Broker Tom has a trust account with a current balance of $42,000 in client funds. His brokerage is short on cash to pay office rent, so he temporarily borrows $3,000 from the trust account, intending to repay it within a week. Under Maryland law, this action is best described as:
Correct Answer
D) Conversion, which is a violation of Maryland license law
Using client trust funds for the broker's own business or personal purposes—even temporarily—constitutes conversion under Maryland law. Conversion is the unauthorized use of another's property and is a serious violation of Md. Code Ann., Bus. Occ. & Prof. § 17-322, subject to license revocation and potential criminal liability, regardless of intent to repay.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Florida brokers are required to maintain transaction records and escrow records for a minimum of five years.
A tie-in arrangement is an illegal antitrust practice in which a seller conditions the purchase of one product or service on the buyer's agreement to purchase a separate product or service.
A trust account, also called an escrow account, is a separate bank account maintained by a broker to hold funds belonging to others, such as earnest money deposits, security deposits, or other client funds.
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