Trust Funds
What constitutes 'misappropriation' of trust funds?
ADepositing trust funds in the wrong bank branch
BUsing trust funds for any purpose other than the purpose for which they were entrusted — including for the broker's own benefit✓ Correct
CFailing to maintain trust fund records for the required period
DMaintaining too much personal funds in the trust account
Explanation
Misappropriation (conversion) occurs when a broker uses trust funds for any unauthorized purpose — paying business expenses, personal bills, or any use inconsistent with the client's instructions. It is the most serious form of trust fund violation, constituting theft.
Related California Trust Funds Questions
- What is 'conversion' in the context of trust funds?
- What must a broker do when they receive a buyer's earnest money deposit check with instructions to hold it uncashed pending acceptance?
- What is 'commingling' of trust funds?
- California regulations require that a broker maintain a 'trust fund bank account record' (journal). What does this record show?
- If a buyer instructs the broker to hold their uncashed check until offer acceptance, the broker should:
- What is a 'neutral escrow' and when is it used for trust funds?
- Conversion of trust funds occurs when a broker:
- Under California law, trust fund records must be retained for a minimum of:
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