Broker David maintains a trust account at a Minnesota bank. His brokerage is having a slow month, and he is short on operating funds to cover payroll. David temporarily transfers $3,000 from the trust account into his business operating account, intending to replace the funds within two weeks before any closings occur. Under Minnesota law, which violation has David committed?
Correct Answer
C) Both commingling and conversion, because he mixed client funds with operating funds and used them for non-client purposes
Under Minn. Stat. Ch. 82, David has committed both commingling and conversion. Commingling occurs when client trust funds are mixed with the broker's own funds (here, the business operating account). Conversion occurs when trust funds are used for purposes other than their intended client-related purpose — even temporarily and even with intent to repay. The intent to return the funds and the absence of immediate client harm are not defenses under Minnesota law.
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Related Topics & Key Terms
Key Terms:
Related Concepts
In real estate, the distinction between an independent contractor and an employee determines tax treatment, liability, and the level of control a broker may exercise over the agent's daily activities. Most real estate agents operate as independent contractors.
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License requirements are the mandatory qualifications—including pre-licensing education, examination, and background checks—that a person must satisfy before legally practicing real estate. These requirements are established and enforced by each state's real estate commission.
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