Commingling

Commingling

1. In securities, it is the mixing of customer-owned securities with brokerage-owned securities.

2. In trust banking, it is the pooling of individual customer accounts into a fund, a share of which each contributing customer owns. This works similarly to a mutual fund.

3. In real estate, it is the illegal act of a broker combining clients' funds with personal funds since, by law, a broker is required to use a separate trust or escrow fund to temporarily hold a client's funds.

Notes:

In all contexts, commingling is basically mixing funds so that they are considered the same material fund. For example, if you deposit a paycheck into an inheritance fund, then the paycheck would not be considered separate funds but part of the inheritance fund. Thus, the paycheck is no long considered separate property from the inheritance. Another example is an egg white and an egg yolk. You can separate the white from the yolk before cooking, but if you mix the two, they cannot be separated.

See also: Commingled Fund, Escrow, Mutual Fund, Trust

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Commingling

In the context of securities, this involves mixing customer-owned securities with brokerage firm-owned securities. This process is referred to as rehypothecation, which is the use of customers' collateral to secure their loans. This is legal with customer consent, although some securities and collateral must be kept separately.