The Deposit That Missed the Trust Account
Tessa is a salesperson at a brokerage in Moose Jaw. On Friday at 4:30 p.m. she receives a $10,000 deposit cheque from a buyer for a $310,000 house. The office manager puts the cheque in a desk drawer and deposits it the following Wednesday. The brokerage’s trust account is at a credit union. The broker later uses $2,000 from the trust account to pay office rent because a commission cheque is late, intending to repay it on Monday. The monthly trust reconciliation has not been completed for 47 days; it now shows a $2,000 shortage. Tessa is asked to sign the reconciliation as ‘reviewed’ even though she did not review it.
1. Identify the trust-account and professional-conduct breaches in this scenario.
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The deposit was not handled promptly. Trust funds must be deposited into the brokerage’s trust account without delay, not held in a desk drawer for several days. The broker then used trust money for office rent, which is a serious breach: trust funds are held for the buyer and seller and cannot be used for the brokerage’s operating expenses, even with an intention to repay. The reconciliation was overdue and showed a shortage, which should have triggered immediate investigation and correction. Asking Tessa to sign as ‘reviewed’ when she did not review the reconciliation is a false record and a professional-conduct issue. Each of these undermines the brokerage’s fiduciary duty and the integrity of the trust account. Tessa should not treat the shortage as a temporary bookkeeping issue; it is a reportable compliance problem.
2. What corrective steps should the brokerage take now?
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The broker should immediately restore the $2,000 from personal or operating funds, identify when the shortage occurred, and complete a full reconciliation of all trust liabilities and bank balances. The brokerage should stop using trust funds for any operating expense and move all future deposits promptly. It should document the shortage, the restoration, and the reconciliation. Depending on Saskatchewan requirements and the brokerage’s policies, the broker should report the matter to the Saskatchewan Real Estate Commission and cooperate with any audit or investigation. The office manager should be retrained on deposit procedures. Tessa should not sign a false review; she should tell the broker in writing that she did not perform the review and cannot certify it. The brokerage should also review whether client funds were ever at risk and whether any client needs to be informed.
3. What are Tessa’s professional obligations and risks if she signs the reconciliation?
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Tessa must not sign a statement she knows to be false. Signing as ‘reviewed’ when she did not review the reconciliation could make her complicit in covering up a trust shortage and could expose her to discipline, licence conditions, or worse. She should promptly report her concerns to the broker in writing and, if the broker does not correct the matter, escalate to the Commission. She should keep copies of the deposit cheque, the reconciliation, and her communications. Tessa also has a duty to cooperate with any investigation and to be truthful. Her obligation is not to protect the brokerage’s reputation at the cost of the trust account. If she is pressured to sign, she should refuse and document the pressure. The longer a shortage is concealed, the greater the risk to clients and to Tessa’s own licence.