The legal obligation of loyalty, care, and honesty an agent owes to their principal in a trust relationship.
Why Fiduciary Duty matters on the exam
This term belongs to Agency. The questions below are real items from Freehold's bank that use it - each one cites its source.
Exam questions using Fiduciary Duty
Every Freehold question shows why the right answer is right — and cites its source.
Even if a bookkeeper performs the actual reconciliation calculations, ultimate responsibility for ensuring the trust account is properly reconciled rests with:
The bookkeeper alone, since they did the work
The bank holding the account
The state auditor who eventually reviews the account
The broker, whose license is on the line for trust account compliance
Show answer & explanation
The broker, whose license is on the line for trust account compliance — Because the broker's license and fiduciary duty are directly tied to trust account compliance, the broker cannot delegate away ultimate responsibility for accurate reconciliation.
Source: PSI National Real Estate Exam Content Outline — Broker Supplement
Rules governing interest earned on trust accounts primarily reflect a broker's fiduciary duty to:
Maximize the brokerage's overall profitability
Simply minimize the total amount of paperwork required at closing
Encourage clients to use interest-bearing accounts for larger deposits
Avoid personally profiting from funds held on behalf of clients
Show answer & explanation
Avoid personally profiting from funds held on behalf of clients — A broker's fiduciary duty prohibits secretly profiting from client trust funds, which is why any interest earned must be handled transparently rather than kept by the broker.
Source: PSI National Real Estate Exam Content Outline — Broker Supplement
A broker found to have commingled or converted client trust funds faces which of the following potential consequences?
License suspension or revocation, fines, and possible civil or criminal liability
A written warning with no further consequence, regardless of severity
Automatic dismissal of the complaint if the broker repays the funds
A temporary reduction in the broker's commission split only
Show answer & explanation
License suspension or revocation, fines, and possible civil or criminal liability — Trust account violations are treated as serious breaches of fiduciary duty, exposing brokers to license discipline up to revocation as well as potential civil damages and criminal prosecution.
Source: PSI National Real Estate Exam Content Outline — Broker Supplement
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