Friday, May 15, 2020

NOW is a Good Time …. IOLTA Records Compliance

The “sequestration” imposed by COVID-19 provides an opportunity for everyone to do some necessary housekeeping in order to address Client Trust Fund/IOLTA records and
reconciliation procedures.  I say this, not just as another “reminder” of our obligation as lawyers to do so or that the Court’s Rules require us to do so, but that there are, presently, and there are going to be severe consequences for failing to do so.  And, those consequences are on the near horizon.

We have represented hundreds of lawyers and law firms with IOLTA (and lots of other) issues.  IOLTA non-compliance is a guaranteed way to get the attention of your bank and then Bar Counsel.  Once that happens, the risk to continuing to practice law is imminent.

So, NOW is a good time to tackle all those required and needed tasks that have been lurking under the bed and desks, related to IOLTA or other trust accounts. 

First, the Supreme Judicial Court IOLTA rule has rigid requirements.  They should be attended to and followed to the letter.

Second, a thorough and top to bottom review of all IOLTA and trust accounts, records and handling is a MUST.  Issues we regularly see include

1.      Non-existent reconciliations.

2.      Non-existent check registers (seriously!).

3.      Non-existent individual client ledgers for each client for whom you held monies.

4.      Non-existent separate office ledger (which holds a few hundred dollars to pay for bank charges, NSF charges and other unexpected charge-backs).

5.      Never going through the account to determine what has happened to long-ago (let alone recently) issued checks that have never cleared.

6.      Monies sitting in the IOLTA account and you have no real idea whose it is.

7.      Commingling earned fees and client (or third party) funds for too long.

8.      Non-existent operating accounts and failure to properly use operating accounts for earned fees.

9.      Thinking (as lots of transactional lawyers do – Yes, real estate lawyers!!!) that the “In and Out” disbursement sheet (or CD) serves as an adequate accounting AND client ledger.  It doesn’t.

10.  Addressing “false” as well as “true” negative check register, client ledger and account balances.  (For example, if you enter checks into a computer program on the day of a “refi” closing, but you have to wait for the redemption period to run before deposits clear, you will always show a “false” negative in your check register and individual client ledger.  Changing when checks are issued can resolve that problem.)

We have worked through all of these issues with lawyer-clients for years.  If Bar Counsel gets a hold of a returned check or a complaint in which any issue about record-keeping has been or might be raised, they have been signaling for months that they intend to seek administrative suspension for non-compliance or not producing records when asked.  If there are issues with the accounts and records, Bar Counsel will act. 

NOW is the time to start digging in and clean house.  Please don’t put it off for the next global intrusion!  

Sarah. Holden is a partner in the litigation department of the newton firm of Brecher, Wyner, Simons, Fox & Bolan, P.C. She represents lawyers and law firms in Board of Bar Overseers and malpractice matters, partnership breakups, departures and law firm litigation.  Sarah can be contacted at  A partner in the firm, Jim Bolan in addition to representing lawyers and law firms in Board of Bar Overseers and malpractice matters, he provides counsel to local, national and transnational lawyers and law firms on professional responsibility, practice and ethics matters, malpractice defense and prevention, and risk management and law firm audits. Jim can be contacted at

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