Broker Lisa manages several rental properties and maintains a property management trust account. One of her clients, landlord Mr. Chen, instructs Lisa in writing to transfer the security deposit funds for his three properties into a new separate account that Mr. Chen has opened at a different bank. The new bank is not federally insured. How should Lisa respond to this instruction?
Correct Answer
A) Lisa must decline to transfer the funds to a non-federally insured account because doing so would violate Tennessee trust account requirements
Tennessee TREC rules require that all trust funds be held in a federally insured financial institution located in Tennessee. This is a regulatory requirement that cannot be waived by client instruction. Regardless of Mr. Chen's written direction, Lisa cannot transfer client funds to a non-federally insured account without violating Tennessee trust account rules. The broker's obligation to comply with TREC regulations supersedes client instructions that conflict with those regulations.
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