The American Bar Association House of Delegates adopted new rules for record keeping regarding client trust accounts when it met earlier this month, reflecting changes in banking laws and technology, and evolving methods of legal practice.
“The Model Rules for Client Trust Account Records” will be promulgated to state high courts for potential adoption as practical guidance for compliance with ABA Model Rule of Professional Conduct 1.15, requiring lawyers to maintain complete records regarding their client trust accounts and to render a full accounting of the receipt and distribution of trust property.
The requirements of Model Rule 1.15 have been adopted in every U.S. jurisdiction, and 28 jurisdictions have adopted additional rules or comments outlining the types of records lawyers must maintain.
Five other jurisdictions direct lawyers to the 1993 ABA Model Rule on Financial Recordkeeping for guidance. The new Model Rules for Client Trust Account Records supplant the 1993 model.
As explained by the ABA Standing Committee on Client Protection, key sponsor of the new model, it responds to a number of changes in banking and business practices that may have left lawyers “inadvertently running afoul of their jurisdiction’s rules of professional conduct.”
One key change was Congressional adoption in 2003 of the Check Clearing for the 21st Century Act, commonly referenced as Check 21, allowing banks to substitute electronic images of checks for canceled checks.
The previous ABA model rule required lawyers to maintain original canceled checks.
The change also addresses the increasing prevalence of electronic banking and wire transfers or electronic transfers of funds, for which banks do not routinely provide specific confirmation.
The new rule acknowledges those issues, addressing record-keeping requirements after electronic transfers and clarifying who can authorize such transfers, record maintenance and safeguards required for electronic record storage systems.
A second change details minimum safeguards lawyers must implement when they allow non-lawyer employees to access client trust accounts.
A third rule allows lawyers to maintain client trust account records in electronic, photographic, computer or other media or paper format, either at the lawyer’s office or at an off-site storage facility.
But it requires that the records be readily accessible to the lawyer and that the lawyer be able to produce and print them upon request.
For lawyers using third-party or Internet-based file storage, the rule requires that the lawyer ensure the company has established reasonable procedures to protect client confidentiality and ensure the files can be accessed by a disciplinary authority, client or interested third-party in response to a subpoena or other court demand for production.
The fourth and fifth rules address law firm partner responsibilities for storage of and access to client trust account records when partnerships are dissolved or when a practice is sold.
The Standing Committee on Client Protection promotes and enhances mechanisms to protect clients, including programs to reimburse clients for financial loss caused by lawyers’ misappropriation of client funds, arbitration of fee disputes and mediation of other client-lawyer disputes, and identifies and comments on emerging issues in regulating the practice of law.
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