The Law Society is seeking input from lawyers who may be affected by proposed rule changes that would prohibit fiduciary property from being deposited into a trust account when no legal services are provided.
The rules currently permit (but do not require) lawyers to deposit “fiduciary property” into a trust account. Fiduciary property is defined as “funds other than trust funds and valuables for which a lawyer is responsible in a representative capacity or as a trustee if a lawyer’s appointment is derived from a solicitor-client relationship.” The rules, adopted in 2015, amended a rule that prohibited fiduciary property from being deposited into a trust account where there were no legal services being provided.
In the years since the current rules took effect, there has been increasing public concern about money laundering and other financial criminal activity. The legal profession is vulnerable, with lawyers being potential targets of criminals seeking to use a lawyer’s trust account for improper purposes. There are concerns that lawyers’ handling of fiduciary property (over which solicitor-client privilege does not generally attach) through a trust account makes it difficult for law enforcement agencies to investigate allegations of criminal activity. The rationale for changing the rules in 2015 – that the prohibition from holding fiduciary property in a trust account was too limiting – does not withstand the need to protect the legal profession from the risk posed by organized crime.
The Law Society Executive Committee has considered the matter further and determined that the rules should be amended to return to the initial requirement that fiduciary property cannot be deposited to or held in a trust account. However, before steps are taken to finalise amendments to the rules, the Law Society wants to hear from lawyers who may be affected by the proposed rule changes to understand and mitigate impacts that may unduly interfere with any fiduciary role undertaken by a lawyer.
The consultation period is open until April 15. Comments may be delivered to Michael Lucas, Director of Policy and Planning, at mlucas@lsbc.org.