Which statement about broker escrow funds is true in NY practice?

• A. Funds may be kept in the broker's general operating account.
• B. Funds must be held in an escrow or trust account separate from business funds and disbursed according to contract terms or legal orders.
• C. Escrow funds must be deposited within 5 days of contract signing.
• D. Escrow funds can be used to cover operating expenses.

Answer: (B)

In New York practice, escrow funds are client money and must be kept in a dedicated escrow or trust account, separate from the broker’s own business funds. This separation protects the funds from comingling with the broker’s finances and ensures they’re available to be disbursed only according to the contract terms or a lawful order. The broker cannot use escrow money to cover operating expenses, and funds should be released only as the agreement or a court order directs. While there are rules about timely deposit, the essential point is that escrow funds must be safeguarded in a trust account and disbursed per the contract or legal directive.