The Deposit in the Personal Account
Kemar is a registered salesman with a licensed dealer in Mandeville. On a Friday afternoon, a buyer, Ms. Grant, gives him a $600,000 deposit for a $19.5 million house listed by Kemar's dealer. The dealer's trust account is locked because the broker is changing signatories, so Kemar deposits the cheque into his personal savings account and issues a receipt on the dealer's letterhead. He tells Ms. Grant the money is safe with me until Monday. Over the weekend the seller accepts a higher offer from another buyer. Ms. Grant demands her deposit back. Kemar says he will return $450,000 because the dealer is entitled to a $150,000 administration fee for work done. The listing agreement says commission is payable only on completion. Ms. Grant complains to the REB.
1. Identify the main statutory and ethical breaches in Kemar's handling of the deposit, and explain why each matters.
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The central breach is commingling client money with personal money. A licensed dealer is required to maintain a trust account for funds received in connection with real estate transactions, and a registered salesman acts under that dealer. Depositing Ms. Grant's cheque into a personal savings account removes the money from the dealer's controlled trust environment and exposes it to loss, attachment, or personal use. That is not a technical slip; it undermines the client-protection purpose of the trust-account rule.
The second breach is the receipt. Issuing a receipt on the dealer's letterhead while banking into a personal account creates a misleading record. The buyer is entitled to know who holds her money, on what terms, and where it is held. The third breach is the deduction of a $150,000 administration fee. Kemar has no agreement with Ms. Grant entitling him to charge her, and the listing agreement says commission is payable only on completion. A deposit is not commission, and a salesman cannot unilaterally convert a client's funds into a fee.
The ethical failures reinforce the statutory ones: dishonesty about where the money was held, failure to disclose the trust-account problem, and self-help collection of a disputed fee. Each matters because the REB regulates fitness and trustworthiness, not merely technical competence.
2. What regulatory consequences are likely, and what should the dealer do?
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The REB complaint is likely to be treated seriously because it involves client funds, a false or misleading receipt, and an unauthorized fee. The Board's disciplinary powers can include reprimand, conditions on registration, suspension, or revocation, and it may refer serious trust-account conduct for criminal investigation. The exact penalty would depend on the investigation, but the combination of personal banking and deduction of a fee is aggravating, not merely administrative.
The dealer should immediately audit the transaction, secure all records, ensure the full deposit is returned, and cooperate with the REB. The dealer should also review supervision of salesmen, trust-account procedures, receipt controls, and what a salesman is permitted to do when the trust account is unavailable. Because the dealer is responsible for the conduct of its registered salesmen, it should not treat this as Kemar's private problem. Kemar should be removed from client-money handling pending investigation and should receive written instructions not to contact Ms. Grant except through the dealer or its attorney. The dealer should also check whether any other deposits were handled the same way and correct any pattern.