How must a purchaser's deposit be handled under NSAR rules?

• A. Deposits may be kept in the broker's operating account.
• B. Deposits must be held in a trust account separate from business funds.
• C. Deposits are optional and do not require records.
• D. Deposits are always returned immediately.

Answer: (B)

Deposits are client funds and must be kept in a trust account separate from the broker’s regular operating funds. This separation protects the buyer’s money from being mixed with the broker’s business funds and ensures there’s a clear, auditable record of all funds tied to the transaction. The broker has a fiduciary duty to hold these funds in trust, not to use them for operating expenses.

The funds stay in the trust account until the transaction closes or until the agreement specifies when they are released or returned. They are not automatically returned immediately, as release depends on the contract terms, closing conditions, or properly documented termination scenarios. Records and reconciliations for the trust account are essential to show precisely where the money is and how it’s been handled.

So the correct approach is to keep the purchaser’s deposit in a separate trust/escrow account, not in the broker’s operating account.