Humber/Ontario Real Estate Course 3 Exam Practice

Broker Ethan mistakenly issues a cheque from the trust account causing a shortfall, discovered three days later. What should the Broker do?

1. An equivalent amount must be placed into the trust account immediately upon discovering the mistake.

2. Administrative staff should be restricted from preparing cheques for signature.

3. Broker Ethan should rectify the shortfall during the next trust account reconciliation process.

4. Broker Ethan must cover the shortfall within a five-business-day period.

The correct answer is: An equivalent amount must be placed into the trust account immediately upon discovering the mistake.

When a broker issues a cheque from a trust account that leads to a shortfall, it is critical to address the situation immediately to maintain the integrity of the trust account and ensure compliance with the regulatory requirements governing trust funds. By placing an equivalent amount back into the trust account immediately upon discovering the mistake, the broker is effectively rectifying the situation right away, which is essential in safeguarding the interests of the clients whose funds are held in trust. This prompt corrective action ensures that the trust account balance reflects the accurate amounts owing to clients, adhering to ethical standards and legal obligations. Addressing the shortfall immediately also helps to prevent any potential consequences or complications that may arise from a failure to maintain the necessary balance in the trust account. This is particularly important for maintaining the trust and confidence of clients and to mitigate the risk of disciplinary action from regulatory bodies. In contrast, other options involve delaying the correction process or preventative measures that do not resolve the immediate issue at hand. Immediate rectification is crucial in maintaining compliance and upholding the fiduciary responsibilities of the broker.