10.1 Trust Accounts, the 72-Hour Deposit Rule, and Commingling

10.1 Trust Accounts, the 72-Hour Deposit Rule, and Commingling

Correct rule: Trust requirements are part of Rule 67.70. Rule 67.72 concerns associate auctioneers and is not the trust-account citation.

Money Belonging to Another

Auction receipts are not automatically the auctioneer's money. The seller's share, refunds owed to buyers, taxes collected, and other restricted amounts must be identified and handled according to their legal character.

Rule 67.70 requires proceeds belonging or owed to another to be placed in a separate trust or escrow account maintained at a federally insured bank or savings and loan association. The rule should not be enlarged into unsupported requirements that the institution be physically located in Texas, that a credit-union account always qualifies, or that the auctioneer may freely keep a “nominal cushion” of operating money in the account.

Use an account clearly designated for fiduciary money and confirm with the institution that it meets the rule.

The 72-Hour Rule

Auction proceeds are deposited into the trust or escrow account within 72 hours after the auctioneer receives them unless:

• the owner or consignor is paid immediately; or
• the written contract provides another lawful arrangement.

The trigger is receipt, not the hammer. A buyer's promise or an uncollected check is different from collected money. Keep a receipt date, deposit date, and traceable batch total.

The written-contract exception should be explicit. Silence is not an agreement to leave money in an operating account. Even when the contract changes timing, the auctioneer remains responsible for safeguarding and remitting the money.

No Commingling or Cross-Funding

Commingling occurs when client money is mixed with the auctioneer's personal or operating money so the ownership cannot be cleanly identified. Conversion or misapplication occurs when the money is used for an unauthorized purpose.

Examples of prohibited risk include:

• paying office rent from gross auction proceeds before authorized settlement;
• using Sale A receipts to pay Sale B's seller;
• delaying deposit so the operating account avoids an overdraft;
• treating collected sales tax as profit; or
• withdrawing a commission before it is earned and supported by the agreement.

Separate accounts do not excuse poor ledgers. The bank balance should equal the total of individual client liabilities plus any separately identified lawful amount.

Checks, Cards, and Chargebacks

Checks may be deposited but can be returned. Card receipts can be charged back. The contract should define when funds are considered collected and whether seller payment waits for clearance, consistent with Rule 67.70.

Do not refund one bidder from another seller's money. Trace the original receipt, preserve the dispute file, and obtain authority for any deduction. Payment processors should settle to the correct trust account when they receive fiduciary auction proceeds.

Reconciliation

A useful three-way reconciliation compares:

1. bank balance and deposit activity;
2. buyer ledger—hammer, premium, tax, payment, refund; and
3. seller ledger—gross proceeds, authorized deductions, payment due.

Differences should have documented timing explanations, such as an uncleared check or pending authorized refund. “The software total looks right” is not enough.

Example: hammer receipts are $50,000, premium earned by the auctioneer is $5,000, tax collected is $4,125, and a buyer deposit refund of $1,000 is owed. The ledger must identify each category. The $5,000 does not become operating money until the agreement and settlement permit withdrawal.

Security Controls

Use dual approval for wires, independent callback for changed instructions, daily review of incoming receipts, restricted user access, positive pay when available, and monthly bank reconciliation. Never accept emailed wire changes without verification through a known number.

Keep copies of bank statements, deposit slips, processor reports, canceled checks or images, wire confirmations, seller settlements, and supporting contracts for the required period.

Discipline

Occupations Code § 1802.251 identifies failure to account for or remit another's money, commingling, and failure to keep another's funds in escrow or trust as grounds for discipline. Depending on intent and facts, civil fiduciary claims or criminal misapplication statutes may also apply. Do not call every bookkeeping mistake a felony; do recognize that intentional misuse is serious.

Exam Rule

Remember separate federally insured bank/S&L account + 72 hours, unless immediate payment or the written contract provides otherwise.

Deposit Evidence

For each receipt batch, retain the processor report or deposit slip, note the receipt time, and connect the amount to buyer invoices. That evidence proves the 72-hour rule and makes a later chargeback or refund traceable without borrowing from another client.