Vt. R. Prof. Cond. 1.15A
Comment
[1] Paragraphs (a) and (b) enumerate minimal accounting controls for client trust accounts.
[2] Paragraph (b)(1) enunciates the requirement that only a lawyer admitted to the practice of law in Vermont or a person who is under the direct supervision of the lawyer shall be the authorized signatory or authorize electronic transfers from a pooled interest-bearing trust account, an account more commonly referred to as an "IOLTA account" or a "client trust account." While it is permissible to grant nonlawyer access to such accounts, the access should be limited and closely monitored by the lawyer. The lawyer has a nondelegable duty to protect and preserve the funds in pooled interest-bearing trust accounts and can be disciplined for failure to supervise subordinates who misappropriate client funds. See V.R.Pr.C. 5.1 and 5.3.
[3] Paragraph (b)(3) delineates the only approved methods of transferring or disbursing funds from a pooled interest-bearing trust account. By the plain terms, cash withdrawals by debit card are not approved. Authorized electronic transfers are limited to (1) money required for payment to a client or third person on behalf of a client; (2) expenses properly incurred on behalf of a client, such as filing fees or payment to third persons for services rendered in connection with the representation; (3) money transferred to the lawyer for fees that are earned in connection with the representation and are not in dispute; or (4) money transferred from one client trust account to another client trust account.
Vt. R. Prof. Cond. 1.15A
Board's Note-2022 Amendment
Subdivision (b) is new. It is intended to provide additional protection to clients and third persons for whom lawyers hold funds in trust.
Subdivisions (c), (d), and (e) are re-lettered to conform to the addition of subdivision (b).
The amendments to new subdivisions (c) and (d) are intended to clarify that it is not solely a lawyer or law firm's pooled interest-bearing trust accounts, more commonly referred to as "IOLTA accounts" or "client trust accounts," that are subject to compliance reviews and audits.
New comments [1] to [3] are added to explain the limited appropriate uses of client trust accounts.
Reporter's Notes-2016 Amendment
Rule 1. 15A(a) is amended to make clear that funds held by a lawyer in a "fiduciary account" as further defined by the amendment may be held in an IOLTA account created pursuant to Rule 1.15 B "in appropriate circumstances"-that is, when the funds meet the standard ofRule 1. 15B(a)(1) that they "are not reasonably expected to earn net interest or dividends" as defined in Rule 1.15 B(a)(2)(i). The amendment benefits both the lawyer through saving management costs and the beneficiaries of the interest distributed to the Vermont Bar Foundation pursuant to Rule 1.15 B(b)-(c).
Rule 1. 15A(a)(4) is amended to require a lawyer to maintain records documenting at least monthly reconciliation of all accounts maintained pursuant to Rule 1.15 A. The rule is intended to establish a bright-line meaning for "timely reconciliation."
Reporter's Notes-2009 AmendmentV.R.P.C. 1.15 A-1.15C as originally adopted had no equivalent in the Model Rules. They were adopted "in order to include mandatory IOLTA, random auditing, the financial support for random auditing, and reporting of overdrafts." Reporter's Notes to V.R.P.C. 1.15 (1999). No Vermont Comments were prepared. The present amendments are designed to clarify and strengthen these rules by eliminating Rule 1.15 C and incorporating its provisions as appropriate in Rules 1.15 A and 1.15B. The amendments also bring the rules in line with current practice and the terminology and format of the Rules of Professional Conduct.
Rule 1.15 A(a) is amended to make clear that the obligation imposed by Rules 1.15 A and 1.15B incorporates the definition of "in connection with a representation" in new Rule 1.15(a)(2) as its basis. The amended rule incorporates provisions of former Rule 1.15 C(a) requiring that funds be held in a "financial institution" as defined in new Rule 1.15 A(d), but Rule 1.15 B(a) makes clear that the institution must be approved by the Professional Responsibility Board only if it holds a pooled interest-bearing account. Amended Rule 1.15 A(a) adapts the language of Rule 1.15(a)(2) to further make clear that a "trust account" is an account in which funds directly arising from a representation are held and that a "fiduciary account" is an account in which funds held pursuant to a fiduciary relationship are held. The requirement that the financial institution be notified as to the identity of the accounts is taken from former Rule 1.15 C.
Rules 1.15 A(a)(1)-(4) are amended for consistency with this broader practice and to eliminate specific references to accounting systems that may be obsolete.
Rule 1.15 A(b) is amended to substitute for audit of trust and fiduciary accounts by an outside accountant a confidential compliance review of these and other financial records by the Disciplinary Counsel appointed pursuant to Administrative Order 9, Rule 3. The results of this review are to remain confidential unless they become part of the record in a disciplinary proceeding and subject to disclosure pursuant to Administrative Order 9, Rule 12A or B.
Rule 1.15 A(c) is amended for consistency with language changes in other provisions of the rule.
Rule 1.15 A(d), taken from former Rule 1.15 C(f), is made applicable to both Rules 1.15 A and B. Broadened language is intended to make clear that the term includes entities in which funds may be held for investment pursuant to client instructions or fiduciary obligations as well as banks and other traditional depositories.