California Real Estate SalespersonPractice of Real Estate and DisclosuresHard
An investigation by the DRE reveals that a broker deposited client trust funds into the same bank account used for office operating expenses. Which disciplinary consequence is most likely for this violation?
- AA civil fine paid directly to the client with no DRE action
- BA verbal warning with no further action since no funds were lost
- CLicense suspension or revocation for commingling trust funds
- DNo violation exists as long as the broker reconciles the account monthly
Show answer & explanationAnswer & explanation
Correct answer: C. License suspension or revocation for commingling trust funds
Commingling trust funds with a broker's personal or operating funds is a serious violation of California real estate law, regardless of whether harm occurred, and can result in license suspension or revocation.
Why the other options are wrong
- A. DRE disciplinary action is separate from any civil remedy and does apply here.
- B. Commingling is a serious violation, not something dismissed with a mere warning.
- D. Monthly reconciliation does not excuse the act of commingling itself.
Commingling Trust Funds
The illegal mixing of client trust funds with a broker's personal or business funds, which is grounds for disciplinary action including license suspension or revocation.
- Commingling is prohibited even if no client loses money
- Distinct from 'conversion,' which is actual misuse of client funds
- DRE can audit trust accounts to detect violations
Memory trick: Mixing money means losing your license