required to maintain for the trust fund account?
- A 'shortage' in a broker's trust account — where the trust liability exceeds the bank balance — is most likely evidence of:
- Conversion of trust funds occurs when a broker:
- Which of the following is considered 'commingling' of trust funds?
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