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    Vol. 83, No. 10, October 2010

    Trust Account Insurance and Safety Requirements

    In the matter of the petition to amend Supreme Court Rule 20:1.15(e)(2)a., relating to trust account insurance and safety requirements.

    Order 10-05

    On March 16, 2010, the Board of Administrative Oversight and the Office of Lawyer Regulation filed a petition with the Wisconsin Supreme Court. The petition requests the court amend Supreme Court Rule (SCR)
    20:1.15(e)(2)a., its comment, and the comments to SCR 20:1.15(cm)(3), to provide greater protection to the public when a lawyer holds trust property at a credit union. The petition and supporting memorandum are available on the Web site of the Wisconsin Supreme Court under http://wicourts.gov/scrules/pending.htm.

    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 Friday, Nov. 5, 2010, at 9:30 a.m.

    IT IS FURTHER ORDERED that the court’s conference in the matter shall be held promptly following the public hearing.

    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.1

    Dated at Madison, Wis., this 1st day of September, 2010.

    By the court:

    A. John Voelker,Acting Clerk of Supreme Court

    1Notice of the hearing will appear in the October 2010 Wisconsin Lawyer, the official publication of the State Bar of Wisconsin, approximately 21 days prior to the hearing rather than the required minimum of 30 days. Pursuant to its rule-making authority under Wis. Stat. § 751.12 and its Internal Operating Procedures, the court exercises its discretion to allow this unavoidable deviation from the requirements. 

    Petition

    The Board of Administrative Oversight and Office of Lawyer Regulation hereby petition the Supreme Court of Wisconsin for an order amending Supreme Court Rule (SCR) 20:1.15(e)(2)a., and comments to SCR 20:1.15(cm)(3) and SCR 20:1.15(e)(2)a., to provide greater protection to the public when a lawyer holds trust property in a credit union.

    Petitioners submit Appendix A (text of proposed amendments), Supporting Memorandum, and Cover Sheet in support of this request.

    Respectfully submitted:

    Steven J. Koszarek, Chair, Board of Administrative Oversight

    Keith L. Sellen, Director, Office of Lawyer Regulation 

    APPENDIX A 

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

    (e) Operational requirements for trust accounts.

    (2) Insurance and safety requirements.

    a. 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 securities investor protection corporation, or any other investment institution financial guaranty insurance. Except as provided in subsections (b)(6) and (cm)(3)b. and c., trust property shall be held in an account in which each individual owner’s funds are eligible for insurance.

    b. IOLTA accounts shall also comply with the requirements of sub. (cm) (3).  

    WISCONSIN COMMENT

    SCR 20:1.15(cm)(3) Insurance and safety requirements.

    Pursuant to SCR 20:1.15 (cm) (3), IOLTA accounts are required to be held in IOLTA participating institutions that are insured by the federal deposit insurance corporation (FDIC), the national credit union share insurance fund (NCUSIF), the securities investor protection corporation (SIPC) or any other investment institution financial guaranty insurance. However, since federal law dictates the amount of available insurance coverage available from the FDIC, the NCUSIF and the SIPC, funds in excess of the those limits are not insured. Federal law also limits the types of losses that are covered by SIPC insurance. Consequently, the purpose of the insurance and safety requirements is not to guarantee that all funds are adequately insured. Rather, it is to assure that trust funds are held in reputable IOLTA participating institutions and, as specified in subsection (e)(2)a., that the funds are eligible for the insurance that is available.

    SCR 20:1.15(e)(2)a. requires a lawyer to hold funds in an account where each owner’s funds are eligible for the financial institution’s insurance coverage. Practitioners should exercise care when placing trust funds in an IOLTA or any other type of lawyer trust account at a credit union, because an individual owner of funds held in any type of lawyer trust account (i.e., a client or third party) is eligible for NCUSIF insurance only if that individual owner is a member of the credit union, or if the credit union is designated by the National Credit Union Administration (NCUA) as a “low-income” credit union. The exceptions to the SCR 20:1.15(e)(2)a. requirement relate to trust property other than funds and to IOLTA accounts that are subject to the safety requirements of SCR 20:1.15(cm)(3)b. and c. 

    SCR 20:1.15(e)(2) Insurance and safety requirements.

    Pursuant to SCR 20:1.15(e)(2),
    trust accounts are required to be held in financial, investment, or IOLTA participating institutions that are insured by the federal deposit insurance corporation (FDIC), the national credit union share insurance fund (NCUSIF), the securities investor protection corporation (SIPC) or any other investment institution financial guaranty insurance. However, since federal law limits dictates the amount of available insurance coverage available from the FDIC, the NCUSIF and the SIPC, funds in excess of the those limits are not insured. Federal law also limits the types of losses that are covered by SIPC insurance. Consequently, the purpose of the insurance and safety requirements is not to guarantee that all funds are adequately insured. Rather, it is to assure that trust funds are held in reputable financial, investment, or IOLTA participating institutions. and, as specified in subsection (e)(2)a., that the funds are eligible for the insurance that is available.

    SCR 20:1.15(e)(2)a. requires a lawyer to hold funds in an account where each owner’s funds are eligible for the financial institution’s insurance coverage. Practitioners should exercise care when placing trust funds in an IOLTA or any other type of lawyer trust account at a credit union, because an individual owner of funds placed in any type of lawyer trust account (i.e., a client or third party) is eligible for NCUSIF insurance only if that individual owner is a member of the credit union, or if the credit union is designated by the National Credit Union Administration (NCUA) as a “low-income” credit union. The exceptions to the SCR 20:1.15(e)(2)a. requirement relate to trust property other than funds and to IOLTA accounts that are subject to the safety requirements of SCR 20:1.15(cm)(3)b.
    and c.

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    Required Court Reporting and Videotape Procedure

    In the matter of the petition to amend Supreme Court Rule 71.01, regarding required court reporting, and Wis. Stat. § 885.42, videotape procedure.

    Order 10-06

    Pending before the court is an administrative rules petition filed on April 14, 2010, by the Director of State Courts on the recommendation of the Committee of Chief Judges and District Court Administrators. The petition was filed in response to this court’s order dated Dec. 11, 2009. See S. Ct. Order 09-05, 2009 WI 104 (issued Dec. 11, 2009, eff. Jan. 1, 2010).1

    The Dec. 11, 2009, order addressed an earlier rule petition filed by the same parties regarding the interpretation of SCR 71.02(2) (Required Court Reporting) and directed the Committee of Chief Judges and District Court Administrators to collaborate with appellate practitioners and other interested parties to evaluate whether amendments to Wis. Stat. § 885.42(4) may be warranted. The pending petition addresses the court’s questions about possible conflicting language in § 885.42 by proposing that videotape depositions continue to be reported and transcribed by the court reporter but other audio and audiovisual recordings need not be reported and transcribed unless ordered by the court. A copy of the petition is available on the website of the Wisconsin Supreme Court under http://wicourts.gov/scrules/pending.htm.

    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 Friday, Nov. 5, 2010, at 9:30 a.m.

    IT IS FURTHER ORDERED that the court’s conference in the matter shall be held promptly following the public hearing.

    IT IS FURTHER ORDERED that notice of the hearing be given by publication of a copy of this order and 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.2

    Dated at Madison, Wis., this 1st day of September, 2010.

    By the court:

    A. John Voelker, Acting Clerk of Supreme Court

    1A copy of the court’s order dated Dec. 11, 2009, is available on the website of the Wisconsin Supreme Court under http://wicourts.gov/scrules/orders.htm.

    2Notice of the hearing will appear in the October 2010 Wisconsin Lawyer, the official publication of the State Bar of Wisconsin, approximately 21 days prior to the hearing rather than the required minimum of 30 days. Pursuant to its rule-making authority under Wis. Stat. § 751.12 and its Internal Operating Procedures, the court exercises its discretion to allow this unavoidable deviation from the requirements. 

    PETITION

    The Director of State Courts, on the recommendation of the Committee of Chief Judges and District Court Administrators, hereby petitions the court to amend SCR 71.01(2), governing the reporting of court proceedings, and Wis. Stats. s. 885.42, governing videotape procedure. This petition is made pursuant to the court’s rulemaking authority under s. 751.12 and its administrative authority over all courts conferred by Article VII, s. 3 of the Wisconsin Constitution.

    This petition is a follow-up to Supreme Court Petition 09-05, also recommended by the chief judges, which sought to clarify when court reporters must transcribe the variety of audio recordings that are played in court – confessions, 911 calls, undercover recordings – following the decision in State v. Ruiz-Velez, 2008 WI App. 169. The changes proposed in this second petition are intended to respond to the court’s questions about possible conflicting language found in Wis. Stats. s. 885.42. The chief judges have consulted with the persons who submitted written comments on Petition 09-05 and have incorporated their suggestions in this petition.

    The chief judges propose to resolve the issue as follows: videotape depositions will continue to be reported and transcribed by the court reporter unless submitted with a certified transcript, as provided by SCR 71.01(2)(d). Other audio and audiovisual recordings will not be reported and transcribed by the court reporter unless ordered by the court. The court may order a party to submit a transcript, as provided by new language added to SCR 71.01(e) and s. 885.42(2).

    The Committee of Chief Judges requests that SCR 71.01(2) be amended to read as follows: 

    SCR 71.01 Required court reporting, reporting.

    (2) All proceedings in the circuit court shall be reported, except for the following: …

    (d) If accompanied with a certified transcript, videotape depositions offered as evidence during any hearing or other court proceeding.

    (e) Audio and audiovisual recordings of any type, if not submitted under sub. (d), that are played during the proceeding, marked as an exhibit and offered into evidence. If only part of the recording is played in court, the part played shall be precisely identified in the record. The court may direct a party or the court reporter to prepare the transcript of a recording submitted under this subsection.

    Comment: Those seeking to admit evidence presented by videotape are advised to consult Wis. Stat. s. 885.42(4).

    885.42 Videotape procedure, when available.

    (1) Depositions. Any deposition may be recorded by audiovisual videotape without a stenographic transcript. Any party to the action may arrange at the party’s expense to have a simultaneous stenographic record made. Except as provided by ss. 885.40 to 885.47, ch. 804 governing the practice and procedure in depositions and discovery shall apply.

    (2) Other evidence. Such other evidence as is appropriate may be recorded by videotape and be presented at a trial. The court may direct a party or the court reporter to prepare a transcript of an audio or audiovisual recording presented under this subsection in accordance with SCR 71.01(2)(e).

    (3) …

    (4) Trial record. At trial, videotape depositions and other testimony presented by videotape shall be reported unless accompanied with a certified transcript submitted in accordance with SCR 71.01(2)(d).

    Judicial Council Committee’s Note, 1975: Sub. (1). The definition of depositions is meant to include adverse examinations prior to trial.

    Sub. (2). This subsection anticipates that certain other evidence, such as the scene of an accident or the lifestyle of an accident victim, may be presented at trial by means of videotape. This provision would also allow the majority of a trial to be conducted by means of videotape.

    Sub. (4). This subsection establishes that matters presented by videotape at trial are made a part of the trial record in anticipation of a possible appeal. [Re Order effective Jan. 1, 1976]

    Respectfully submitted:

    A. John Voelker
    Director of State Courts

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