Commingling

Commingling occurs when a broker fails to maintain a clear boundary between personal/brokerage corporate funds and fiduciary funds. Brokers are legally required to keep separate trust accounts to ensure client money is completely safeguarded.

Texas-Specific Nuance & Citation

Under TREC Rules §535.146(d), a broker may not commingle trust money with personal or business money. The rule requires that all escrow or trust funds must be deposited into a designated trust account or with an authorized escrow agent (such as a title company) within strict timelines.

The Trap

Candidates often confuse “commingling” with “conversion.” Commingling is simply the mixing of funds, which is a violation in itself even if no money is stolen. Conversion is the actual spending or misappropriation of a client’s funds for the broker’s own use.

Worked Example

A broker in Beaumont receives a $10,000 cash earnest money deposit from a buyer. Short on time, the broker deposits the cash into the brokerage’s general office operating account, intending to transfer it to the title company on Monday. This is commingling—a direct violation of TREC rules.