State Bar Targets Client Trust Account Regulation, Other Measures

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The Committee on the Special Discipline Case Audit, established on July 23, will further analyze the audit report on specific closed discipline complaints and propose a comprehensive corrective action plan. The Board also directed this new committee, chaired by Trustee José Cisneros, to work with staff to develop recommendations to strengthen regulation of attorney-client trust accounts.

“The Board’s actions today demonstrate resolve to identify and remedy shortcomings in our discipline system that impact the State Bar’s ability to carry out its public protection mission,” said Board Chair Sean SeLegue. “That includes not only ensuring that attorney ethical violations are properly investigated and prosecuted but also innovative means of preventing misconduct and harm to the public from occurring in the first place.”

Recommendations to be considered for regulation of client trust accounts to prevent misappropriation include:

• Conducting proactive, random audits of attorney-client trust accounts

• Requiring some or all attorneys to have their trust accounts regularly audited by Certified Public Accountants

• Requiring annual self-funded audits and reporting of client trust accounts

• Requiring bonding or the use of third-party escrow accounts for some or all attorneys

• Proposing new and amended statutes, State Bar rules, rules of professional conduct, and other rules governing attorney conduct as well as standards governing discipline for client trust account violations

• Assessing technology and other tools that can be employed in this effort

Such changes would be groundbreaking and put California at the forefront of protecting funds that attorneys hold in trust on behalf of clients and others.

The Board expects to finalize a set of approved recommendations for public comment no later than December 31, 2021.

In other actions at the July meeting focused on the discipline system, the Board:

• Approved a five-year plan to develop preventative education for attorneys that will include interactive e-learning courses and self-assessments. Proactive approaches to help prevent attorney misconduct represent a growing area of focus for the State Bar, particularly as it also works to eliminate racial disparities in discipline. The first such course and self-assessment, scheduled to launch by the end of this year, will be on client trust accounting practices.

• Directed staff to work with the Legislature to modify and modernize the existing statutory backlog standard with improved case processing standards. The longstanding statutory definition of the State Bar’s disciplinary case backlog--the number of cases as of December 31 each year that were pending beyond six months after receipt--does not account for variations in case types or complexity. The State Auditor’s April 2021 report on the State Bar recommended that the backlog standard be revisited to improve how the agency is measured and how resources are allocated.

• Approved circulation for a 45-day public comment period amendments to Rule 2201 of the Rules of the State Bar. The rule 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 oversight and integrity of the Rule 2201 program.