Question 14

A broker who charges or collects an advance fee in excess of $25 for services to be rendered MUST furnish within ninety days of its collection an accounting of how the money was used.

When a broker collects an advance fee exceeding $25, they are required to provide an accounting of how that money was utilized within ninety days of its collection. This requirement ensures transparency and accountability in the handling of client funds.

A) deduct the amount collected from the commission or settlement

This option is incorrect because there is no requirement for the broker to deduct the advance fee from the final commission or settlement. Instead, the focus is on providing an accounting of the funds collected.

B) give the principal receipts for all expenditures

While providing receipts for expenditures may be good practice, this option does not specifically address the requirement related to advance fees. The law mandates an accounting of the usage of the fees, which encompasses more than just issuing receipts.

C) furnish within ninety days of its collection an accounting of how the money was used

This option is correct as it directly reflects the legal obligation of the broker. The requirement to furnish an accounting ensures that clients are informed about the use of their funds, promoting trust and compliance with regulations.

D) retain the difference between the amount of money collected and the amount spent

This option is not correct because it implies that the broker can keep any unspent amount, which is not stipulated in the regulations. The focus is instead on providing an accounting of the funds rather than retaining excess fees.

Conclusion

The requirement for a broker to furnish an accounting within ninety days of collecting an advance fee over $25 ensures clients receive clarity and transparency regarding their payments. Options A, B, and D do not fulfill this legal obligation, making option C the only correct choice that aligns with regulatory standards.