TABLE OF CONTENTS

A Licensee’s Guide to
Trust Fund Handling
Volume XIII

I....... Introduction....................................................................................................................................... 1
II...... Goals and Objectives......................................................................................................................... 3
III.... Definitions.......................................................................................................................................... 5
A..... Fiduciary Duty of Accountability
B...... Distinguishing Trust Funds from Non-trust Funds
IV.... Trust Fund Handling Requirements..................................................................................................... 7
A..... Fiduciary Responsibility
B...... Placement of the funds
C..... Separation of Funds
D..... Holding restrictions
E...... Holding of uncashed checks
F...... Owner(s) of trust funds
G..... Protection of Principals
H..... Obligation for Brokers
I....... Protection to Brokers
J....... Consequence of Non-compliance
V..... Broker Trust Accounts..................................................................................................................... 11
A..... Account Requirements
B...... Interest bearing accounts
C..... Withdrawals
VI.... Commingling.................................................................................................................................... 13
A..... Consequences of Commingling
B...... Non-trust funds Deposited in a Trust Fund Account
C..... Trust Funds Deposited in a Non-Trust Fund Account
D..... Failing to Withdraw Earned Income
VII... Trust Fund Balances......................................................................................................................... 15
A..... Overages & Shortages
B...... Conversion
C..... Reconciliation
VIII.. Trust Fund Records......................................................................................................................... 17
A..... Record Keeping
B...... Separate Records for Each Beneficiary
C..... Retention of Records
D..... DRE Audit Costs
IX.... Accounting Procedures.................................................................................................................... 19
A..... Specific Requirements
B...... Accounting for Each Beneficiary
C..... Daily Balancing
D..... Date and Amount Received
E...... Date of Deposit and/or Disposition
F...... Identifying Information
G..... Bank Reconciliation
H..... DRE Example
X..... Trust Account Audits....................................................................................................................... 39
A..... DRE Program of Reviews
B...... Disciplinary Proceedings
C..... Costs Chargeable to Broker
XI.... Article 15 of the DRE Regulations on Trust Fund Handling................................................................ 41
XII... Ten Most Common Violations Found in DRE Audits........................................................................ 47
A..... Record Retention
B...... False or Fictitious Name
C..... Maintenance of Records
D..... Records for Each Beneficiary
E...... Reconciliation of Accounts
F...... Trust Fund Shortage
G..... Deposition of Trust Funds
H..... Trust Fund Withdrawals
I....... Commingling of Funds
J....... Written Disclosure Statement
XIII.. Sanctions For Trust Fund Violations................................................................................................. 51
A..... Suspension or Revocation of License
B...... Financial Liability
C..... Criminal Prosecution
XIV. Questions And Answers................................................................................................................... 53
XV... Summary......................................................................................................................................... 55
A..... Fiduciary Responsibility
B...... Maintaining an Account Balance
C..... Timeliness of Deposits
D..... Retention of Records
E...... Account Reconciliations
F...... Clearing of Checks
G..... Commingling of Funds
H..... Penalties
XVI. Review Quiz Answers...................................................................................................................... 57