A Washington designated broker, Rita, discovers that one of her affiliated brokers, Tom, has been depositing buyer earnest money checks into Tom's personal bank account and then writing personal checks to the firm's trust account several days later — always for the exact same amount. Tom insists he has never lost or misused any client funds and that all amounts have been properly credited. Rita must report this to the DOL. Which of the following best characterizes Tom's conduct and Rita's obligation?
Correct Answer
A) Tom has committed both commingling and conversion; Rita must immediately report the conduct to the DOL and may face discipline herself if she fails to do so
Tom's conduct constitutes both commingling (depositing client funds into a personal account rather than the firm's trust account) and conversion (the unauthorized use of client funds, even temporarily, for his own account — regardless of whether the amounts were fully restored). Under RCW 18.85.361, these are serious violations. Rita, as the designated broker, has a non-delegable supervisory duty under RCW 18.85.285 and WAC 308-124B to supervise affiliated licensees and to report known violations to the DOL. Failure to report known misconduct can itself result in disciplinary action against Rita's license.
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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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