Supreme Court of Missouri
en banc

In re:

Repeal of subdivision (a)(5)(A) and subdivision (a)(7) of subdivision 4-1.145, entitled "Definitions – Safekeeping Property and IOLTA Accounts;" subdivision (b) of subdivision 4-1.15, entitled "Trust Accounts and Property of Others;" subdivision (b)(3) of the Overdraft Reporting Advisory Committee Regulation to subdivision 4-1.15; and paragraphs [6], [15], and [18] of the Comment to subdivision 4-1.15; all of the foregoing as a part of Rule 4, entitled "Rules of Professional Conduct," and in lieu thereof adoption of a new subdivision (a)(5)(A) and a new subdivision (a)(7) of subdivision 4-1.145, entitled "Definitions – Safekeeping Property and IOLTA Accounts;" a new subdivision (b) of subdivision 4-1.15, entitled "Trust Accounts and Property of Others;" a new subdivision (b)(3) of the Overdraft Reporting Advisory Committee Regulation to subdivision 4-1.15; and new paragraphs [6], [15], and [18] of the Comment to subdivision 4-1.15 entitled "Trust Accounts and Property of Others."
1. It is ordered that effective January 1, 2017, subdivision (a)(5)(A) and subdivision (a)(7) of subdivision 4-1.145; subdivision (b) of subdivision 4-1.15; subdivision (b)(3) of the Overdraft Reporting Advisory Committee Regulation to subdivision 4-1.15; and paragraphs [6], [15], and [18] of the Comment to subdivision 4-1.15 be and the same are hereby repealed and a new subdivision (a)(5)(A) and a new subdivision (a)(7) of subdivision 4-1.145; a new subdivision (b) of subdivision 4-1.15; a new subdivision (b)(3) of the Overdraft Reporting Advisory Committee Regulation to subdivision 4-1.15; and new paragraphs [6], [15], and [18] of the Comment to subdivision 4-1.15 adopted in lieu thereof to read as follows:

4-1.145 DEFINITIONS - SAFEKEEPING PROPERTY AND IOLTA ACCOUNTS


(a) As used in Rules 4-1.145 to 4-1.155, the following terms mean:

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(5) "Eligible institution," one of the following entities choosing to offer and maintain IOLTA accounts to its lawyer and law firm customers:

(A) a bank, savings and loan association, or credit union authorized by federal or state law to do business in Missouri, the deposits of which are insured by an agency of the federal government, or

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(7) "Financial institution," a bank, savings and loan association, or credit union authorized by federal or state law to do business in Missouri the deposits of which are insured by an agency of the federal government or an open-end investment company registered with the Securities and Exchange Commission authorized by federal or state law to do business in Missouri.

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4-1.15 TRUST ACCOUNTS AND PROPERTY OF OTHERS


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(b) A lawyer may deposit the lawyer's own funds in a client trust account for the sole purpose of paying financial institution service charges on that account, but only in an amount necessary for that purpose.

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(f) Complete records of client trust accounts shall be maintained and preserved for a period of at least five years after termination of the representation or after the date of the last disbursement of funds, whichever is later.

Records may be maintained by electronic, photographic, or other media provided that they otherwise comply with Rules 4-1.145 to 4-1.155 and that printed copies can be produced. These records shall be readily accessible to the lawyer.

Upon dissolution of a law firm or of any legal professional corporation, the partners shall make reasonable arrangements for the maintenance of client trust account records. Upon the sale of a law practice, the seller shall make reasonable arrangements for the maintenance of records.

Complete records shall include at a minimum:

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(7) the physical or electronic equivalents of all checkbook registers, financial institution statements, records of deposit, pre-numbered canceled checks, and substitute checks provided by a financial institution;

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Advisory Committee Regulation


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(b) The financial institution shall agree:

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(3) To maintain a copy of all records related to a report for a period of five years. Any such agreement shall apply to all branches of the financial institution and shall not be cancelled except upon 30 days notice in writing to the advisory committee. If a financial institution or branch changes ownership, the new owner must seek approval from the advisory committee or provide notice of cancellation within 30 days, unless the new owner is a financial institution that is already approved;

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Comment

[6] While normally it is impermissible to commingle the lawyer's own funds with client funds, Rule 4-1.15(b) provides that it is permissible when necessary to pay financial institution service charges on that account. Accurate records must be kept regarding which part of the funds are the lawyer's.

[15] The physical or electronic equivalents of all checkbook registers, financial institution statements, records of deposit, pre-numbered canceled checks, and substitute checks must be maintained for a period of five years after termination of each legal engagement or representation. The "Check Clearing for the 21st Century Act" or "Check 21 Act", codified at 12 U.S.C. §§5001 et. seq., recognizes "substitute checks" as the legal equivalent of an original check. A "substitute check" is defined at 12 U.S.C. §5002(16) as "paper reproduction of the original check that contains an image of the front and back of the original check; bears a magnetic ink character recognition ("MICR") line containing all the information appearing on the MICR line of the original check; conforms with generally applicable industry standards for substitute checks; and is suitable for automated processing in the same manner as the original check. "Banks," as defined in 12 U.S.C. §5002(2), are not required to return to customers the original canceled checks. Most banks now provide electronic images of checks to customers who have access to their accounts on internet-based websites. It is the lawyer's responsibility to download electronic images. Electronic images shall be maintained for the requisite number of years and shall be readily available for printing upon request or shall be printed and maintained for the requisite number of years.

[18] The potential of these records to serve as safeguards is realized only if reconciliations are regularly performed. Reconciliation each time a statement is generated by the financial institution will enable the easiest identification of an error (whether by the lawyer or the financial institution).

2. It is ordered that notice of this order be published in the Journal of the Missouri Bar.

3. It is ordered that this order be published in the South Western Reporter.

Day – to – Day

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PATRICIA BRECKENRIDGE
Chief Justice