Trust Accounts and Financial Handling
Money questions are where registrants lose their licences. The exam tests whether you know what trust money is, where it must sit, when it may move, and what records must exist to prove it.
What counts as trust money
Deposits on offers, holdbacks, escrow funds, rent collected for a landlord client, and any money received on behalf of another person. It belongs to the client, not the brokerage, from the moment it is received.
The rules
- Deposit into the brokerage’s designated trust account at a financial institution, promptly as the bylaws require, and issue a receipt.
- Never commingle trust money with operating money, and never use it for brokerage expenses, rent or the brokerage’s own commission.
- Pay out only to the person entitled, and only when entitlement is clear - a completed transaction, a signed release, or a court order where there is a dispute.
- Keep the records: deposit book, cheque register, individual client ledgers, monthly reconciliations to the bank statement, and cancelled cheques or electronic equivalents, retained for the period the bylaws set.
- Interest and unclaimed balances are dealt with as the Act and bylaws direct. The Real Estate Assurance Fund exists to compensate consumers for a registrant’s dishonesty.
Worked example
A deposit cheque arrives Friday afternoon. The broker is leaving for the weekend and deposits it into the operating account, planning to move it Monday. On Monday the account is frozen. Two failures: the money went to the wrong account, and the delay was avoidable. Misappropriation does not require intent to steal; the trust breach is complete.
Traps
- Treating a post-dated cheque as received, or as not received.
- Paying a referral fee to an unregistered person out of trust money.
- Skipping monthly reconciliation and discovering the shortage at audit.
- Holding a deposit after both parties have signed a mutual release.
- Taking commission out of the deposit before the transaction completes.
Brokerage Operations, Supervision and Registration
The Commission regulates brokerages, not just individuals. This domain tests the broker’s supervisory role, registration mechanics, and how an office must be run day to day.
Registration structure
A brokerage must be registered; each salesperson must be registered with a specific brokerage; branch offices must be registered and supervised. A registrant cannot operate independently of a brokerage. Education requirements, continuing education and renewals are conditions of continued registration.
Supervision
The broker is accountable for the brokerage’s compliance and for supervising the salespersons, including review of contracts and trust handling. Supervision can be delegated to a manager, but accountability does not transfer. Practical controls include written office policies on advertising, deposits and file documentation; periodic file audits; advertising approval; and a standing check that no unregistered person is performing registrable activity.
Advertising and records
Advertising must identify the brokerage, be accurate, and have the seller’s authority. Team names are permitted only within the rules. Records - contracts, trust records, disclosure documents - must be kept for the period the bylaws require and produced on request.
Worked example
A salesperson leaves Brokerage A on Friday and starts at Brokerage B. On Saturday she holds an open house and posts an ad showing her name and Brokerage B’s logo. Her registration still shows Brokerage A because the transfer paperwork is incomplete. She is advertising and trading while not registered with B - a breach by her and a supervision failure for B’s broker. The correct sequence is release and completion of the transfer before any activity under the new brokerage.
Traps
- Assuming a broker can delegate accountability as well as tasks.
- Letting an unlicensed assistant host an open house, quote a price or discuss terms.
- Advertising under a team name without the brokerage name.
- Continuing to trade after a registration lapses “to finish a few deals”.
- Failing to notify the Commission of an address change or a charge that affects registration.
Ethics, Professional Conduct and Discipline
Ethics questions are rarely about unusual facts; they are about the obvious answer that protects the public, which candidates talk themselves out of. The exam wants the conduct rule and the consequence.
Standards of conduct
Registrants must act honestly and with integrity; be competent for the work accepted; disclose material facts in writing; protect confidential information; avoid and disclose conflicts of interest; avoid misleading advertising; account for money; cooperate with other registrants and with the Commission; and comply with the Act, regulations and bylaws. Caveat emptor governs what a seller must volunteer about a property, but it never licenses a registrant to make a false or misleading statement or to conceal a known material fact.
Complaints and discipline
A complaint goes to the Commission, is reviewed or investigated, and may proceed to a discipline hearing. Orders can include fines, suspension, conditions on practice, required education, costs, or revocation of registration. Appeal rights are set by the Act. A private settlement with a complainant does not end the Commission’s process, because the regulator protects the public, not only the individual.
Worked example
A registrant advertises a rental property as “guaranteed 8% return, no risk”, based on nothing but the seller’s optimism, and does not tell the buyer about a pending work order on the building. The buyer loses money. Two breaches: misleading advertising and failure to disclose material facts. That the buyer never complained, or that the seller said it first, is no defence - a registrant cannot hide behind a client’s statement.
Traps
- Assuming an honest belief excuses a claim a reasonable registrant would have checked.
- Treating “the seller told me to say it” as a defence.
- Believing confidentiality ends at closing.
- Discussing a client’s affairs with another registrant as gossip.
- Ignoring the duty to report misconduct or a charge that affects your registration.