Trust cheques must be signed by a practising lawyer
October 19, 2011
Law Society Rule 3-56 sets out the requirements that must be met for withdrawing funds from trust. All lawyers should be very familiar with this Rule; however, the results of compliance audits show that there are two areas where lawyers are either not aware of these requirements, or otherwise fail to meet them.
As a general rule, funds may only be withdrawn from trust by cheque. There are some limited exceptions set out in Rule 3-56(1.3). Any lawyer withdrawing funds from trust other than by cheque should carefully review the exceptions to ensure that the requirements are met.
As well, under Rule 3-56(2)(c) trust cheques must be signed by a practising lawyer.
The May 2008 Benchers’ Bulletin reminded the profession about Rule 3-56(2)(c). Notwithstanding this, the Law Society continues to encounter violations.
In the past few years, the Compliance Audit program has uncovered a number of instances where a lawyer has permitted a non-lawyer to be the sole signatory to a trust cheque.
In some cases, these breaches have been isolated and inadvertent. However, there have been other cases where the lawyer has repeatedly permitted a non-lawyer to be the sole signatory and has taken the position that he or she was unaware of Rule 3-56(2)(c).
Permitting a non-lawyer to be the sole signatory to a trust cheque significantly increases the risk that trust funds may be mishandled, whether through misappropriation or mistake.
The Law Society expects lawyers to understand their trust accounting obligations and to ensure that proper safeguards are in place. The Discipline Committee has taken disciplinary action against lawyers for such breaches, which have included requiring the lawyer to attend a conduct review or authorizing a citation. The following factors, in particular, may be considered by the committee: a systemic failure to comply with the rule, breaches of other accounting rules, or prior disciplinary action for accounting rule breaches.
If a lawyer will be away from practice, arrangements should be made for another practising lawyer to sign trust cheques, if necessary.
Lawyers with questions about their accounting obligations should contact the Trust Assurance Department at 604.697.5810 or trustaccounting@lsbc.org
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