West Virginia Code of State Rules › Agency 174 - Real Estate Commission › Title 174 - LEGISLATIVE RULE REAL ESTATE COMMISSION › Series 174-05 - Compliance With Requirement That Broker's Trust Fund Accounts Be Insured Against Loss › Section 174-5-3 - Commission Findings

Current through Register Vol. XLI, No. 28, July 12, 2024
(a) West
				Virginia Code §
									30-40-18(c),
				which requires that brokers' trust fund account be federally insured, is an
				important public policy that is necessary to protect the public interest.
				However, the FDIC insurance for deposits at a particular financial institution
				may be insufficient, requiring some brokers to either open additional trust
				fund accounts at other financial institutions or at times be out of compliance
				with this important requirement when the balance of the trust fund account
				exceeds the amount that is insured against loss.
(b) The Commission finds there is a need to
				allow brokers to have a means for complying with §
									30-40-18(c)
				through safe, secure, established banking products that allow for the temporary
				deposit of excess funds with other insured financial institutions. The
				Commission finds that a cash sweep product is such a safe, secure and
				established means for brokers with excess funds to comply with the provisions
				of §
									30-40-18(c).
(c) The Commission finds that such accounts
				comply with the current provisions of West Virginia Code §
									30-40-18 so
				long as an appropriate addendum to the Trust Fund Account Statement and Consent
				to Examine is signed by the broker and the financial institution where the cash
				sweep account is established.
(d)
				The Commission finds that brokers with cash sweep accounts may at times require
				the withdrawal of funds which are on deposit in other financial institutions
				due to the cash sweep account. West Virginia Code §
									30-40-18(d)
				and related rules require that each trust fund account provide for the
				withdrawal of funds without notice. Since excess funds may at times be
				deposited in other financial institutions in accordance with the cash sweep
				account agreement, the relationship institution must agree to advance funds on
				any check drawn against the broker's trust fund account for which there are
				sufficient funds in the cash sweep account unless prohibited by applicable law
				or court order or cannot by reason of force majeure or circumstances beyond the
				relationship bank's control.
(e) In
				the event of such advanced payment, the Commission finds that the advance is
				not a loan, the funds in the cash sweep account are not collateral for a loan,
				the anticipated debit of the funds in the cash sweep account does not breach
				the broker's fiduciary obligations in relation to the broker's trust fund
				account, and the relationship bank's advance to cover a check drawn against the
				broker's trust fund account with the understanding that the advanced funds will
				be debited upon receipt of the swept funds deposited elsewhere is not violative
				of West Virginia Code §
									30-40-18(f)
				and related rules.