What action by a licensee would constitute commingling?

Commingling occurs when a licensee mixes client funds with personal or business funds, which is against ethical and legal standards in real estate transactions. In this scenario, depositing a client's earnest money into the firm's operating account represents commingling because it involves treating the funds intended for a specific purpose—such as securing a property—like regular operating funds. This action not only risks the fiduciary duty owed to the client but also can create legal complications if the funds are not easily segregated for their intended purpose.

Maintaining clear boundaries between client funds and the firm's operational finances is crucial for compliance with regulatory requirements. Therefore, using a client’s earnest money in a way that doesn't clearly separate those funds from the company's general finances directly exemplifies the practice of commingling.