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July 2015 Archives

Top DRE Audit #8: Trust Account Withdrawals

Commissioner's Regulation 2834(a) states that withdrawals may be made from a trust fund account of an individual broker only upon the signature of the broker or one or more of the following persons if specifically authorized in writing by the broker:


  • A salesperson licensed to the broker.

  • A person licensed as a broker who has entered into a written agreement pursuant to Section 2726 with the broker.

  • An unlicensed employee of the broker with fidelity bond coverage at least equal to the maximum amount of trust funds to which the employee has access at any time.


Regulation 2834(b) also states that withdrawals may be made from a trust fund account of a corporate broker only upon the signature of:

  • An officer through whom the corporation is licensed pursuant to Section 10158 or 10211 of the Code; or

  • One of the persons enumerated in paragraph (1), (2) or (3) of Regulation 2834(a), provided that specific authorization in writing is given by the officer through whom the corporation is licensed and the officer is an authorized signatory of the trust fund account.


Regulation 2834(c) states that a broker or broker-officer is responsible or liable for the handling of trust funds regardless of the existence of any authorization given regarding signature authority.

Top DRE Audit #7: Trust Fund Handling

The most common violations of this section found in audits relate to Commissioner's Regulation 2832(a), which requires that a broker place funds accepted on behalf of another into the hands of the owner of the funds, into a neutral escrow depository or into a trust fund account in the name of the broker, or in a fictitious name if the broker is the holder of a license bearing such fictitious name, as trustee at a bank or other financial institution not later than three business days following receipt of the funds by the broker or by the broker's salesperson. Two of the most common problems related to this regulation are:


  • A broker's failure to designate accounts receiving trust funds as trust fund accounts in the name of the broker or broker's dba as trustee; and

  • Failure to deposit trust funds received by a broker or broker's employee into a trust fund account within three business days of receipt.


Other violations of this section relate to a broker's use of an improper interest-bearing account {Regulation 2832(b)}, a broker's failure to place checks received from an offeror into a neutral escrow depository or trust fund account in a timely manner following acceptance of an offer {Regulations 2832(c & d)} and failure of a broker acting as an escrow holder in a transaction in which the broker is performing acts for which a real estate license is required to place trust funds received as required not later than the next business day following receipt of the funds {Regulation 2832(e)}.

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