Broker Linda in Cherry Hill has collected $25,000 in various client deposits held in her escrow trust account. Her brokerage is experiencing a cash flow shortage, and Linda briefly transfers $3,000 from the trust account into the brokerage operating account to cover payroll, intending to replace it within a week. Under New Jersey law, which violation has Linda committed?
Correct Answer
A) Both commingling and conversion, which are separate and distinct violations
Linda has committed two separate violations under N.J.S.A. 45:15-17(n). Commingling occurs when client funds are mixed with the broker's personal or business funds — which happened the moment Linda transferred trust funds into the operating account. Conversion occurs when client funds are actually used for the broker's own purposes, which happened when the funds were used to cover payroll. Intent to repay is irrelevant; both violations are complete upon the act. The NJREC treats these as serious grounds for disciplinary action, including license revocation.
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