Commissioner’s Regulation 2834(a) states that withdrawals may be made from a trust fund account of an individual broker only upon the signature of the broker or one or more of the following persons if specifically authorized in writing by the broker:
- A salesperson licensed to the broker.
- A person licensed as a broker who has entered into a written agreement pursuant to Section 2726 with the broker.
- An unlicensed employee of the broker with fidelity bond coverage at least equal to the maximum amount of trust funds to which the employee has access at any time.
Regulation 2834(b) also states that withdrawals may be made from a trust fund account of a corporate broker only upon the signature of:
- An officer through whom the corporation is licensed pursuant to Section 10158 or 10211 of the Code; or
- One of the persons enumerated in paragraph (1), (2) or (3) of Regulation 2834(a), provided that specific authorization in writing is given by the officer through whom the corporation is licensed and the officer is an authorized signatory of the trust fund account.
Regulation 2834(c) states that a broker or broker-officer is responsible or liable for the handling of trust funds regardless of the existence of any authorization given regarding signature authority.
The most common violations found in audits related to Regulation 2834 are:
- The failure of the broker or designated officer to be a signatory on the trust account (this may indicate a supervision problem).
- Presence of an unlicensed signatory on the trust account who does not have fidelity bond coverage.
- Fidelity bond coverage inadequate in amount and/or has a deductible.
- The failure of the broker or designated officer to give specific written authorization permitting a salesperson, broker or unlicensed person to sign on the trust account.