Wisconsin Lawyer: Supreme Court Orders:

State Bar of Wisconsin

Sign In

Top Link Bar

    Wisconsin LawyerWisconsin Lawyer

News & Pubs Search

Advanced

    Supreme Court Orders

    The Wisconsin Supreme Court will hold a public hearing on Sept. 18 relating to procedures for the lawyer regulation system (order 03-01), including the trust account rules (order 02-06). The court will hold a public hearing on Oct. 1 relating to discovery in CHIPS cases (order 03-02) and eligibility for appointment as a GAL for adults (order 03-03).


    Share This:

    Wisconsin Lawyer
    Vol. 76, No. 8, August 2003

    Supreme Court Orders


    The Wisconsin Supreme Court will hold a public hearing on Sept. 18 relating to procedures for the lawyer regulation system (order 03-01), including the trust account rules (order 02-06). The court will hold a public hearing on Oct. 1 relating to discovery in CHIPS cases (order 03-02) and eligibility for appointment as a GAL for adults (order 03-03).

    Lawyer Trust and Fiduciary Accounts

    In the matter of the amendment of Supreme Court Rule 20:1.15 relating to safekeeping property, trust accounts and fiduciary accounts

    Order 02-06

    On Dec. 19, 2002, the State Bar of Wisconsin and the Office of Lawyer Regulation filed a petition seeking to amend Supreme Court Rule 20:1.15 by repealing the current provisions of SCR 20:1.15 and recreating the rule in order to provide clarity and additional information to lawyers regarding the regulation and administration of trust accounts and fiduciary accounts.

    IT IS ORDERED that a public hearing on the petition shall be held in the Supreme Court Room in the State Capitol, Madison, Wis., on Thursday, Sept. 18, 2003, at 9 a.m.

    IT IS FURTHER ORDERED that the court's conference in the matter shall be held promptly following the public hearing on this matter and rule petition 03-01.

    IT IS FURTHER ORDERED that notice of the hearing be given by a single publication of a copy of this order and of the petition in the official state newspaper and in an official publication of the State Bar of Wisconsin not more than 60 days nor less than 30 days before the date of the hearing.

    Dated at Madison, Wis., this 11th day of June, 2003.

    By the court:

    Cornelia G. Clark, Clerk of Supreme Court

    Petition

    The State Bar of Wisconsin and the Office of Lawyer Regulation hereby petition the Supreme Court of Wisconsin for an order amending SCR 20:1.15 by repealing the current provisions of SCR 20:1.15 and recreating the rule in accordance with the attached language.

    Background

    The Petitioners hereby provide the following background to the Court in support of this petition:

    • Certain changes have previously been made to SCR 20:1.15 based upon a petition from the State Bar of Wisconsin and the Board of Attorneys Professional Responsibility (now the Office of Lawyer Regulation).

    • The State Bar of Wisconsin and the Office of Lawyer Regulation have determined that the past amendments to SCR 20:1.15 have addressed concerns raised by the Court regarding lawyers serving as fiduciaries and managing accounts on behalf of clients, but has also raised concerns regarding the applicability of the trust account rule to various accounts.

    • The State Bar of Wisconsin and the Office of Lawyer Regulation recognize that the current language of SCR 20:1.15 is confusing and difficult for lawyers to understand for purposes of compliance with the requirements of properly managing a trust account used by a lawyer in the practice of law.

    • The State Bar of Wisconsin and the Office of Lawyer Regulation wish to modify the language of the trust account rule to provide clarity and additional information to lawyers relating to the regulation and administration of trust accounts and fiduciary accounts by lawyers in the State of

    Wisconsin.

    • The State Bar of Wisconsin and the Office of Lawyer Regulation have participated in extensive discussions and research regarding the trust account rule and the content of trust account rules in other states. The Wisconsin Bankers Association has also been consulted regarding a number of the proposed changes and has provided guidance and suggestions in the drafting of the attached rule.

    Subchapter 20:1.15

    SCR 20:1.15(a) Definitions.

    SCR 20:1.15(b) Segregation of trust property.

    SCR 20:1.15(c) Types of trust accounts.

    SCR 20:1.15(d) Prompt notice and delivery of property.

    SCR 20:1.15(e) Operational requirements for trust accounts.

    SCR 20:1.15(f) Record keeping requirements for trust accounts.

    SCR 20:1.15(g) Withdrawal of fees from trust account.

    SCR 20:1.15(h) Dishonored instrument notification; (Overdraft notices).

    SCR 20:1.15(i) Certification of compliance with trust account rules.

    SCR 20:1.15(j) Fiduciary property.

    SCR 20:1.15(k) Exceptions to SCR 20:1.15.

    SCR 20:1.15 Safekeeping property; trust accounts and fiduciary accounts

    (a) Definitions

    (1) Demand account. For purposes of this rule, a "demand account" is defined as an account upon which funds are disbursed through a properly payable instrument.

    (2) Fiduciary. For purposes of this rule, "fiduciary" is defined as agent, attorney-in-fact, conservator, guardian, personal representative, special administrator, trustee, or any other position requiring the lawyer to safeguard the property of a third party.

    (3) Fiduciary account. For purposes of this rule, a "fiduciary account" is defined as an account in which the lawyer deposits fiduciary property.

    (4) Fiduciary property. For purposes of this rule, "fiduciary property" is defined as funds or property of a client or third person that is in the lawyer's possession in a fiduciary capacity that directly arises in the course of, or as a result of, a lawyer-client relationship. Fiduciary property includes, but is not limited to, property held as agent, attorney-in-fact, conservator, guardian, personal representative, special administrator, or trustee.

    (5) Financial institution. For purposes of this rule, "financial institution" means a bank, savings bank, trust company, credit union, savings and loan association, or investment institution.

    (6) Immediate family member. For purposes of this rule, an "immediate family member" is defined as the lawyer's spouse, child, stepchild, grandchild, sibling, parent, grandparent, aunt, uncle, niece or nephew.

    (7) Investment institution. For purposes of this rule, "investment institution" means an institution, such as a brokerage house, that is capable of providing overdraft notification on lawyer trust accounts maintained in that institution.

    (8) IOLTA account. For purposes of this rule, an "IOLTA account" is defined as a pooled, interest-bearing account, separate from the lawyer's business and personal accounts, in which the lawyer deposits and holds funds received in trust on behalf of a client or third party, the interest on which does not go to the client. Typical funds that would be placed in an IOLTA account include earnest monies, loan proceeds, settlement proceeds, collection proceeds, cost advances, and advance payments for fees that have not yet been earned. These accounts are subject to the provisions of SCR Chapter 13 Interest on Trust Accounts Program.

    (9) Properly payable instrument. For purposes of this rule, a "properly payable instrument" is defined as an instrument that, if presented in the normal course of business, is in a form requiring payment pursuant to the laws of this state.

    (10) Trust account. For purposes of this rule, a "trust account" is defined as an account in which the lawyer deposits trust property.

    (11) Trust property. For purposes of this rule, "trust property" is defined as funds or property of clients or third persons that is in the lawyer's possession in connection with a representation.

    (b) Segregation of trust property

    (1) Separate account. A lawyer shall hold in trust, separate from the lawyer's own property, that property of clients and third persons that is in the lawyer's possession in connection with a representation. All funds of clients and third persons paid to a lawyer or law firm in connection with a representation shall be deposited in one or more identifiable trust accounts.

    (2) Identification of account. Each trust account shall be clearly designated as a "Client Account," a "Trust Account," or words of similar import. The account shall be identified as such on all account records, including, but not limited to, signature cards, monthly statements, checks, and deposit slips. An acronym, such as "IOLTA," "IOTA," or "LTAB," without further elaboration, does not clearly designate the account as a client account or trust account.

    (3) Lawyer funds. No funds belonging to the lawyer or law firm, except funds reasonably sufficient to pay monthly account service charges, may be deposited or retained in a trust account.

    (4) Unearned fees and cost advances. Unearned fees and advanced payments of fees shall be held in trust until earned by the lawyer, and withdrawn pursuant to SCR 20:1.15(g). Funds advanced by a client or third party for payment of costs shall be held in trust until the costs are incurred.

    (5) Probate accounts. Trust property of a probate estate shall be maintained in a separate account that is subject to the requirements of subparagraphs (b) through (i) of this rule.

    (6) Trust property other than funds. Unless the client otherwise directs in writing, securities in bearer form shall be kept by the lawyer in a safe deposit box at a financial institution authorized to do business in Wisconsin. The safe deposit box shall be clearly designated as a "Client's Account" or "Trust Account." Other property of a client or third person shall be identified as such and appropriately safeguarded.

    (7) Multi-jurisdictional practice. If a lawyer also licensed in another state is entrusted with funds or property in connection with a representation in the other state, the provisions of SCR 20:1.15 shall not supersede the trust account rules of the other state.

    (c) Types of trust accounts

    (1) IOLTA accounts. A lawyer who receives client funds shall maintain a pooled interest-bearing trust account for deposit of client or third party funds that are:

    a. nominal in amount or expected to be held for a short period of time; or

    b. not deposited in an account or investment, pursuant to SCR 20:1.15(c)(2); or

    c. not eligible for an account or investment, pursuant to SCR 20:1.15(c)(2), because the client is a corporation or organization not permitted by law to maintain such an account or the terms of the account are not consistent with a need to make funds available without delay.

    The interest accruing on this account, net of any transaction costs, shall be paid to the Wisconsin Trust Account Foundation, Inc., which shall be deemed the beneficial owner thereof, pursuant to SCR Chapter 13 Interest on Trust Accounts Program. A lawyer may notify the client of the intended use of these funds.

    (2) Other client accounts. A lawyer shall deposit all client funds in the account specified in SCR 20:1.15(c)(1) unless they are deposited in any of the following:

    a. a separate interest-bearing trust account for the particular client or client's matter, the interest on which shall be paid to the client, net of any transaction costs;

    b. a pooled interest-bearing trust account with sub-accounting by the financial institution, the lawyer or the law firm that will provide for computation of interest earned by each client's funds and the payment thereof to the client, net of any transaction costs;

    c. an income-generating investment vehicle selected by the client and designated in specific written instructions from the client or authorized by the court or other tribunal, on which income shall be paid to the client or as directed by the court or other tribunal, net of any transaction costs;

    d. an income-generating investment vehicle selected by the lawyer and approved by a court where the lawyer serves as guardian for a ward, pursuant to chs. 880 and 881, stats;

    e. an income-generating investment vehicle selected by the lawyer to protect and maximize the return on funds in a bankruptcy estate, which investment vehicle is approved by the trustee in bankruptcy and by a bankruptcy court order, consistent with 11 USC 345; or

    f. a demand deposit or other non-interest-bearing account for funds that are neither nominal in amount nor expected to be held for a short term, provided the client specifically so directs.

    (3) Selection of account. In deciding whether to use the account specified in SCR 20:1.15(c)(1) or an account or investment vehicle specified in SCR 20:1.15(c)(2), a lawyer shall determine, at the time of the deposit, whether the client funds could be utilized to provide a positive net return to the client by taking into consideration all of the following:

    a. the amount of income the funds would earn during the period they are expected to be on deposit;

    b. the cost of establishing and administering the account, including the cost of the lawyer's services and the cost of preparing any tax reports required for income accruing to a client's benefit; and

    c. the capability of financial institutions to calculate and pay interest or other income to individual clients.

    (4) Professional judgment. The determination whether funds to be invested could be utilized to provide a positive net return to the client rests in the sound judgment of the lawyer or law firm. If a lawyer acts in good faith in making this determination, the lawyer is not subject to any charge of ethical impropriety or other breach of the rules of professional conduct.

    (5) WisTAF. For accounts created pursuant to SCR 20:1.15(c)(1), the lawyer or law firm shall direct the financial institution to remit to the Wisconsin Trust Account Foundation, Inc. ("WisTAF"), at least quarterly, the following:

    a. the interest or dividends, net of any service charges or fees, on the average monthly balance in the account or as otherwise computed in accordance with an institution's standard accounting practice; and

    b. a statement showing the name of the lawyer or law firm for whose account the remittance is sent, the rate of interest applied, the amount of service charges deducted, if any, and the account balance for the period for which the report is made. A copy of the statement shall be provided to the lawyer or law firm.

    (d) Prompt notice and delivery of property

    (1) Notice and disbursement. Upon receiving funds or other property in which a client has an interest, or in which the lawyer has received notice that a third person has an interest identified by a lien, court order, judgment or contract, the lawyer shall promptly notify the client or third person in writing. Except as stated in this rule or otherwise permitted by law or by agreement with the client, the lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive.

    (2) Accounting. Upon final distribution of any trust property or upon request by the client or a third person having an ownership interest in the property, the lawyer shall promptly render a full written accounting regarding such property.

    (3) Disputes regarding trust property. When the lawyer and another person or the client and another person claim ownership interest in trust property identified by a lien, court order, judgment or contract, the lawyer shall hold that property in trust until there is an accounting and severance of their interests. If a dispute arises regarding the division of the property, the lawyer shall hold the disputed portion in trust until the dispute is resolved. Disputes between the lawyer and a client are subject to SCR 20:1.15(g)(2).

    (e) Operational requirements for trust accounts

    (1) Location. Each trust account shall be maintained in a financial institution that is authorized by federal or state law to do business in Wisconsin and that is located in the State of Wisconsin or has a branch office located in the State of Wisconsin, and which agrees to comply with the overdraft notice requirements of SCR 20:1.15(h).

    (2) Insurance requirements. Each trust account shall be maintained at a financial institution that is insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, the Wisconsin Credit Union Savings Insurance Corporation, the Securities Investor Protection Corporation or other investment institution financial guaranty insurance.

    (3) Interest requirements. An interest-bearing trust account shall bear interest at a rate no less than that applicable to individual accounts of the same type, size and duration and in which withdrawals or transfers can be made without delay when funds are required, subject only to any notice period which the depository institution is required to observe by law or regulation.

    (4) Prohibited transactions.

    a. Cash. No disbursement of cash shall be made from a trust account or from a deposit to a trust account, and no check shall be made payable to "Cash."

    b. Telephone transfers. No deposits or disbursements shall be made to or from a trust account by a telephone transfer of funds.

    c. Internet transactions. A lawyer shall not make deposits to or disbursements from a trust account via an Internet transaction.

    d. Electronic transfers by third parties. A lawyer shall not authorize a third party to electronically withdraw funds from a trust account.

    e. Credit card transactions. A lawyer shall not authorize transactions via credit card to or from a trust account. However, earned fees may be deposited via credit card to a lawyer's business account.

    f. Debit card transactions. A lawyer shall not use a debit card to make deposits to or disbursements from a trust account.

    (5) Availability of funds for disbursement.

    a. Standard for trust account transactions. A lawyer shall not disburse funds from the lawyer's trust account(s) unless the deposit from which those funds will be disbursed has cleared, and the funds are available for disbursement.

    b. Exception: real estate transactions. In closing a real estate transaction, a lawyer's disbursement of closing proceeds from funds that are received on the date of the closing, but which have not yet cleared, shall not violate SCR 20:1.15(e)(5)(a) if those proceeds are deposited on the date of the closing and are comprised of the following types of funds: 1) a certified check; 2) a cashier's check, teller's check, bank money order, official bank check or electronic transfer of funds, issued or transferred by a financial institution insured by the Federal Deposit Insurance Corporation or a comparable agency of the federal or state government; 3) a check drawn on the trust account of any lawyer or real estate broker licensed under the laws of any state; 4) a check issued by the State of Wisconsin, the United States, or a political subdivision of the State of Wisconsin or the United States; 5) a check drawn on the account of or issued by a lender approved by the United States Department of Housing and Urban Development as either a supervised or a nonsupervised mortgagee as defined in 24 C.F.R. § 202.2; 6) a check from a title insurance company licensed in the State of Wisconsin, or from a title insurance agent of the title insurance company, provided that the title insurance company has guaranteed the funds of that title insurance agent; and 8) a personal check or checks in an aggregate amount not exceeding $5,000 per closing if the lawyer has reasonable and prudent grounds to believe that the deposit will be irrevocably credited to the trust account. Without limiting the rights of the lawyer against any person, it shall be the responsibility of the disbursing lawyer to reimburse the trust account for such funds that are not collected and for any fees, charges and interest assessed by the financial institution on account of such funds being disbursed before the related deposit has cleared and the funds are available for disbursement. The lawyer shall maintain a subsidiary ledger for funds of the lawyer that are deposited in the trust account to reimburse the account for uncollected funds and to accommodate any fees, charges and interest.

    c. Exception: collection trust accounts. When handling collection work for a client, and maintaining a separate trust account to hold funds collected on behalf of that client, a lawyer's disbursement to the client of collection proceeds which have not yet cleared, shall not violate SCR 20:1.15(e)(5)(a) so long as those collection proceeds have been deposited prior to the disbursement. Without limiting the rights of the lawyer against any person, it shall be the responsibility of the disbursing lawyer to reimburse the trust account for such funds that are not collected and for any fees, charges, and interest assessed by the financial institution on account of such funds being disbursed before the related deposit has cleared and the funds are available for disbursement. The lawyer shall maintain a subsidiary ledger for funds of the lawyer that are deposited in the client's trust account to reimburse the account for uncollected funds and to accommodate any fees, charges and interest.

    (6) Record retention. Complete records of trust account funds and other trust property shall be maintained by the lawyer and shall be preserved for a period of at least six (6) years after termination of the representation.

    (7) Production of records. All trust account records shall be deemed to have public aspects as related to a lawyer's fitness to practice. Upon request of the Office of Lawyer Regulation, or upon direction of the Supreme Court, the records shall be submitted to the office for its inspection, audit, use and evidence under such conditions to protect the privilege of clients as the Court may provide. The records, or an audit thereof, shall be produced at any disciplinary proceeding involving the lawyer, wherever material. Failure to produce the records shall constitute unprofessional conduct and grounds for disciplinary action.

    (8) Business account. Each lawyer who receives trust funds shall maintain at least one demand account, other than the trust account, for funds received and disbursed other than in the lawyer's trust capacity, which shall be entitled "Business Account."

    (f) Record keeping requirements for trust accounts

    (1) Demand accounts. Complete records of a trust account that is a demand account shall include a transaction register; individual client ledgers; a ledger for account fees and charges, if law firm funds are held in the account pursuant to SCR 20:1.15(b)(3); deposit records; disbursement records; monthly statements; and reconciliation reports, as described in SCR 20:1.15(f)(1)(a)-(g).

    a. Transaction register. The transaction register shall contain a chronological record of all account transactions, and shall include the date, source and amount of all deposits; the date, check or transaction number, payee and amount of all disbursements, whether by check, wire transfer, or other means; the date and amount of every other deposit or deduction of whatever nature; the identity of the client for whom funds were deposited or disbursed; and the balance in the account after each transaction.

    b. Individual client ledgers. A subsidiary ledger shall be maintained for each client or matter for which the lawyer receives trust funds, and shall record each receipt and disbursement of that client's funds, and the balance following each transaction. A lawyer shall not disburse funds from the trust account that would create a negative balance with respect to any individual client or matter.

    c. Ledger for account fees and charges. A subsidiary ledger shall be maintained for funds of the lawyer deposited in the trust account to accommodate monthly service charges. This ledger shall record each deposit and expenditure of the lawyer's funds in the account and the balance following each transaction.

    d. Deposit records. Deposit slips shall identify the name of the lawyer or law firm, and the name of the account. The deposit slip shall identify the amount of each deposit item, the client or matter associated with each deposit item, and the date of the deposit. The lawyer shall maintain a copy or duplicate of each deposit slip. All deposits shall be made intact. No cash, or other form of disbursement, shall be deducted from a deposit. Deposits of wired funds shall be documented in the account's monthly statement.

    e. Disbursement records.

    (1) Checks. Checks shall be pre-printed and pre-numbered. The name and address of the lawyer or law firm, and the name of the account, shall be printed in the upper left corner of the check. Trust account checks shall include the words "Client Account" or "Trust Account" in the account name. Each check disbursed from the trust account shall identify the client matter and the reason for the disbursement on the memo line.

    (2) Canceled checks. Canceled checks shall be obtained from the financial institution. Imaged checks may be substituted for canceled checks.

    (3) Imaged checks. Imaged checks shall be acceptable if they provide both the front and reverse of the check and comply with the requirements of this paragraph. The information contained on the reverse side of the imaged checks shall include any endorsement signatures or stamps, account numbers, and transaction dates that appear on the original. Imaged checks shall be of sufficient size to be readable without magnification and as close as possible to the size of the original check.

    (4) Wire transfers. Wire transfers shall be documented by a written withdrawal authorization or other documentation, such as a monthly statement of the account, which indicates the date of the transfer, the payee and the amount.

    f. Monthly statement. The monthly statement provided to the lawyer/law firm by the financial institution shall identify the name and address of the lawyer or law firm, and the name of the account.

    g. Reconciliation reports. For each trust account, the lawyer shall prepare and retain a printed reconciliation report on a regular and periodic basis, but in any event, no less frequently than every thirty (30) days. Each reconciliation report shall show the following balances and verify that they are identical:

    (1) the balance, which appears in the transaction register as of the reporting date;

    (2) the total of all subsidiary ledger balances, determined by listing and totaling the balances in the individual client ledgers and the ledger for account fees and charges, as of the reporting date; and

    (3) the adjusted balance, determined by adding outstanding deposits and other credits to the balance in the financial institution's monthly statement and subtracting outstanding checks and other deductions from the balance in the monthly statement.

    (2) Non-demand accounts. Complete records of a trust account that is a non-demand account shall include:

    a. all monthly or other periodic statements provided by the financial or investment institution to the lawyer or law firm; and

    b. all transaction records, including passbooks, records of electronic fund transactions, duplicates of any instrument issued by the financial institution from funds held in the account, duplicate deposit slips identifying the source of any deposit, and duplicate withdrawal slips identifying the purpose of any withdrawal.

    (3) Trust property other than funds.

    a. Property ledger. A lawyer who receives trust property other than funds shall maintain a property ledger, identifying the property, date of receipt, owner, client or matter, and the location of the property. The ledger shall also identify the disposition of all such property.

    b. Receipt upon taking custody. Upon taking custody of such property, the lawyer shall provide to the previous custodian a signed receipt, with a description of the property, and the date of receipt.

    c. Dispositional receipt. Upon disposition of the property, the lawyer shall obtain a signed receipt, with a description of the property and the date of disposition, from the recipient.

    (4) Electronic record retention.

    a. Back-up of records. A lawyer who maintains trust account records by computer must maintain the transaction register, client ledgers, and reconciliation reports in a form that can be reproduced to printed hard copy. Electronic records must be regularly backed up by an appropriate storage device.

    b. IOLTA account records. In addition to the requirements of SCR 20:1.15(f)(4)(a), the transaction register, the subsidiary ledger, and the reconciliation report shall be printed every 30 days for the IOLTA account. The printed copy shall be retained for at least six (6) years, pursuant to the requirements of SCR 20:1.15(e)(6).

    (g) Withdrawal of fees from trust account

    (1) Notice to client. At least five (5) business days before the date on which a disbursement is made from a trust account for the purpose of paying fees, with the exception of contingent fees, the lawyer shall deliver to the client in writing the following:

    a. an itemized bill or other accounting showing the services rendered;

    b. written notice of the amount owed and the anticipated date of the withdrawal; and

    c. a statement of the balance of the client's funds in the lawyer trust account after the withdrawal.

    (2) Objection to disbursement. If a client objects to the disbursement, the funds shall remain in the trust account until the dispute is resolved. If the client objects after the funds have been withdrawn, the disputed portion shall be returned to the trust account.

    (h) Dishonored instrument notification; (Overdraft notices)

    All demand trust accounts and demand fiduciary accounts shall comply with the following provisions on dishonored instrument notification:

    (1) Overdraft reporting agreement. A lawyer shall maintain demand trust accounts only in a financial institution or investment institution that has agreed to provide an overdraft report to the Office of Lawyer Regulation, pursuant to SCR 20:1.15(h)(3).

    (2) Identification of accounts subject to SCR 20:1.15(h). A lawyer or law firm shall notify the financial institution at the time a trust account or fiduciary account is established that the account is subject to SCR 20:1.15(h), and shall provide the financial institution with a list of all existing accounts at that institution that are subject to SCR 20.15(h).

    (3) Overdraft report. In the event any properly payable instrument is presented against a lawyer trust account containing insufficient funds, whether or not the instrument is honored, the financial institution or investment institution shall report the overdraft to the Office of Lawyer Regulation.

    (4) Content of report. All reports made by a financial institution pursuant to SCR 20:1.15(h) shall be substantially in the following format:

    a. In the case of a dishonored instrument, the notice shall be identical to the overdraft notice customarily forwarded to the depositor or investor, accompanied by the dishonored instrument, if a copy is normally provided to the depositor or investor.

    b. In the case of instruments that are presented against insufficient funds and are honored, the notice shall identify the financial institution or investment institution involved, the lawyer or law firm, the account number, the date on which the instrument is paid, and the amount of overdraft created by the payment.

    (5) Timing of report. A report made pursuant to SCR 20:1.15(h) shall be made simultaneously with the overdraft notice given to the depositor or investor.

    (6) Confidentiality of report. A report made by a financial institution or an investment institution pursuant to SCR 20:1.15(h) shall be subject to SCR 22.40 Confidentiality.

    (7) Withdrawal of report by financial institution. The office shall hold each overdraft report for ten (10) business days to enable the financial institution or investment institution to withdraw a report provided by inadvertence or mistake. The deposit of additional funds by the lawyer or law firm shall not constitute reason for withdrawing an overdraft report.

    (8) Lawyer compliance. Every lawyer practicing or admitted to practice in this state shall comply with the reporting and production requirements of SCR 20:1.15(h).

    (9) Service charges. SCR 20:1.15(h) does not preclude a financial institution or investment institution from charging a particular lawyer or law firm for the reasonable costs of producing the reports and records required by this rule.

    (10) Immunity of financial institution. This rule does not create a claim against a financial institution or investment institution or its officers, directors, employees, and agents for failure to provide a trust account overdraft report or for compliance with any provision of SCR 20:1.15(h).

    (i) Certification of compliance with trust account rules

    (1) Annual requirement. A member of the State Bar of Wisconsin shall file with the State Bar annually, with payment of the member's State Bar dues or upon such other date as approved by the Supreme Court, a certificate stating whether the member is engaged in the practice of law in Wisconsin. If so, the lawyer shall also state the number of each trust account, and the name of each financial institution in which the member maintains a trust account, safe deposit box, or both, as required by SCR 20:1.15. The State Bar shall supply to each member, with the annual dues statement or at such other time as directed by the Supreme Court,

    a form on which the certification must
    be made.

    (2) Trust account record compliance. Each member shall explicitly certify on the State Bar certificate that he or she has complied with each of the record keeping requirements set forth in SCR 20:1.15(f) and SCR 20:1.15(j)(5).

    (3) Certification by law firm. A law firm shall file one certificate on behalf of the lawyers in the firm who are required to file a certificate, pursuant to SCR 20:1.15(i)(1). The law firm shall give a copy of the certificate to each lawyer in the firm.

    (4) Suspension for non-compliance. The failure of a member to file the required certificate is grounds for automatic suspension of the member's membership in the State Bar in the same manner as provided in SCR 10.03(6) for nonpayment of dues. The filing of a false certificate is unprofessional conduct and is grounds for disciplinary action.

    (j) Fiduciary property

    (1) Separate account. A lawyer shall hold in trust, separate from the lawyer's own funds or property, those funds or property of clients or third persons that are in the lawyer's possession when acting in a fiduciary capacity that directly arises in the course of or as a result of a lawyer-client relationship. When a lawyer is in possession of fiduciary property of a probate estate, the lawyer shall maintain the property in a separate account subject to the requirements of SCR 20:1.15(j).

    (2) Location. Each fiduciary account shall be maintained in a financial institution or an investment institution in the state where the lawyer's office is situated, or elsewhere as provided by the written authorization of the client, the governing trust agreement, organizational by-laws, or order of a court.

    (3) Prohibited transactions.

    a. Cash. No disbursement of cash shall be made from a fiduciary account or from a deposit to a fiduciary account, and no check shall be made payable to "Cash."

    b. Internet transactions. A lawyer shall not make deposits to or disbursements from a fiduciary account via an Internet transaction.

    c. Credit card transactions. A lawyer shall not authorize transactions via credit card to or from a fiduciary account.

    d. Debit card transactions. A lawyer shall not use a debit card to make deposits to or disbursements from a fiduciary account.

    (4) Availability of funds for disbursement. A lawyer shall not disburse funds from a fiduciary account unless the deposit from which those funds will be disbursed has cleared, and the funds are available for disbursement. However, the exception for real estate transactions, pursuant to SCR 20:1.15(e)(5)(b), shall apply to fiduciary accounts.

    (5) Records. For each fiduciary account, the lawyer shall retain records of receipts and disbursements as necessary to document the transactions. The lawyer shall maintain:

    a. all monthly or other periodic statements provided by the financial or investment institution to the lawyer or law firm; and

    b. all transaction records, including canceled or imaged checks, passbooks, records of electronic fund transactions, and deposit slips, identifying the source of the deposit.

    (6) Record retention. Complete records of fiduciary accounts and other fiduciary property shall be maintained by the lawyer during the course of the fiduciary relationship. A lawyer shall maintain a complete record of the fiduciary account for the six (6) most recent years of the account's existence and shall maintain, at minimum, a summary accounting of the fiduciary account for prior years of the account's existence. After the termination of the fiduciary relationship, complete records shall be preserved for a period of at least six (6) years.

    (7) Production of records. All fiduciary account records shall be deemed to have public aspects as related to a lawyer's fitness to practice. Upon request of the Office of Lawyer Regulation, or upon direction of the Supreme Court, the records shall be submitted to the Office for its inspection, audit, use and evidence under such conditions to protect the privilege of clients as the Court may provide. The records, or an audit thereof, shall be produced at any disciplinary proceeding involving the lawyer, wherever material. Failure to produce the records shall constitute unprofessional conduct and grounds for disciplinary action.

    (8) Fiduciary property other than funds.

    a. Property ledger. A lawyer who receives fiduciary property other than funds shall maintain a property ledger, identifying the property, date of receipt, owner, and the location of the property. The ledger shall also identify the disposition of all such property.

    b. Receipt upon taking custody. Upon taking custody of such property, the lawyer shall provide to the previous custodian a signed receipt, with a description of the property, and the date of receipt.

    c. Dispositional receipt. Upon disposition of the property, the lawyer shall obtain a signed receipt, with a description of the property and the date of disposition, from the recipient.

    (9) Dishonored instrument notification or alternative protection. A lawyer who holds fiduciary property in a demand account shall be required to take one of the following actions:

    a. comply with the requirements of SCR 20:1.15(h), Dishonored instrument notification (Overdraft notices); or

    b. have the account independently audited by a certified public accountant on at least an annual basis; or

    c. hold the funds in a demand account, which requires the approving signature of a co-trustee, co-agent, co-guardian, or co-personal representative before funds may be disbursed from the account.

    (10) Certification requirements. Funds held by a lawyer in a fiduciary account that is a demand account shall be required to comply with the certification requirements of SCR 20:1.15(i).

    (k) Exceptions to SCR 20:1.15

    The provisions of SCR 20:1.15 shall not be applicable to the following instances in which a lawyer is acting in a fiduciary capacity:

    (1) the lawyer is serving as a bankruptcy trustee subject to the oversight and accounting requirements of the bankruptcy court; or

    (2) the property held by the lawyer when acting in a fiduciary capacity is property held for the benefit of an "immediate family member" of the lawyer, as defined in SCR 20:1.15(a)(6); or

    (3) the lawyer serves in a fiduciary capacity for a civic, fraternal or non-profit organization, which is not a client and has other officers or directors participating in the governance of the organization.

    Comment: A lawyer should hold property of others with the care required of a professional fiduciary. All property that is the property of clients or third persons must be kept separate from the lawyer's business and personal property and, if monies, in one or more trust accounts.

    SCR 20:1.15(b)(4) Advances for fees and costs

    Lawyers often receive funds from third parties from which the lawyer's fee will be paid. If there is risk that the client may divert the funds without paying the fee, the lawyer is not required to remit the portion from which the fee is to be paid. However, a lawyer may not hold funds to coerce a client into accepting the lawyer's contention. The disputed portion of the funds should be kept in trust, and the lawyer should suggest means for prompt resolution of the dispute, such as arbitration. The undisputed portion of the funds shall be promptly distributed.

    Lawyers also receive cost advances from clients or third parties. Since Jan. 1, 1987, the Court has required cost advances to be held in trust. Prior to that date, the applicable trust account rule [SCR 20.50(1)], specifically excluded such advances from the funds that the Court required lawyers to hold in trust accounts. However, by order, dated March 21, 1986, the Court amended SCR 20.50(1) as follows:

    All funds of clients paid to a lawyer or law firm, other than advances for costs and expenses, shall be deposited in one or more identifiable bank trust accounts as provided in sub. (3) maintained in the state in which the law office is situated and no funds belonging to the lawyer or law firm may be deposited in such an account except as follows...

    This requirement is specifically addressed in SCR 20:1.15(b)(4).

    SCR 20:1.15(b)(5) Probate accounts

    With respect to probate matters, a lawyer's role may be to represent the estate's personal representative, to serve as the personal representative, or to act as both personal representative and attorney for an estate. SCR 20:1.15(b)(5) identifies the rules that apply when a lawyer holds trust property as the attorney for a client/personal representative. Those rules, SCR 20:1.15(b) - (i), also apply when the lawyer serves as both the attorney and personal representative for an estate. However, if the lawyer serves solely as an estate's personal representative, the lawyer acts as a fiduciary and must maintain the fiduciary property in a separate account that is subject to the requirements of SCR 20:1.15(j).

    SCR 20:1.15(d) Interests of third parties

    Third parties, such as client's creditors, may have just claims against funds or other property in a lawyer's custody. A lawyer may have a duty under applicable law, including SCR 20:1.15(d), to protect such third-party claims against wrongful interference by the client, and accordingly, may refuse to surrender the property to the client. However, a lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party.

    If a lawyer holds property belonging to one person and a second person has a contractual or similar claim against that person but does not claim to own the property or have a security interest in it, the lawyer is free to deliver the property to the person to whom it belongs.

    SCR 20:1.15(e)(2) Insurance requirements

    Pursuant to SCR 20:1.15(e)(2), trust funds are required to be held in accounts that are insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, the Wisconsin Credit Union Savings Insurance Corporation, the Securities Investor Protection Corporation or other investment institution financial guaranty insurance. However, since federal law limits the amount of the insurance coverage by account holder, rather than by account, whenever a lawyer has one or more accounts at a particular financial institution, and the total balance in all of the accounts exceeds the FDIC maximum, the excess amount is not insured. Consequently, the purpose of the insurance requirement is not to guarantee that all funds are adequately insured. Rather, it is to assure that trust funds are held in reputable financial institutions.

    SCR 20:1.15(e)(5)(b) Real estate transactions

    SCR 20:1.15(e)(5)(b) establishes an exception to the requirement that a lawyer only disburse funds that are available for disbursement, i.e., funds that have been credited to the account. This exception was created in recognition of the fact that real estate transactions in Wisconsin require a simultaneous exchange of funds. However, even under this exception, the funds from which a lawyer disburses the proceeds of the real estate transaction, i.e., the lender's check, draft, wire transfer, etc., must be deposited on the date of the closing. In refinancing transactions, the lender's funds must be deposited as soon as possible, but no later than the date on which the transaction is finalized and the loan proceeds are distributed. This is generally three days after the closing date.

    SCR 20:1.15(e)(7) Inspection of records

    The duty of the lawyer to produce client trust account records for inspection under SCR 20:1.15(e)(7) is a specific exception to the lawyer's responsibility to maintain the confidentiality of the client's information as required by SCR 20:1.6.

    SCR 20:1.15(i) and SCR 20:1.15(j)(10) Certification of compliance

    The current rule is intended to implement the Court's order of April 11, 2001; certification is required for "all trust accounts and safe deposit boxes in which the lawyer deposits clients' funds or property held in connection with a representation or held in a fiduciary capacity that directly arises in the course

    of or as a result of a lawyer-client

    relationship."

    SCR 20:1.15(j) Lawyer as professional fiduciary

    A lawyer must hold property of others with the care required of a professional fiduciary. All property which is the property of clients or third persons must be kept separate from the lawyer's business and personal property and, if monies, in one or more trust accounts. SCR 20:1.15(j) specifies the requirements and responsibilities for a lawyer's management of fiduciary property.

    SCR 20:1.15(j)(1) Separate account

    With respect to probate matters, a lawyer's role may be to represent the estate's personal representative, to serve as the personal representative, or to act as both personal representative and attorney for an estate. SCR 20:1.15(j)(1) states that "(w)hen a lawyer is in possession of fiduciary property of a probate estate, the lawyer shall maintain the property in a separate fiduciary account subject to the requirements of SCR 20:1.15(j). SCR 20:1.15(j) applies only when the lawyer serves solely as an estate's personal representative. If the lawyer represents a client/personal representative, or when the lawyer serves as both personal representative and attorney for the estate, the lawyer is responsible for trust property and is subject to the requirements of SCR 20:1.15(b)-(i).

    Top of page

    Procedures for Lawyer Regulation System

    In the matter of amendments to Supreme Court Rules chapter 22 - Procedures for the Lawyer Regulation System

    Order 03-01

    On Jan. 24, 2003, the Office of Lawyer Regulation filed a petition seeking to amend Supreme Court Rules 22.04, 22.11, 22.25, 22.30, 22.40, and 22.42 relating to procedures for the lawyer regulation system. The petition proposes to correct references to subpoena authority, create reciprocal subpoena authority with other jurisdictions, authorize the filing of a reciprocal discipline complaint without the need for submission to the preliminary review committee for a finding of cause to proceed, clarify that the Supreme Court reviews allegations of malfeasance against special investigators and members of the special preliminary review panel, eliminate the requirement that notices of reinstatement hearings be published in the official publication of the State Bar of Wisconsin, and allow disclosure of relevant information to the United States Attorney in situations where jurisdiction lies with the federal government.

    IT IS ORDERED that a public hearing on the petition shall be held in the Supreme Court Room in the State Capitol, Madison, Wis., on Thursday, Sept. 18, 2003, at 9 a.m.

    IT IS FURTHER ORDERED that the court's conference in the matter shall be held promptly following the public hearing on this matter and rule petition 02-06.

    IT IS FURTHER ORDERED that notice of the hearing be given by a single publication of a copy of this order and of the petition in the official state newspaper and in an official publication of the State Bar of Wisconsin not more than 60 days nor less than 30 days before the date of the hearing.

    Dated at Madison, Wis., this 11th day of June, 2003.

    By the court:

    Cornelia G. Clark, Clerk of Supreme Court

    Petition

    The Petitioner, Keith L. Sellen, Director of the Office of Lawyer Regulation, hereby petitions the Supreme Court of Wisconsin for an order that amends Supreme Court Rules (SCR) relating to the Lawyer Regulation System as described in the following paragraphs.

    Proposed Amendments

    SCR 22.04 Referral to district committee. (1) The director may refer a matter to a district committee for assistance in the investigation. A respondent has the duty to cooperate specified in SCR 21.15(4) and 22.03(2) in respect to the district committee. The committee may subpoena and compel the production of documents specified in SCR 22.03(7 8) and 22.42. [Purpose: to correct the reference to the subpoena authority.]

    SCR 22.11 Initiation of Proceeding. (2) The complaint shall set forth only those facts and misconduct allegations for which the preliminary review panel determined there was cause to proceed and may set forth the discipline or other disposition sought. Facts and misconduct allegations arising under SCR 22.22, may be set forth in a complaint without a preliminary review panel finding of cause to proceed. [Purpose: to authorize the filing of a reciprocal discipline complaint without the need for submission to the Preliminary Review Committee for a finding of cause to proceed.]

    SCR 22.25 Misconduct and malfeasance allegations against lawyer regulation system participants. (8) Allegations of malfeasance against the director, retained counsel, a member of a district committee, a member of the preliminary review committee, a member of the board of administrative oversight, a special investigator, a member of the special preliminary review panel, or a referee shall be referred by the director to the supreme court for appropriate action. [Purpose: to clarify that the Supreme Court reviews allegations of malfeasance against special investigators and members of the special preliminary review panel.]

    SCR 22.30 Reinstatement procedure. (3) At least 30 days prior to the hearing, the director shall publish a notice in a newspaper of general circulation in any county in which the petitioner maintained an office for the practice of law prior to suspension or revocation and in the county of the petitioner's residence during the suspension or revocation and in an official publication of the state bar of Wisconsin . [Purpose: to shorten the lead-time required to schedule reinstatement hearings. Publication lead-time for the Wisconsin Lawyer delays hearing dates longer than would otherwise be required. Publication in newspapers of general circulation is sufficient to protect the public interest.]

    SCR 22.40 Confidentiality. (3) The director may provide relevant information to a district attorney or a United States Attorney where there is substantial evidence of an attorney's possible criminal conduct. [Purpose: to authorize disclosure in situations where jurisdiction lies with the federal government.]

    SCR 22.42 Subpoena. (6) Reciprocal subpoena authority.

    (a)Subpoena pursuant to law of another jurisdiction. Whenever a subpoena is sought in Wisconsin pursuant to the law of another jurisdiction for use in lawyer discipline or disability investigations or proceedings in that jurisdiction, and where the application for issuance of the subpoena has been duly approved or authorized under the law of that jurisdiction, the director may issue a subpoena as provided in this chapter to compel the attendance of witnesses and production of documents in Wisconsin, or elsewhere as agreed by the witnesses, for use in such foreign investigations or proceedings or in defense thereof.

    (b) Request for foreign subpoena in aid of proceeding in this jurisdiction. In a lawyer discipline or disability investigation or proceeding pending in this jurisdiction, the director, special investigator, or respondent may apply for the issuance of subpoenas in other jurisdictions, pursuant to the rules of those jurisdictions, where such application is in aid of such investigation or proceeding or in defense thereto, and to the extent that the director, special investigator, or respondent could issue compulsory process or obtain formal prehearing discovery under the provisions of this chapter.

    [Purpose: to provide reciprocal subpoena authority with other jurisdictions that have similar reciprocal authority. This provision is intended to honor disciplinary system subpoenas from other jurisdictions and to enable the Office of Lawyer Regulation to have subpoenas honored in other jurisdictions based upon reciprocal authority.]

    Top of page

    Discovery in CHIPS Cases

    In the matter of the amendment of Wis. Stat. §§ 48.293, 48.295, and 804.01, relating to discovery in CHIPS cases

    Order 03-02

    On Feb. 12, 2003, the Judicial Council filed a petition seeking to amend Wis. Stat. §§ 48.293, 48.295, and 804.01 to address concerns regarding discovery in CHIPS cases and to clarify when and by whom reports described in § 48.293(1) and (2) are to be provided. The Council's petition also proposes a provision that would allow the agency possessing such reports to seek a protective order.

    IT IS ORDERED that a public hearing on the petition shall be held in the Supreme Court Room in the State Capitol, Madison, Wis., on Wednesday, Oct. 1, 2003, at 9 a.m.

    IT IS FURTHER ORDERED that the court's conference in the matter shall be held promptly following the public hearing on this matter and rule petition 03-03.

    IT IS FURTHER ORDERED that notice of the hearing be given by publication of a copy of this order and of the petition in the official state newspaper once each week for three consecutive weeks and in an official publication of the State Bar of Wisconsin not more than 60 days nor less than 30 days before the date of the hearing.

    Dated at Madison, Wis., this 11th day of June, 2003.

    By the court:

    Cornelia G. Clark, Clerk of Supreme Court

    Petition

    The Judicial Council, pursuant to its authority under §758.13, Stats., to receive, consider, and in its discretion investigate suggestions from any source pertaining to the administration of justice, and to recommend changes in the statutes and rules governing procedure in the courts of Wisconsin, hereby petitions the court to adopt the following statutory and rule changes under §751.12, Stats.

    A. In the CHIPS case In the Interest of F.Q., et al. v. Milwaukee County Department of Social Services, 162 Wis. 2d 607, 611-12, 470 N.W.2d 1, 2 (Ct. App. 1991), the court of appeals held that the respondent, Milwaukee County DSS, was permitted to obtain a judgment using summary judgment procedure because "CHIPS proceedings are civil proceedings[,]" and the Code of Civil Procedure applies.

    Like summary judgment, discovery is also a part of the Code of Civil Procedure and is therefore also available in CHIPS proceedings. Attorney Gretchen Viney, a former member and chairperson of the Judicial Council, represented that abuses of discovery have occurred in CHIPS proceedings, complaining that discovery has been employed to question young children who are the alleged victims in CHIPS petitions, e.g., young children whose parents may be alleged to be perpetrators of abuse upon the children, thereby frightening, intimidating, confusing and otherwise violating the children's best interests. One can easily imagine the potential for inappropriate use of deposition or other discovery mechanisms on a reporting child. Attorney Viney provided anecdotal accounts.

    Following Attorney Viney's suggestion, the Judicial Council referred the issue to its Evidence and Civil Procedure Committee. The committee agreed that, without some limitation protecting a child's best interests, potential existed for abusive use of discovery. The committee, therefore, developed and proposed amendments to §48.293, Stats., and the Judicial Council has adopted them. Primarily, the proposal sets limitations on discovery, intending to protect an alleged victim-child's best interests. These can be seen in the proposed §48.293(1) and (2) and §48.295, Stats. A correlative clause and comment is added to §804.01, Stats. (Rule), the general civil discovery statute. The proposed amendments are attached as Appendix A. Section 48.293 in its present form is attached as Appe




To view or add comment, Login