Information on Trust Accounts

A trust account is a special bank account that a mortgage brokerage must use to hold client monies. This money can include deposits, payments for services, or funds from a mortgage transaction. The main purpose of a trust account is to keep clients’ money separate from the brokerage’s own funds, ensuring safety and transparency for clients.

Not every mortgage brokerage requires a trust account. Only those brokerages that hold money on behalf of their clients should apply to BCFSA for an authorization to hold a trust account. Brokerages cannot have a trust account unless BCFSA authorizes it.

A principal broker must make sure that authorized trust accounts follow the requirements set by the Mortgage Services Act (MSA), the Mortgage Services Regulation (Regulation), and the Mortgage Services Rules (Rules). The MSA, Regulation, and Rules provide other requirements related to trust accounts beyond what is set out in this Regulatory Information.

Information on Trust Accounts

Applying for Trust Account Authorization

To get approval to open or maintain a trust account, a mortgage brokerage must apply to BCFSA to amend its licence through the IRIS web portal.

Requirement to Use a B.C. Savings Institution

Once approved, trust accounts must be interest bearing and held in a B.C. savings institution (such as a bank or credit union). Brokerages and savings institutions must clearly mark these accounts as trust accounts in all related records, including cheques, statements, and deposit slips.

Signing Authority

At least one principal broker must have signing authority on each trust account. They must review and sign off on monthly reconciliations. More information on record keeping requirements can be found on BCFSA’s Mortgage Services Knowledge Base.

Payment Into Trust Accounts

Trust accounts are for holding clients’ money. Mortgage brokerages must make sure that no other kinds of funds are deposited into a brokage trust account.

Money received from or on behalf of clients must be deposited into a brokerage trust account promptly but no more than two business days after the date of receipt. There are two exceptions to this:

1. Where the client(s) agree in writing that the provision does not apply, the money can be given to a person authorized to take it, and the brokerage must maintain records of the transaction including the receipt of the money; or
2. Where the money received or held is in the form of a cheque, draft, or money order payable to someone other than the mortgage brokerage or a related licensee of the mortgage brokerage, provided that they deliver it to the person it is payable to, and the brokerage records the transaction and the receipt of the money.

Money is deemed to be held or received in trust by a mortgage brokerage if one or the following people receives or holds it:

• An officer, director, controlling shareholder, or partner of a mortgage brokerage that is a partnership or corporation;
• A controlling individual of a mortgage brokerage that is not a partnership or corporation;
• An employee of a mortgage brokerage or of a related licensee; or
• A person acting in an independent contractor relationship with a mortgage brokerage or with a related licensee.

Interest on Trust Account

Trust money must be held in an interest-bearing account. Any interest earned on a separate trust account maintained for a client must be paid to the client. For interest on pooled trust accounts, interest must be paid in accordance with the written instructions of each of the clients whose money is pooled.

Negative Balance in Trust Accounts and Trust Records

Mortgage brokerages must not allow a trust account to have a negative balance. If this happens, they must take immediate steps to eliminate the negative balance and must notify BCFSA immediately if the negative balance may result in a person having a claim for a compensable loss or; in any other case, within 10 days after the day on which the negative balance arose, unless the mortgage brokerage is able to eliminate the negative balance in that time.

Withdrawals from Trust Account

Money can only be withdrawn from trust accounts for specific reasons, such as:

• Mistaken deposits;
• Paying interest to clients;
• Licensee remuneration;
• Reimbursing expenses for mortgage administrators;
• Unclaimed money transfers under the Unclaimed Property Act;
• Courts orders; or
• Money paid to or in accordance with client instructions.

Licensee Remuneration

All mortgage broker remuneration for providing mortgage services must be paid to the mortgage brokerage first. Not all licensee remuneration is required to be held in a trust account, but if it is, certain rules must be followed when taking it out. Money in a brokerage trust account that is meant to pay licensees for mortgage services can be taken out only when it has been earned. Any share of money payable to another mortgage brokerage has to be paid directly from the brokerage trust account. Similarly, any net share of money being paid to a licensee of the brokerage must be paid directly to that licensee from the trust account. More information on remuneration can be found on BCFSA’s Mortgage Services Knowledge Base.

Payment to Licensee of Proceeds from Mortgage Sale

If a licensee sells a mortgage to a person, the money from the proceeds of that sale can be taken out of the trust account when the mortgage is transferred to the buyer.

Unclaimed Money Held in Trust

A mortgage brokerage may transfer unclaimed money in a trust account to the administrator appointed under the Unclaimed Property Act if the brokerage has made reasonable efforts to identify, locate, and notify the person who is entitled to the money. Before transferring any unclaimed money, they must wait until one year after the following time period:

• If a communication or cheque sent to the person entitled to claim the money is returned undeliverable to the mortgage brokerage, the day the brokerage received the returned communication or cheque;
• If a communication directing the person entitled to claim the money to take action by a specified day is ignored, the day specified in the communication; or
• If a cheque sent to the person entitled to claim the money is not cashed within three years, the day after the three-year period ends.

Definitions

• Trust money: all money held or received by a mortgage brokerage that is held on behalf of someone else, except remuneration that has already been earned by the mortgage brokerage at the time it is held or received by the mortgage brokerage.
• Trust account: an interest-bearing trust account maintained in a B.C. savings institution in accordance with the MSA and Rules.
• Pooled trust account: a trust account in which money is held on behalf of more than one person.
• Trust account record: all banking records relating to account transactions (including statements and cancelled cheques), records containing the amounts received and disbursed, the reason for the receipt or disbursement, and any unexpended balances, and monthly reconciliations.
• Trust ledger: A ledger required for pooled trust accounts that contains
  • Money related to mortgages, including all amounts received and spent, and any remaining balance;
  • Money related to payments for mortgage services, including all amounts received and spent, and any remaining balance; and
  • a monthly reconciliation that matches each mortgage or transaction with the trust money held, and the total amount held in the trust account with the remaining balances.

Applicable Section of Mortgage Services Act, its Regulations, or the Mortgage Services Rules

MSA

s. 33 [Trust accounts]

MSA Rules

s. 17 [Trust account authorization – amendment to licence]

s. 88 [Payment into trust account]

s. 89 [Interest on trust account]

s. 90 [Withdrawals from trust account]

s. 91 [Payment of licensee remuneration

s. 92 [Payment to licensee of proceeds from mortgage sale]

s. 93 [Unclaimed money held in trust]

s. 94 [Trust account requirements]

s. 95 [Negative balances in trust accounts and trust records]