Which term describes fraudulent activity where a broker uses funds or property belonging to another for personal use, including misusing, commingling, or failing to account for funds?

• A. Misrepresentation
• B. Conversion
• C. Prohibited false/misleading advertising
• D. Example of filing false documents

Answer: (B)

The key idea here is how a broker handles someone else’s money or property. Using funds or property that belong to another person for the broker’s own use, including actions like misusing what’s in a trust, mixing client funds with personal money (commingling), or failing to keep accurate records and accounts, is called conversion. This term covers taking or using someone else’s property as if it were the broker’s own, which is a serious breach of fiduciary duty and illegal.

Think of it this way: clients’ funds are supposed to be held in trust and accounted for separately. When a broker diverts or improperly uses those funds, or doesn’t properly account for them, that movement from rightful ownership to personal use fits the description of conversion.

The other options describe different problems: misrepresentation involves false statements about a transaction or property; prohibited false or misleading advertising refers to deceptive marketing practices; and filing false documents concerns falsifying forms or records. None of these capture the act of taking or inappropriately using someone else’s funds or property in the way conversion does.