How can the State Bar better protect funds that attorneys hold in trust for their clients?

Lawyer on the phone and laptop/Abogado en el teléfono y la computadora portátil

When lawyers hold money for their clients, they are required to keep it in a client trust account. This money could include settlements owed to clients and advance payments for court costs, for example.

The State Bar wants to improve public protection by strengthening oversight and regulation of these accounts. We would collect information about how much money may be flowing through client trust accounts in any given year, require lawyers who have client trust accounts to do annual self-assessments, and assess if the accounts are being properly managed.

It’s called the Client Trust Account Protection Program (CTAPP).

Why we need your views The State Bar seeks public comment on the rules that would govern this new program.

You can provide comments on any or all of the rules. It’s okay if you support some and oppose others.

A man talking on the phone/Un hombre hablando por telefono
Question bubble/Burbuja de preguntas.

State Bar authority to implement the CTAPP

Should the State Bar implement a Client Trust Account Protection Program?

The details: The new program would require lawyers, every year, to:

  • Register their trust accounts with the State Bar;
  • Confirm their compliance with related rules of professional conduct; and
  • Complete a self-assessment on their client trust account management practices.

With additional resources, the State Bar would also be able to:

  • Select a sample of lawyers for compliance reviews;
  • Recommend compliance audits for selected lawyers; and
  • Mandate corrective action, or referral for disciplinary action, for attorneys whose audit results indicate they are out of compliance with the rules.

A new California Rule of Court would grant the State Bar the authority to implement key parts of this program. It would:

  • Authorize the State Bar Board of Trustees to adopt rules and regulations for the program;
  • Provide examples of the requirements that may be imposed on lawyers; and
  • Specify that a failure to comply with a CTAPP requirement would subject a lawyer to being placed on inactive status.

You can review the full proposed Rule of Court, Rule 9.8.5, here.

Question bubble/Burbuja de preguntas.
Question bubble/Burbuja de preguntas.

Changing rules about how attorneys handle trust account funds

Should the rule governing a lawyer’s handling of funds or property that belong to a client be changed to enhance the requirements it imposes?

The details: The State Bar is proposing amendments to the rule that governs attorneys’ responsibilities in handling client trust accounts. The changes include:

  • Requiring the lawyer to notify their client within 14 days of receiving funds or property.
  • Removing the condition that a lawyer’s duty to distribute funds or property is triggered only when they receive a client request.
  • Providing for discipline for a lawyer’s failure to distribute undisputed funds or property within 45 days of receiving them.
  • Adding a comment that a lawyer must act diligently to resolve any disputes that delay the distribution of funds or property.

You can view Rule 1.15, with proposed amendments, here.

Clarifying that attorneys must communicate with clients after receiving client funds

When attorneys receive funds intended for the client, should they be required to contact that client?

The details: This change would add a comment to the rule governing a lawyer’s communications with a client, that a lawyer must proactively communicate with a client when the lawyer receives funds on the client’s behalf. You can view Rule 1.4, with the proposed added comment, here.