Dear Attorney Customer:
A recent change to the Rules of Professional Conduct (22 NYCRR Rule 1.15 and Part 1300) has recently been implemented concerning attorney escrow accounts. The new change broadens the bank’s obligation to provide reports to the Lawyers’ Fund for Client Protection to cases where the escrow account is in an overdrawn status. The previous rule obligated the bank to report to the Lawyers’ Fund only when a check presented against the escrow account was returned for insufficient funds.
It, therefore, becomes critical for you to be certain that the funds against which you are drawing checks from your escrow account are in the account and are collected to disburse. For example, subaccount transfers need to be made to the disbursement account before the checks are issued against those funds. If they are not, it will potentially create an overdraft that is required to be reported to the Lawyers’ Fund (even though the funds are in a subaccount at the bank).
All overdraft notices to the Lawyers’ Fund that are not rescinded due to bank error are then forwarded to the Grievance Committee for consideration and investigation. A copy of the changed rule with the modifications indicated by underscoring is enclosed for your reference. As always, if you have any questions about this issue or any other matter impacting your escrow account, please do not hesitate to contact your banking representative. As always, we appreciate your business.