Statutory Requirements: Trust Accounts and Prohibited Conduct
The statutory requirements governing licensees also cover handling client money and the conduct South Dakota law prohibits. This chapter covers trust accounts, disputed deposits, and grounds for discipline.
Trust Accounts
A responsible broker must hold client money, such as earnest-money deposits, in a trust account separate from the broker's personal or business funds. A broker associate who receives client funds must deliver them to the responsible broker promptly. Commingling trust money with the broker's own funds, or converting it to the broker's use, is prohibited and is one of the most serious violations of South Dakota license law.
Disputed Deposits and Recordkeeping
When the parties make conflicting demands for an earnest-money deposit, the responsible broker acts as a neutral stakeholder and must not release the funds unilaterally, retaining them until the parties agree in writing or a court resolves the dispute. Brokers must keep accurate trust-account records and be able to show that each client's funds are intact. Poor records or unexplained shortages are grounds for discipline.
Prohibited Conduct
South Dakota law lists conduct that can lead to discipline, including misrepresentation, false advertising, failing to provide required disclosures, commingling or converting trust funds, and other dishonest dealing. Licensees must deal honestly with all parties and disclose known material facts. Knowing the prohibited practices and their consequences is essential because the statutory-requirements section is the heaviest-weighted part of the South Dakota state exam.