New penalties for late filing of accountant's reports
in effect August 1
A lawyer who fails to file an annual trust accounting report when due will soon face, not only a late filing assessment (for a failure to file within 30 days of the due date), but possible suspension from practice (for a failure to file within 60 days of the due date), under new rules that come into effect August 1. These rules will also authorize the Law Society to complete an outstanding report at the lawyer's expense: see Rules 3-74 and 3-74.1 in the enclosed Member's Manual amendment package or online at www.lawsociety.bc.ca.
The Law Society trust accounting rules continue to require that an accountant's report (or a declaration for an exemption) be filed with the Law Society within three months of the end of each reporting period or the termination of a lawyer's practice. A lawyer may file a report within 30 days of the due date by paying a late filing fee: Rule 3-72.
Under the new rules, if a report is not filed within 30 days of the due date, a flat assessment of $400 per month will apply (replacing the current assessment of $50 per day per lawyer in the firm): Rule 3-74(3). While many practices have sought and been granted a waiver of late filing assessments by the Law Society Discipline Committee, the new assessment will be waived by the Committee only in special circumstances: Rule 3-74(4). Most significantly, failure to file a report within 60 days of the due date will result in the suspension of all lawyers in the practice, on at least 30 days notice, subject to the Discipline Committee's discretion not to suspend in special circumstances: Rule 3-74.1.
These measures are aimed at more effectively deterring late filings and are in keeping with the approach taken by several other law societies. They also more fully reflect the importance of the accountant's report as a key standard of financial responsibility.
Under Rule 3-74.1(5) to (8), the Law Society will have authority, for any late filing, to complete an outstanding accountant's report, through either its own or contract accountants, at the lawyer's expense. Although primarily a deterrent, this provision ensures that delinquent reports do not remain outstanding and that the Law Society can verify the integrity of the practice's handling of trust funds.
The Benchers approved these rule changes on recommendation of the Trust Accounting Reform Task Force, chaired by President Howard Berge, QC, which over the past two years has undertaken a thorough review of the Law Society trust accounting program.
In the near future, BC lawyers will see a revised form of trust accounting report to replace the current Form 47 accountant's report. The Task Force has received input from numerous lawyers and accountants and representatives of the Institute of Chartered Accountants of BC and the Certified General Accountants of BC in redrafting the accountant's report, rules and administrative processes. More information will be published to the profession within the next few months as implementation details are finalized.