Advance payments held in trust accounts are restricted in what way?

• A. They can be withdrawn freely by the licensee
• B. They must be invested in equities
• C. They cannot be withdrawn except by regulation
• D. They are used to fund immediate costs

Answer: (C)

Advance payments placed in a trust account belong to clients and are held for the specific services they prepaid for. The licensee acts as a trustee, so these funds cannot be touched at the licensee’s whim. They can only be withdrawn in accordance with the regulations that govern trust accounts. This means releases and refunds happen only under the rules set by the regulator, not at the licensee’s discretion. This protection keeps prepaid funds safe for the services promised and for any permissible refunds if a contract is terminated or services aren’t provided.

In short, advance payments cannot be withdrawn except as permitted by regulation.