Which term describes the illegal act of appropriating trust account funds for an agency's operating expenses?

The term that describes the illegal act of appropriating trust account funds for an agency's operating expenses is conversion. In the context of real estate and agency operations, conversion specifically refers to the unauthorized use of client or customer funds. This typically occurs when a broker or agent diverts money that is held in a trust account—meant for specific clients or purposes—into the agency's general operating expenses. Such actions are considered a serious violation of ethical standards and legal regulations, as trust accounts are intended to safeguard client funds and ensure they are used only for their designated purposes.

Understanding this concept is crucial for professionals within the real estate field. It reflects the importance of maintaining the integrity of client funds and adhering to fiduciary responsibilities. Engaging in conversion not only poses legal risks but also undermines client trust and the ethical standards inherent in agency practices.