Escrow, Trust Accounts, and Broker Supervision
Handling other people's money is the most broker-distinctive competency. This chapter covers Connecticut escrow/trust-account rules, disputed deposits, and the recordkeeping expected of a supervising broker.
Holding Client Funds
Connecticut brokers must place client money, such as earnest-money deposits, in a separate escrow/trust account and must not commingle it with personal or business funds or convert it to their own use. The broker is accountable for the money and may disburse it only as the transaction and the parties' agreement allow. Commingling or conversion is a serious violation that can lead to discipline and Guaranty Fund claims.
Disputed Deposits
When the parties make conflicting demands for an escrow deposit, the broker acts as a neutral stakeholder and must not unilaterally decide who is entitled to the funds. The prudent course is to retain the money in escrow until the parties agree in writing or a court resolves the dispute, using interpleader if necessary. Releasing disputed money on one party's demand exposes the broker to liability.
Recordkeeping and Reconciliation
Brokers must keep accurate records of trust-account activity and reconcile the account so that every client's funds can be shown to be intact and properly handled. Complete records protect consumers and the broker, and unexplained shortages or poor records are grounds for discipline. This recordkeeping responsibility rests with the broker, not the individual salesperson.