204 Pa. Code r. 83.221 - Funds of clients and third persons Mandatory overdraft notification
(a) For
purposes of this rule, the following definitions apply:
(1)
Eligible Institution. An
Eligible Institution is a Financial Institution which has been approved as a
depository of Trust Accounts pursuant to section (h),
infra.
(2)
Financial Institution. A Financial Institution is an entity
which is authorized by federal or state law and licensed to do business in the
Commonwealth of Pennsylvania as one of the following: a bank, bank and trust
company, trust company, credit union, savings bank, savings and loan
association or foreign banking corporation, the deposits of which are insured
by an agency of the federal government, or as an investment adviser registered
under the Investment Advisers Act of 1940 or with the Pennsylvania Securities
Commission, an investment company registered under the Investment Company Act
of 1940, or a broker dealer registered under the Securities Exchange Act of
1934.
(3)
Fiduciary
Funds. Fiduciary Funds are 1.15 Funds which an attorney holds as a
Fiduciary, as defined in 1.15(a)(2) of the Pennsylvania Rules of Professional
Conduct. Fiduciary Funds may be either Qualified Funds or Nonqualified
Funds.
(4)
1.15
Funds. 1.15 Funds are funds which an attorney receives from a client
or third person in connection with a client-lawyer relationship, or as an
escrow agent, settlement agent or representative payee, or as a Fiduciary, or
receives as an agent, having been designated as such by a client or having been
so selected as a result of a client-lawyer relationship or the attorney's
status as such. When the term "property" appears with "1.15 Funds," it means
property of a client or third person which the attorney receives in any of the
foregoing capacities.
(5)
Trust Account. A Trust Account is an account in an Eligible
Institution in which an attorney holds 1.15 Funds. A Trust Account must be
maintained either as an IOLTA Account or as a Non-IOLTA Account, as defined in
1.15(a)(5) and (7) of the Pennsylvania Rules of Professional
Conduct.
(b) An attorney
shall maintain a Trust Account with respect to his/her practice in this
Commonwealth only in an Eligible Institution approved by the Supreme Court of
Pennsylvania for the maintenance of such accounts. Subject to the provisions
set forth herein, the Disciplinary Board shall establish regulations governing
approval and termination of approval for Eligible Institutions, shall make
appropriate recommendations to the Supreme Court of Pennsylvania concerning
approval and termination, and shall periodically publish a list of Eligible
Institutions.
(c) All Fiduciary
Funds shall be placed in a Trust Account (which, if the Fiduciary Funds are
also Qualified Funds as defined in 1.15(a)(9) of the Pennsylvania Rules of
Professional Conduct, must be an IOLTA Account) or in another investment or
account which is authorized by the law applicable to the entrustment or the
terms of the instrument governing the Fiduciary Funds.
(d) The responsibility for identifying an
account as a Trust Account shall be that of the attorney in whose name the
account is held.
(e) An attorney
shall maintain the following books and records for each Trust Account and for
any other account in which 1.15 Funds are held:
(1) all transaction records provided to the
attorney by the Financial Institution, such as periodic statements, canceled
checks in whatever form, deposited items and records of electronic
transactions; and
(2) check
register or separately maintained ledger, which shall include the payee, date
and amount of each check, withdrawal and transfer, the payor, date, and amount
of each deposit, and the matter involved for each
transaction.
(f) The
records required by this rule may be maintained in electronic or hard copy
form. If records are kept only in electronic form, then such records shall be
backed up at least monthly on a separate electronic storage device.
(g) The records required to be maintained by
Pa.R.P.C. 1.15 shall be readily accessible to the lawyer and available for
production to the Pennsylvania Lawyers Fund for Client Security and the Office
of Disciplinary Counsel in a timely manner upon request or demand by either
agency made pursuant to these Enforcement Rules, the Rules of the Board, the
Pennsylvania Lawyers Fund for Client Security Board Rules and Regulations,
agency practice, or subpoena.
(1) Upon a
request by Disciplinary Counsel under this subdivision (g), which request may
take the form of a letter to the respondent-attorney briefly stating the basis
for the request and identifying the type and scope of the records sought to be
produced, a respondent-attorney must produce the records within ten business
days after personal service of the letter on the respondent-attorney or after
the delivery of a copy of the letter to an employee, agent or other responsible
person at the office of the respondent-attorney as determined by the address
furnished by the respondent-attorney in the last registration form filed by the
respondent-attorney pursuant to Enforcement Rule 219(c), but if the latter
method of service is unavailable, within ten business days after the date of
mailing a copy of the letter to the last registered address or addresses set
forth on the form.
(h) An
Eligible Institution shall be approved as a depository for Trust Accounts of
attorneys if it shall be in compliance with applicable provisions of 1.15 of
the Pennsylvania Rules of Professional Conduct and the Regulations of the IOLTA
Board and shall file with the Disciplinary Board an agreement in a form
approved by the Board to comply with IOLTA Regulations governing approved
Eligible Institutions and to make a prompt report to the Lawyers Fund for
Client Security Board whenever any check or similar instrument is presented
against a Trust Account when such account contains insufficient funds to pay
the instrument, regardless of
(1) whether the
instrument is honored, or
(2)
whether funds are subsequently deposited that cover the overdraft or the
dishonored instrument is made good.
(i) For purposes of this rule:
(1) A Trust Account shall not be deemed to
contain insufficient funds to pay a check or similar instrument solely because
it contains insufficient collected funds to pay the instrument, and no report
shall be required in the case of an instrument presented against uncollected or
partially uncollected funds. This provision shall not be deemed an endorsement
of the practice of drawing checks against uncollected funds.
(2) Funds deposited in an account prior to
the close of business on the calendar date of presentation of an instrument
shall be considered to be in the account at the close of business on that date
notwithstanding the treatment of such funds by the Eligible Institution, for
other purposes, as being received at the opening of the next banking day
pursuant to
13 Pa.C.S. ยง
4108(b) (relating to items
or deposits received after cutoff hour).
(3) A check or draft against a Trust Account
shall be deemed to be presented at the close of business on the date of
presentation.
(j) No
report need be made when the Eligible Institution determines that the
instrument presented against insufficient funds had been issued in reliance on
a deposited instrument that was ultimately dishonored. This provision shall not
be deemed an endorsement of the practice of drawing checks against uncollected
funds.
(k) A failure on the part of
an Eligible Institution to make a report to the Lawyers Fund for Client
Security Board called for by this rule or to comply with IOLTA Regulations
governing approved Eligible Institutions may be cause for termination of
approval by the Supreme Court, but such failure shall not, absent gross
negligence, give rise to a cause of action, by any person who is proximately
caused harm thereby.
(l) Eligible
Institutions shall be immune from suit for the filing of any reports required
by this Rule or believed in good faith to be required by this Rule.
(m) An Eligible Institution shall be free to
impose a reasonable service charge upon the attorney in whose name the account
is held for the filing of the report required by this rule.
(n) A report filed pursuant to this rule
shall not, in and of itself, be considered a disciplinary complaint.
(o) A designated representative of the
Lawyers Fund for Client Security Board shall conduct a preliminary inquiry and
shall, where appropriate, refer the matter to the Office of Disciplinary
Counsel for further investigation. Neither a report filed with the Lawyers Fund
for Client Security Board pursuant to this rule nor a referral of such report
to the Office of Disciplinary Counsel shall, in and of itself, be considered a
disciplinary complaint.
(p) Reports
required to be made under this rule shall be made to the Lawyers Fund for
Client Security Board within five business days of the presentation of the
instrument.
(q) An attorney
required to file the registration form under Enforcement Rule 219(a), with the
exception of a person holding a Limited In-House Corporate Counsel License
under Pennsylvania Bar Admission Rule 302 or a foreign legal consultant license
under Pennsylvania Bar Admission Rule 341, shall identify the financial
accounts enumerated in paragraphs (1)-(3) during the period from May 1 of the
previous year to the date of the filing of the registration form. For each
account, the attorney shall provide the name of the Financial Institution, as
defined in Pa.R.P.C. 1.15(a)(4), or other bank or investment fund as allowed by
Pa.R.P.C. 1.15(k) and (l), its location within or outside the Commonwealth,
account number, type of account, and whether the account held funds subject to
Pa.R.P.C. 1.15. The attorney shall identify:
(1) all accounts in which the attorney held
funds of a client or a third person subject to Pa.R.P.C. 1.15;
Note: See paragraph (r)(1) of this rule for the definition of "funds of a client or a third person subject to Pa.R.P.C. 1.15" and paragraph (r)(2) for exclusions from the definition of "funds of a third person."
Note: If an attorney employed by a law firm receives fiduciary funds from or on behalf of a client and deposits or causes the funds to be deposited into a law firm account, the attorney must report the account of deposit pursuant to this paragraph (1).
(2) every account not reported under
paragraph (1) that held funds of a client or a third person (whether or not
subject to Pa.R.P.C. 1.15) over which the attorney had sole or shared signature
authority or authorization to transfer funds to or from the account;
and
(3) every business operating
account maintained or utilized by the attorney in the practice of law.
Note: The type of account shall be identified as an IOLTA Trust Account, see Pa.R.P.C. 1.15(a)(5); Non-IOLTA Trust Account (Interest for Clients), see Pa.R.P.C. 1.15(a)(7), (k), (l); IOLTA-exempt Trust Account (non-interest bearing), see Pa.R.P.C. 1.15(n); other authorized investments or accounts, see Pa.R.P.C. 1.15(k) and (l); or Business/Operating Account, see Pa.R.P.C. 1.15(j).
(r) For
purposes of subdivision (q) of this rule, the phrase:
(1) "funds of a client or a third person
subject to Pa.R.P.C. 1.15" means funds that belong to a client or third person
and that an attorney receives:
(i) in
connection with a client-attorney relationship;
(ii) as an escrow agent, settlement agent,
representative payee, personal representative, guardian, conservator, receiver,
trustee, agent under a durable power of attorney, or other similar fiduciary
position;
(iii) as an agent, having
been designated as such by a client or having been so selected as a result of a
client-attorney relationship or the attorney's status as such;
(iv) in connection with nonlegal services
that are not distinct from legal services;
(v) in connection with nonlegal services that
are distinct from legal services, and the attorney knows or reasonably should
know that the recipient of the service might believe that the recipient is
receiving the protection of a client-attorney relationship; or
(vi) as an owner, controlling party,
employee, agent, or as one who is otherwise affiliated with an entity providing
nonlegal services and the attorney knows or reasonably should know that the
recipient of the service might believe that the recipient is receiving the
protection of a client-attorney relationship;
(2) "funds of a third person" shall not
include funds held in:
(i) an attorney's
personal account held jointly; or
(ii) a custodial account for a minor or
dependent relative unless the source of any account funds is other than the
attorney and his or her spouse or spousal equivalent.
Notes
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