Law Courts Center

Law Courts Center Trust Accounting 101 Course Syllabus v130912.doc

Trust Accounting 101

Learning Outcomes

1. Gain an understanding of the regulatory framework of the Law Society of BC

2. Explain the duty and ethical obligations of lawyers handling trust funds

3. Understand the seven key concepts in trust accounting

4. Understand the rules surrounding proper cash handling

5. Demonstrate the ability to correctly operate and reconcile trust accounts

6. Understand when a letter or report to the Law Society is required under the trust accounting rules

7. Understand when and how to apply the trust administration fee (TAF)

8. Understand how a compliance audit works

Course Pre-requisite

This course is open to those who work or have worked in a law firm setting and have completed recognized introductory accounting course.

Primary Teaching Tools

1. Mini-lectures using PowerPoint presentations;

2. On-line access to the LSBC website to enable the students to understand learning outcomes for # 6,7 and 8;

3. Pre-course work requiring the students to work on learning outcomes #1, 2, 4, 6 and 7;

4. In-course work requiring the students to demonstrate understanding in learning outcomes #3, 4 and 8; and

5. Post-course work to enable the students to demonstrate the key points to all the outcomes.

Presenters Staff:

Felicia Ciolfitto, Manager, Trust Regulation, Law Society of British Columbia

Dom Bautista, Facilitator and Course designer

Law Courts Center Trust Accounting 101 Course Syllabus v130912.doc 9/12

Trust Accounting 101

Date of Course:

Summary of Marks:

Pre-Course Work (40%)

In-course Group Work (10%)

Participation (10%)

Post-Course Work: (40 %) due one week after the course

Minus 5% per day late demerit (if applicable)

Total /100%

Remarks

This is a mandatory course for the Canadian Paralegal Institute's Qualified Paralegal Program in Civil Litigation.

For continuing professional development reporting purposes to the Law Society of British Columbia, this course is 7.0 hours long. It includes 7.0 hours of training in professional responsibility and ethics, client care and relations and practice management.

Upon the completion of a course, you will receive one of these two types of certificates - attendance or completion. The Certificate of Completion indicates that you attended the course, participated in the discussions, completed the pre and post course work and achieved a minimum mark of 70%.

Reviewed:120425130825

Law Courts Center Trust Accounting 101 Course Syllabus v130912.doc 9/12

Course Outline

Learning Outcomes

9. Gain an understanding of the regulatory framework of the Law Society of BC

10. Explain the duty and ethical obligations of lawyers handling trust funds

11. Understand the seven key concepts in trust accounting

12. Understand the rules surrounding proper cash handling

13. Demonstrate the ability to correctly operate and reconcile trust accounts

14. Understand when a letter or report to the Law Society is required under the trust accounting rules

15. Understand when and how to apply the trust administration fee (TAF)

16. Understand how a compliance audit works

Course Pre-requisite

This course is open to those who work or have worked in a law firm setting and have completed recognized introductory accounting course.

Primary Teaching Tools

1. Mini-lectures using PowerPoint presentations;

2. On-line access to the LSBC website to enable the students to understand learning outcomes for # 6,7 and 8;

3. Pre-course work requiring the students to work on learning outcomes #1, 2, 4, 6 and 7; and

4. In-course work requiring the students to demonstrate understanding in learning outcomes #3, 4 and 8

5. Post-course work to enable the students to demonstrate the key points to all the outcomes

Presenters Staff:

Felicia Ciolfitto, Manager, Trust Regulation, Law Society of British Columbia

Dom Bautista, Facilitator and Course designer

Law Courts Center Trust Accounting 101 Course Syllabus v130912.doc 9/12

A. Regulation and Ethics

A.1 Law Society of BC as regulators

A.2 A lawyer's duty and ethics

A.3 By the Rules (Legal Profession Act and Law Society of BC Rules)

B. Trust Accounting Overview

B.1 The role of the Law Society’s Trust Assurance Department

B.2 The definition of trust funds

B.3 The seven key concepts in trust accounting

C. Setting up Trust Accounts

C.1 Pooled trust accounts

C.2 Separate trust accounts

C.3 Record-keeping

D. Operating Trust Accounts

D.1 Funds into trust

D.2 Funds out of trust

D.3 Cash handling

D.4 Billing (fees & disbursements)

D.5 Trust shortages

D.6 Monthly trust reconciliations

D.7 Unclaimed trust funds

E. Compliance Reporting

E.1 Cash handling

E.2 Trust shortages

E.3 Retention and security of records

E.4 Storage modification

E.5 CDIC Report

E.6 Annual trust report

E.7 The trust administration fee (TAF)

F. Compliance Audit

F.1 Compliance audit process

F.2 Compliance audit exceptions

Law Courts Center Trust Accounting 101 Course Syllabus v130912.doc 9/12

Course Timeline

9:00 Section A: Regulation and Ethics

9:30 Section B: Trust Accounting Overview

10:00 Section C: Setting up a Trust Account

10:30 Morning break

10:45 Section D: Operating Trust Accounts

11:45 Question and Answer Period

12:00 Lunch Break

1:00 Section D: Operating Trust Accounts (cont’d)

2:30 Afternoon break

3:00 Section E: Compliance Reporting

3:45 Section F: Compliance Audit

4:30 Trust Accounting Wrap-up

4:45 Question and Answer Period

4:55 Summation and Post-Course Work

Law Courts Center Trust Accounting 101 Course Syllabus v130912.doc 9/12

Pre-Course Work

To facilitate your learning and to make good use of your time with us, we ask that you prepare these before class.

Please turn in your answers to the following four questions:

1. If a lay person asks you to describe the mandate of the Law Society, how would you explain it in plain language?

2. The Law Society focuses a lot of attention to the subject of trust accounts. Cite at least two trust account related matters that are found on the Law Society’s website and provide us with a summary.

3. Why are the Division 7 Rules on Trust Accounts and Other Client Property vital?

4. You are about to leave for holidays. Based on Rule 3-56, write a memo describing what steps your replacement should follow to correctly disburse funds from the trust account. (A copy of Rule 3-56 is attached).

For your pre-reading: please take a moment to review:

Law Society of BC website: www.lawsociety.bc.ca

In-class case study on cash transactions.

Withdrawal from trust

3-56 (1) A lawyer must not withdraw or authorize the withdrawal of any trust funds unless the funds are

(a) properly required for payment to or on behalf of a client or to satisfy a court order,

(b) the property of the lawyer,

(d) paid to the lawyer to pay a debt of that client to the lawyer,

(e) transferred between trust accounts,

(f) due to the Foundation under section 62(2)(b) of the Act, or

(g) unclaimed trust funds remitted to the Society under Division 8.

(1.1) The Executive Director may authorize a lawyer to withdraw trust funds for a purpose not specified in subrule (1).

(1.2) No payment from trust funds may be made unless

(a) trust accounting records are current, and

(b) there are sufficient funds held to the credit of the client on whose behalf the funds are to be paid.

(1.3) A lawyer must not make or authorize the withdrawal of funds from a pooled or separate trust account, except

(a) by cheque as permitted by subrule (2) or (3),

(b) by electronic transfer as permitted by subrule (3.1) or (3.2),

(d) in cash if required under Rule 3-51.1(3.2) or (3.3).

(2) A lawyer who makes or authorizes the withdrawal of funds from a pooled or separate trust account by cheque must

(a) withdraw the funds with a cheque marked "Trust,"

(b) not make the cheque payable to "Cash" or "Bearer," and

(3) A lawyer who withdraws or authorizes the withdrawal of trust funds for the payment of fees must withdraw the funds with a cheque payable to the lawyer's general account.

(3.1) A lawyer may make or authorize the withdrawal of funds from a pooled or separate trust account by electronic transfer, provided all of the following conditions are met:

(a) [rescinded 07/2009]

(b) the transfer system is one that will produce, not later than the next banking day, a confirmation form from the financial institution confirming the details of the transfer, which should include the following:

(i) the date of the transfer;

(ii) source trust account information, including account name, financial institution and account number;

(iii) destination account information, including account name, financial institution, financial institution address and account number;

(iv) the name of the person authorizing the transfer;

(v) amount of the transfer;

(i) complete and personally sign a requisition for the transfer in a form approved by the Discipline Committee,

(ii) submit the original requisition to the appropriate financial institution,

(iii) retain a copy of the requisition in the lawyer's records,

(iv) obtain the confirmation referred to in paragraph (b) from the financial institution,

(v) retain a hard copy of the confirmation in the lawyer's records, and

(vi) immediately on receipt of the confirmation, verify that the money was drawn from the trust account as specified in the requisition.

(3.2) A lawyer may make or authorize the withdrawal of funds from a pooled or separate trust account by electronic transfer using the Electronic Filing System of the Land Title Branch for the purpose of the payment of Property Transfer Tax on behalf of a client, provided that the lawyer

(a) retains in the lawyer's records a copy of

(i) all Electronic Payment Authorization forms submitted to the Electronic Filing System,

(ii) the Property Transfer Tax return, and

(iii) the transaction receipt provided by the Electronic Filing System,

(b) digitally signs the Property Transfer Tax return in accordance with the requirements of the Electronic Filing System, and

(4) A lawyer may instruct a savings institution to pay to the Foundation under Rule 3-52 the net interest earned on a pooled trust account.

(5) A transfer of funds from a pooled trust account to a separate trust account must be authorized by the client and approved in writing signed by a lawyer.

[(1), (2) and (5) amended, (1.1), (1.2) and (3.1) added 02/2003; (2) and (4) amended,
(1.3) and (3.2) added 03/2004; (3.2) amended 05/2004; (1.3) amended 06/2005; (3.1) amended 07/2009; (1.3) amended 11/2009]

Law Courts Center Trust Accounting 101 Course Syllabus v130912.doc 9/12

Case Study: Cash Transactions

Version: September 12, 2013

Facts

Mr. Lawyer Dee is a sole practitioner. While out on a lunch break, Mr. Dee’s receptionist, Ms. Eee, receives $25,000 in cash from a client as a retainer.

Mr. Dee is representing this client in a criminal matter. The cash is deposited to Mr. Dee’s trust account by the receptionist (N.B. that Mr. Dee is unaware that this retainer was received in cash as Ms. Eee failed to note the form of funds received in the trust books and records).

A few days later, the client decides that he no longer wants Mr. Dee to represent him and so asks that the $25,000 be refunded as soon as possible.

Mr. Dee asks Ms. Eee to prepare a trust cheque in the amount of $25,000 for his signature. Ms. Eee does so and this refund cheque is delivered to the client.

1. Did Ms. Eee do the right thing?

2. Had the money been received for a real estate transaction, would the situation have been handled any differently?

A copy of Rule 3-51.1 and Rule 3-61.1 is attached.

Law Society of BC’s Rules on Cash Transactions

Cash transactions

3-51.1 (1) This Rule applies to a lawyer when engaged in any of the following activities on behalf of a client, including giving instructions on behalf of a client in respect of those activities:

(a) receiving or paying funds;

(b) purchasing or selling securities, real property or business assets or entities;

(2) This Rule does not apply to a lawyer when

(a) engaged in activities referred to in subrule (1) on behalf of his or her employer, or

(b) receiving or accepting cash

(i) from a peace officer, law enforcement agency or other agent of the Crown acting in an official capacity,

(ii) pursuant to the order of a court or other tribunal,

(iii) to pay a fine or penalty, or

(iv) from a savings institution or public body.

(3) While engaged in an activity referred to in subrule (1), a lawyer must not accept an aggregate amount in cash of $7,500 or more in respect of any one client matter or transaction.

(3.1) Despite subrule (3), a lawyer may accept an aggregate amount in cash of $7,500 or more in respect of a client matter or transaction for professional fees, disbursements, expenses or bail.

(3.2) A lawyer who accepts an aggregate amount in cash of $7,500 or more under subrule (3.1), must make any refund greater than $1,000 out of such money in cash.

(3.3) A lawyer who receives cash, unless permitted under this Rule to accept it, must

(a) make no use of the cash,

(b) return the cash, or if that is not possible, the same amount in cash, to the payor immediately,

(c) make a written report of the details of the transaction to the Executive Director within 7 days of receipt of the cash, and

(d) comply with all other Rules pertaining to the receipt of trust funds.

(4) For the purposes of this Rule, foreign currency is to be converted into Canadian dollars based on

(a) the official conversion rate of the Bank of Canada for that currency as published in the Bank of Canada's Daily Memorandum of Exchange Rates in effect at the relevant time, or