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The proper management of a Trust Account It is crucial for brokers, ensuring that their clients' funds are safe and handled according to legal standards. One particular situation highlights the importance of knowing these details.
Clara's Dilemma and the Withdrawal of Funds
The broker Clara needs to withdraw funds from the Trust Account that maintains for a property management client to pay a repairman. Due to his busy schedule, he asks Marco, an unlicensed employee, to go to the bank and make the withdrawal. This action will be completely legal if:
- Marco is a trustworthy employee.
- Clara calls the bank first to inform them of Marco's order.
- Marco has sufficient fidelity bond coverage or insurance coverage to cover the maximum amount of the balance of the Trust Account.
- The administration client has given Clara permission to delegate this responsibility.
Correct Answer and Analysis
The correct answer is that Marco has sufficient fidelity bond coverage or insurance coverage to cover the maximum amount of the balance of the Trust Account. The fact that Clara trusts Marco does not make it legal for him to make a withdrawal. Neither does Clara's call to the bank. And even the client's permission is not enough. The law (BPC 10145 (a)(2)(C)) requires that Marco be fully insured or supported by a bond.
Conclusion
When managing a Trust Account, it is essential that brokers are well informed and adhere to state regulations. The steps and decisions related to withdrawals of funds must be handled with the utmost caution to ensure the integrity of the client's funds and the reputation of the broker.
