Does a bond make commingling safe...?

A QI told me his commingling of his client's accounts isn't a problem because they're bonded. Is that correct?

Well, it SOUNDS good, but there's something they're not telling you. First, let me explain commingling. Some QIs commingle their company's money with their client's proceeds into one large bank account. The advantages (for them) should be as obvious as the dangers are to you, the client. More common though, is the practice of commingling all of their client's proceeds into one large account that is separate from their company funds. They then comfort their clients by telling them that they're covered by a bond.

The problem with this is that while a bigger bank account earns them more interest (which they seldom share with you), the entire account is still vulnerable to being seized in a legal action. This is because the bond is designed to protect the account from inappropriate actions of the employees of the QI. It doesn't protect the account from any potential action of any of their clients. If a client's assets are seized and some of those assets are being held in a commingled account, a court can (and has) seize the entire account. An example of this last point was detailed in this Tee-Shot.

And the bond does not protect you from the actions of the owners of the intermediary company. If the intermediary only has a few employees, it's likely that at least one of the owners is responsible for the commingled account, meaning that the bond may not cover you anyway.

The bottom line is this: Don't take chances with your or your client's money. Use a QI that has completely segregated accounts, from the company and from one another, and has a bond for each one of them.

--The Experts