PART V. PROFESSIONAL ETHICS AND CONDUCT
[ 204 PA. CODE CH. 83 ]
Proposed Amendments to the Pennsylvania Rules of Disciplinary Enforcement Regarding Approval and Termination of Eligible Institutions
[47 Pa.B. 3490]
[Saturday, June 24, 2017]
Notice is hereby given that The Disciplinary Board of the Supreme Court of Pennsylvania is considering recommending to the Supreme Court of Pennsylvania that it adopt amendments to Pennsylvania Rule of Disciplinary Enforcement (''Pa.R.D.E.'') 221, governing the approval and termination of eligible institutions as depositories for trust accounts, as set forth in Annex A.
Pursuant to Pa.R.D.E. 221(h), a financial institution will be approved as an eligible institution for attorney trust accounts, which includes IOLTA trust accounts, if it is in compliance with Rule 1.15 of the Pennsylvania Rules of Professional Conduct (''RPC'') and regulations of the IOLTA Board (''IOLTA''), and files with the Disciplinary Board an agreement to report to the Pennsylvania Lawyers Fund for Client Security Board (''Fund'') whenever an attorney's trust account has insufficient funds. A failure on the part of an eligible institution to make the report required in paragraph (h) may be cause for termination of the approval, pursuant to Pa.R.D.E. 221(k).
A financial institution must be in compliance with IOLTA regulations in order to be approved as an eligible institution; however, once approved, a failure to comply with such regulations does not result in consequences to the eligible institution. The only cause for termination under Rule 221(k) is for failing to make the report to the Fund of any dishonored payments.
IOLTA seeks modifications to the Enforcement Rules to enhance its authority over eligible institutions. By way of background, IOLTA has implemented a financial institution compliance program to monitor adherence to the interest rate comparability and account reporting requirements outlined in RPC 1.15(o) and the implementing IOLTA regulations at 204 Pa. Code §§ 81-101—81.113. IOLTA has advised the Disciplinary Board (''Board'') that when institutions withhold interest remittances and account reports for significant periods, IOLTA works with the institutions to resolve such issues. IOLTA reports that in many of these cases, the eligible institutions take prompt steps to resolve back interest amounts or problems with account reports; however, in some cases these issues require extensive and prolonged negotiation. IOLTA has advised the Board that its lack of enforcement power under the rules has hampered its ability to swiftly resolve these issues with eligible institutions, as there are no consequences for the institutions' noncompliance with IOLTA regulations. According to IOLTA, the lengthy delays that occur during the negotiation process with recalcitrant institutions impact IOLTA's ability to: forecast revenue available for legal aid grants; answer questions from attorneys regarding account activity; and, provide information requested by Office of Disciplinary Counsel.
Two amendments are proposed in order to give IOLTA heightened power to address situations where eligible institutions fail to comply with IOLTA regulations. Paragraph (h) adds new language which would require eligible institutions to commit to complying with the Fund and IOLTA responsibilities in the form submitted to the Disciplinary Board, in contrast to the current requirement that the form only contain responsibilities to the Fund. This language more clearly defines the institution's obligations at the inception of participation in the IOLTA program.
Proposed language in paragraph (k) provides that failure by the institution to comply with IOLTA regulations is a basis for termination of the eligible institution's approval by the Court. Again, the intent of the proposed language is to clearly set forth the consequences for an eligible institution's failure to meet its obligations to the Fund and to IOLTA.
Interested persons are invited to submit written comments by mail or facsimile regarding the proposed amendments to the Office of the Secretary, The Disciplinary Board of the Supreme Court of Pennsylvania, 601 Commonwealth Avenue, Suite 5600, PO Box 62625, Harrisburg, PA 17106-2625, Facsimile number (717-231-3382), Email address Dboard.firstname.lastname@example.org on or before July 31, 2017.
By the Disciplinary Board of the
Supreme Court of Pennsylvania
JULIA FRANKSTON-MORRIS, Esq.,
TITLE 204. JUDICIAL SYSTEM GENERAL PROVISIONS
PART V. PROFESSIONAL ETHICS AND CONDUCT
Subpart B. DISCIPLINARY ENFORCEMENT
CHAPTER 83. PENNSYLVANIA RULES OF DISCIPLINARY ENFORCEMENT
Subchapter B. MISCONDUCT
Rule 221. Funds of clients and third persons. Mandatory overdraft notification.
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(h) An Eligible Institution shall be approved as a depository for Trust Accounts of attorneys if it shall be in compliance with applicable provisions of Rule 1.15 of the Pennsylvania Rules of Professional Conduct and the Regulations of the IOLTA Board and shall file with the Disciplinary Board an agreement [(in a form provided by the Board)] in a form approved by the Board to comply with IOLTA Regulations governing approved Eligible Institutions and to make a prompt report to the Lawyers Fund for Client Security Board whenever any check or similar instrument is presented against a Trust Account when such account contains insufficient funds to pay the instrument, regardless of
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(k) A failure on the part of an Eligible Institution to make a report to the Lawyers Fund for Client Security Board called for by this rule or to comply with IOLTA Regulations governing approved Eligible Institutions may be cause for termination of approval by the Supreme Court, but such failure shall not, absent gross negligence, give rise to a cause of action, by any person who is proximately caused harm thereby.
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[Pa.B. Doc. No. 17-1038. Filed for public inspection June 23, 2017, 9:00 a.m.]
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