Recent news headlines of attorneys stealing from their clients have caused great embarrassment to the legal profession. Fortunately, these instances are the exception. The vast majority of attorneys and law firms view client money as sacrosanct and implement the highest standards of care in guarding these funds. It is important for all of our current and potential clients to know of our commitment to preserve and protect money and property entrusted to our care.
Every lawyer licensed by the Supreme Court of Pennsylvania is subject to the Pennsylvania Rules of Professional Conduct (the “RPC”). Serious violation of the RPC may result in the attorney being sanctioned, or even disbarred, by the Disciplinary Board of the Supreme Court of Pennsylvania. Section 1.15 of the RPC governs the safekeeping of property of clients and other third parties. The cardinal rule of RPC 1.15 is that an attorney must always maintain client funds completely separate from money that belongs to the attorney or law firm. Attorney and client funds may never be comingled.
Client funds must always be kept in a trust account that is completely separate from the attorney or law firm operating account. Attorneys can maintain trust accounts only at banks that are approved by the Pennsylvania Supreme Court. Trust accounts are generally of two types. A standard trust account is for the deposit of client funds in larger amounts that are expected to be maintained by the lawyer for longer periods of time. Interest on these accounts is paid to the client. The second type of trust account is maintained pursuant to the Interest on Lawyers’ Trust Accounts (“IOLTA”) program. The IOLTA program was established by the Supreme Court of Pennsylvania, and provides funding for legal assistance for low income citizens as well as legal education programs. IOLTA accounts house smaller amounts, or monies expected to be held by the lawyer for relatively short periods of time. Funds belonging to multiple clients are typically maintained in the IOLTA account, with interest regularly forwarded to the IOLTA Board to fund these programs. Whether it is a standard trust account or an IOLTA account, client money is always maintained separate from the money of the attorney or law firm.
RPC 1.15 imposes rules for accounting and reporting requirements for attorney trust accounts. For instance, a lawyer must keep accurate records of all transactions involving trust accounts, and maintain a proper check registry. If the trust account holds funds for multiple clients, the attorney must keep an individual ledger for each client. All trust accounts must be reconciled at least monthly. All trust account records must be available to be produced upon demand by the Disciplinary Board.
Approved banks have an important responsibility. If a check cashed against an attorney trust account is returned for insufficient funds, the bank is required to notify the Lawyers Fund for Client Security Board (the “LFCS”). Once the bank files this report, the LFCS will conduct an investigation, and if necessary, report the matter to the Disciplinary Board. This is a very important safety mechanism that protects clients by immediately alerting appropriate authorities when something is amiss with an attorney trust account.
Of the thousands of practicing attorneys in Pennsylvania, only a very few commit crimes against their clients. Unfortunately, it is these few that garner the most attention and foster mistrust of the legal profession. It is the hope of all honest attorneys that the self-policing policies of the Supreme Court of Pennsylvania are universally upheld to eliminate wrongdoing. Your trust matters to us, and we are committed to guarding all funds that are entrusted to us.
*This article is for general informational purposes only and is not intended as or a substitute for legal advice.