Escrow and Trust Account Requirements
Handling other people's money is the most broker-distinctive competency. This chapter covers Delaware's escrow/trust rules, the prohibition on commingling, disputed deposits, and recordkeeping.
Separate Escrow Accounts and Commingling
Delaware requires client money to be kept in a designated escrow/trust account, separate from the broker's own business and personal funds. Mixing client funds with the broker's money (commingling) or using them for the broker's purposes (conversion) is prohibited. Holding multiple clients' deposits together in a properly maintained escrow account is normal; mixing them with the broker's own funds is not.
Disputed Deposits
When the parties dispute who is entitled to an escrow deposit, the Delaware broker is a neutral stakeholder and should not decide the dispute. The prudent course is to keep the funds in escrow until the parties agree in writing or a court directs disbursement, using interpleader if necessary. Paying out disputed funds on one party's demand exposes the broker to liability.
Recordkeeping and Reconciliation
Brokers must keep accurate escrow records and reconcile the account so the Commission can verify that all client funds are intact and properly handled. The escrow account is a fiduciary account and cannot be used as collateral for the broker's borrowing. Poor records or unexplained shortages are grounds for discipline.