98. A broker’s trust account shows Client A negative $1000 and Client B positive $2000. Is this permissible?
Answer: B
It is a violation of real-estate license law.
Maintaining a broker's trust account with a negative balance for any client is not permissible under real-estate license law. The broker is required to ensure that all clients' funds are properly accounted for and safeguarded, which means no client should ever show a negative balance.
A) This is okay because there is more than enough to cover the $1000 shortfall
This option is incorrect because the presence of a positive balance in another client's account does not justify or allow for a negative balance in a different client's account. Each client's funds must be treated separately, and having a negative balance indicates mismanagement of those funds.
B) This is a violation of real-estate license law
This option is correct as it accurately reflects the legal requirements surrounding the management of trust accounts. Real-estate license laws mandate that brokers maintain clear and accurate records, ensuring no client’s account shows a negative balance, thereby protecting clients' funds.
C) This is a violation of federal banking regulations
While there may be relevant federal banking regulations that pertain to trust accounts, the scenario specifically involves real-estate license law. Therefore, this option is not the most accurate choice in the context of the question, which emphasizes the obligations under real estate regulations.
D) This is okay because Client A will replenish before Client B is paid
This option is incorrect because it assumes that future actions can justify the current negative balance. Trust account regulations require that client funds be available and accounted for at all times, regardless of anticipated future deposits.
Conclusion
The violation of real-estate license law is clear in this scenario, as it prohibits any client from having a negative balance in a trust account. All other options fail to recognize the stringent legal requirements that govern the management of client funds, thereby reinforcing why option B is the definitive correct choice.