By Alice Neece Mine
1.15 of the North Carolina Rules of Professional Conduct, and its
subparts, contains many provisions about the duty to deposit client
funds in a trust account to protect and secure the funds. For example,
Rule 1.15-2(b) admonishes: All trust funds received by or
placed under the control of a lawyer shall be promptly deposited
in either a general trust account or a dedicated trust account of
the lawyer. The rule does not say where a lawyer should establish
a trust account except that it must be maintained at a bank
in North Carolina unless there is written consent of the client
to deposit the funds in an institution outside of the state. Rule
1.15-1(e). Bank is tersely defined as a bank,
savings and loan association, or credit union chartered under North
Carolina or federal law. There is no list of approved or recommended
banks from which a lawyer must choose. The choice of a depository
bank for your trust account is entirely up to you. What many lawyers
do not realize is that the decision to establish a trust account
at a particular bank may make a difference in whether the lawyer
is in compliance with the Rules of Professional Conduct.
lawyer with a trust account must insure that the depository bank
does the following things:
Reports to the North Carolina State Bar when an instrument drawn
on the trust account is presented for payment against insufficient
funds. See Rule 1.15-2(k). A lawyer may not maintain a trust or
fiduciary account at a bank that does not agree to make the reports.
The State Bar can provide you with a form directing your bank to
report overdrafts to the State Bar. [Notice form available at www.ncstatebar.org]
Provide the lawyer with all canceled checks or other instruments
drawn on the trust account or printed digital images of the checks.
The digital images must be legible reproductions of the front and
back of the original instrument with no more than six instruments
per page and no images smaller than 1 3/16 x 3 inches. Rule 1.15-3(a)(2).
If the bank provides only digital images of canceled checks and
instruments, it must maintain the capacity to reproduce additional
or enlarged images of the original instruments upon request for
a period of six years. Rule 1.15-3(a)(2).
your bank is not doing these things, you are professionally responsiblenot
DeMolli, the staff auditor who performs random audits of trust accounts,
reports that compliance with the requirements varies substantially
from bank to bank and from branch office to branch office. Some
banks regularly fail to notify the State Bar when a trust account
check is presented against insufficient funds. This occurs despite
the fact the lawyer properly filed a directive with the bank, pursuant
to Rule 1.15-2(k), instructing the bank to notify the State Bar.
Many of the branch offices of one large statewide bank notify the
State Bar only when a trust account check is presented against insufficient
funds drawn on an IOLTA account. The reporting requirement applies
regardless of whether the lawyer participates in the IOLTA program.
problem that Bruno sees regularly is non-compliance with the record-keeping
requirements relative to digital images of cancelled trust account
checks. Many banks do not provide the back image of the check or
the images are smaller than permitted by Rule 1.15-3(a)(2). Some
banks keep digital records for a much shorter period than the six
years mandated by Rule 1.15-3(a)(2). Non-compliance with these requirements
substantially impairs the enforcement efforts of the State Bar.
Do You Fulfill Your Professional Responsibility to Choose the Right
you are responsible for the banks compliance with the notice
and record-keeping requirements, the only way for you to act in
a professionally responsible manner is to investigate the banks
in your community to find out which banks understand the requirements
and are willing to comply. If the bank maintains only digital images
of cancelled checks, you must ensure that the size and front/back
requirements are being met and that the bank maintains the ability
to reproduce the records for a period of at least six years. Once
you chose a bank, monitor the banks compliance and, if the
bank changes its procedures, insist upon compliance or move your
trust account at a bank that will comply. If a local branch manager
does not understand the requirements, encourage the manager to contact
the home office for instructions or call the State Bar. The lawyers
in the ethics department and Mr. DeMolli would be glad to explain
Youre At It, Help IOLTA
Supporting improvements in the administration of justice is another way to act in a professionally responsible manner. While you are investigating banks, consider depositing your clients funds in an IOLTA bank that has policies that increase the earnings for IOLTA. The higher the interest paid on the IOLTA account and the lower the service charges, the more income for IOLTA. A trust account at a bank that has favorable policies can be very beneficial to the IOLTA program, while accounts at a bank with less favorable policies can actually cost the program money. For more information about a banks IOLTA account policies, contact the IOLTA office at 919-828-0477.
THE NORTH CAROLINA STATE BAR
217 E. Edenton Street (27601) • PO Box 25908 • Raleigh, NC 27611-5908 • 919.828.4620
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