Series 63 practice questioneasyProhibited Practices — Commingling Funds
A broker-dealer deposits a customer's funds into the firm's general operating account. This is an example of:
- AProper cash management
- BCommingling of funds, which is prohibited✓ Correct answer
- CA temporary deposit pending investment
- DAn authorized sweep arrangement
Explanation
Why B — Commingling of funds, which is prohibited
Under NASAA model rules and USA Section 502, commingling customer funds with a broker-dealer's own funds is a prohibited practice. Customer funds must be maintained in separate accounts to protect them from the firm's creditors and to ensure proper accounting. Mixing customer and firm funds creates significant risks of misuse and loss.
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