At its meeting November 18, the State Bar Board of Trustees approved creation of a new, comprehensive Client Trust Account (CTA) protection program and other corrective actions to strengthen the State Bar’s oversight and regulation of client trust accounts.
“The Board is moving forward with urgency and resolve to fix the problems that have come to light over the last several months,” said Board Chair Ruben Duran. “Strengthening the regulation of client trust accounts through proactive oversight and intervention will improve public protection and increase trust in our discipline system. We must help attorneys improve their own trust accounting practices so that we can prevent lapses that could harm clients, and we must get better at detecting and prosecuting misconduct by those attorneys who engage in intentional malfeasance regarding entrusted funds.”
The Board received the final report and recommendations by the Committee on Special Discipline Case Audit, chaired by Trustee José Cisneros. Its recommendations envision a comprehensive program of education, deterrence, detection, and enforcement. Key elements include:
Requiring licensed attorneys to report annually to the State Bar whether they are responsible for CTAs and to provide basic account information.
Requiring attorneys responsible for CTAs to certify annually to the State Bar that they know and comply with the rules of professional conduct related to safeguarding client funds. They would also be required to complete an annual self-assessment to validate their practices.
Requiring a subset of CTAs to undergo a compliance review by an independent third-party Certified Public Accountant (CPA), based on policies and procedures developed by the State Bar in collaboration with the CPA community.
Using data including complaints, identified risk factors, and results from these compliance reviews, the State Bar would follow up on any identified issues, using a response proportional and appropriate to their findings.
The State Bar would also expand education for attorneys responsible for CTA management and launch a campaign to educate consumers about what they should expect from their attorney in safeguarding their funds. Such changes would put California in the forefront nationally of protecting funds that attorneys hold in trust on behalf of clients and others.
The Board authorized staff to return with program design details and effectuating rule proposals for consideration at the January or March Board meetings. Rule changes would then circulate for an extended period of public comment, to be completed by June 30, 2022.
In other actions at the November meeting, the Board:
• Approved amendments to Rule 2201, which addresses the recusal of the chief trial counsel in discipline cases involving individuals with close ties to the State Bar. The amendments are designed to further improve the oversight and integrity of the Rule 2201 program.
• Approved amendments to the charter of the Board›s Regulation and Discipline (RAD) Committee to strengthen its oversight of the chief trial counsel. The changes include approval of an annual performance plan and completion of an annual performance evaluation as well as quarterly meetings between the chair and vice-chair of the RAD committee and the chief trial counsel to review a dashboard of data on the operations of the Office of Chief Trial Counsel.
• Announced that it had authorized staff to pursue a plan to place the State Bar’s building at 180 Howard Street in San Francisco on the market for sale in 2022. The State Bar purchased the building in 1996 and paid off the mortgage in 2006. Capital projects needed to maintain the 43-year-old building have been an ongoing financial challenge, and were only partly addressed by the 2020 licensing fee increase. The agency has turned to debt financing and restructuring of its existing debt portfolio to address the highest-priority building improvements. The agency’s ability to lease out vacant space in the building also has been challenging, a situation exacerbated by the COVID-19 pandemic. State Bar staff continue to work predominantly remotely, and the agency continues to evaluate options for a long-term hybrid work plan for its staff.
The State Bar of California’s mission is to protect the public and includes the primary functions of licensing, regulation and discipline of attorneys; the advancement of the ethical and competent practice of law; and support of efforts for greater access to, and inclusion in, the legal system.
