Brokerage Operations, Supervision, Trust Accounts, and Recordkeeping
Supervision
Each brokerage must have a designated broker responsible for supervising licensees, employees, and unlicensed assistants. Supervision requires written policies, review of advertising, and oversight of transaction files.
Trust accounts
- Earnest money, security deposits, rents, and owner funds go into a dedicated trust account at a Minnesota depository.
- No commingling with operating funds; trust money may not pay business expenses.
- The broker reconciles the trust account monthly and retains records for at least six years.
- Disbursements require proper authorization; earnest money is released only on a signed cancellation or at closing.
Records and advertising
Keep a transaction file for every deal - agreement, disclosures, agency documents, closing statement - for six years. Advertising must identify the brokerage. Teams operate under the broker and are not separate brokerages.
Worked example
A salesperson receives a $10,000 earnest money check and deposits it in the brokerage's general account "until the inspection period ends." Even if the money is later moved into trust, the deposit is commingling and a breach of trust. Correct handling: deposit into the trust account promptly as the contract requires, and disburse only on written authorization.
Traps that cost marks
- Reconciling quarterly instead of monthly.
- Treating a team leader as a broker.
- Paying a referral fee to an unlicensed contractor.
- Discarding transaction files after closing.
- Letting a salesperson sign the trust account checks alone.