4. Deposits Held as Agent or Stakeholders; Petty Cash; Interest Flashcards
In a property sale, what occurs to the deposit where the firm acts as agent for its seller client?
The funds belong to the seller on exchange and will be credited to the seller’s client account
In a property sale, what should happen to the mortgage funds?
Credited on a separate account for the lender when received
If a payment is made on behalf of a client using petty cash, where must the funds come from, even if there is enough in the client account?
The business account
What interest on bank deposits must firm pay to a client?
They must account for a fair sum of interest
What must firms provide to come to a different agreement regarding the payment of interest?
Sufficient information to enable the client to give informed consent
What is required of the firm’s policy regarding the payment of interest?
It must be in writing, and presented to the client at the outset of any transaction
When is the payment of interest usually settled?
At the conclusion of a client matter
May the firm adopt a de minimis policy, and even pay no interest?
Yes
What can a firm do with any interest earned on client deposits which exceeds the amount payable under the rules?
Keep it
If a firm opens a separate account for a client, what additional interest obligations does this give rise to beyond funds held in a general client account?
None
What are the three ways a firm can account to a client for interest?
- Offset interest owed from amounts owed to firm by client
- Transfer the sum of interest from business account to client account
- Send interest directly to the client, if the transaction has ended
Again, what should we be weary of on the exam?
Any answer choice suggesting a firm must pay interest
