Which type of account is a broker prohibited from using for holding earnest money?

A broker is prohibited from using a business operating account for holding earnest money. This is because earnest money is considered a fiduciary responsibility and must be kept separate from the broker's own funds to avoid commingling. A business operating account is intended for the broker's business transactions and includes funds that are not related to client transactions.

When earnest money is held, it should be in a trust account, which is specifically designed for this purpose, ensuring that clients' funds are properly safeguarded. An interest-bearing account can be acceptable if it is disclosed to all parties involved, as it allows for the potential of accruing interest on the funds until they are disbursed. However, if the broker does not disclose that the earnest money will be held in an interest-bearing account, this would be a violation of the rules.

Therefore, the correct answer is that brokers are explicitly prohibited from holding earnest money in a business operating account, as doing so violates the principles of proper financial management and fiduciary duty.