Commingling

Commingling is when units are combined and treated the same, despite having different origins. This means that funds or financial instruments may be combined, usually in order to increase processing efficiencies. Commingling may also occur with the intent of violating the law. For example:

  • A business owner buys assets through his company, and then uses them as an individual, not on behalf of the company. This is illegal commingling of assets between the individual and the corporate entity.
  • An investor sends funds to a broker, with instructions to invest the funds in a particular manner. The broker cannot merge these funds into its other accounts, as this would be commingling of the assets of a separate entity.
  • A mutual fund commingles the cash deposited with it by investors, so that it can use the funds to acquire government securities in bulk.
  • A company takes a deposit from a customer for an order, and transfers the funds into its general checking account. The funds are still owned by the customer until the related order is complete, but the company is parking the cash in its general account, since this is its standard procedure for handling cash.

It can be difficult to trace back funds that have been commingled, to prove that they have a separate owner. This is a particular issue in a divorce proceeding, since funds earned by the couple have usually been deposited into a joint, commingled account.