The issue of the duties of legal practitioners with regard to the management of trust funds has already been addressed by the Office of the Legal Practitioners` Loyalty Fund (LPFF), but the mandatory nature of these articles needs to be reiterated so that lawyers are wary of the obligations imposed on them by Law 28 of 2014 on Legal Practice (LPA). and the consequences of non-compliance with these rules. Obligations. These accounting documents may be subject to control by the LPC or the LPFF to enable these bodies to ensure compliance with the provisions of the LPA. If a violation is detected, the LPC or LPFF can prepare the accounting records and recover both the costs of inspection and the preparation of accounting records from the identified escrow account practice. (b) Paragraph 4 to the person referred to in this paragraph: Fiduciary account administrators are advised that amounts credited to an escrow account do not form part of the assets of the escrow practice or escrow account and cannot be seized by any creditor of the escrow account practice. This is subject to the provision of Article 88(1)(b) LPA, which states that any surplus remaining after settlement by all escrow creditors and “all claims relating to interest on invested funds shall be deemed to be part of the assets of the relevant trust account practice”. (2) Every trust account firm shall maintain an escrow account with a bank with which the Fund has entered into an agreement in accordance with section 63 (1) (g) and shall deposit the funds held by that firm on behalf of a person in the trust account as soon as practicable after receiving the escrow account. 86. (1) Any lawyer within the meaning of Article 84 para. 1 holds an escrow account. The remaining chapters of Law No. 28 of 2014 on Legal Practice (LPA) entered into force on 1 November 2018, and lawyers and all relevant stakeholders are reminded of the requirements of Article 87(4)(a) which require legal practitioners to pay all unclaimed and unknown funds into an escrow account at the Legal Practitioners` Loyalty Fund (LPFF).
Article 87(4)(a) and (b) of the PCPA provides: (a) Funds held in the escrow account of an escrow practice whose ownership is unknown or which are not claimed after one year shall, after the second annual accounts of the escrow account records, after the date on which those funds were deposited in the escrow account of the escrow practice; be transferred to the Fund through the practice of the escrow account. (b) Nothing in this paragraph shall deprive the owner of the money provided for in subparagraph (a) of the right to claim from the Fund any party to whom he can prove a claim. Effective November 1, 2018, the legal profession will now be regulated by legal counsel (“Legal practitioners engaged in trust account practices must comply with the mandatory provisions of the PCPA regarding how trust funds are to be managed in order to remain compliant and avoid serious risks and consequences. Legal practitioners should use relevant risk mitigation tools to ensure continued compliance with those obligations, taking into account that the obligation to comply is their responsibility. Trust account practitioners are sometimes faced with an unidentified trust money situation. Paragraph 87(4)(a) of the PCPA provides that if the identity of the owner of the trust funds is unknown or trust funds that are not claimed after one year are to be paid into the LPFF after the second annual closure of the books and records after the date of payment by escrow account. If at any time the owner of the money is determined, he is not excluded from the right to claim from the LPFF a party to which he can prove that he is entitled. (7) An advocate within the meaning of Article 84 (1) shall comply with the terms of an agreement between a bank and the Fund in accordance with Article 63 (1) (g). The most serious consequence for fiduciary account lawyers is contained in section 89 LPA, which provides that the LPC or LPFF, by application to the High Court, prohibits any escrow lawyer from working in any way on his escrow account and from appointing a bounty trustee to control and administer that escrow account. Fiduciary accounts are now governed by subsections 86(2) and 86(3) of the Act.
If money (usually larger amounts) is held in an escrow account for an extended period of time and the lawyer obtains the client`s consent to invest those funds, it will be held in an account under section 86(4). In practice, most lawyers and law firms have more than one bank account and often more than one bank account in different banks. Previously, section 78 of the Lawyers Act regulated lawyers` bank accounts. Section 78 has now been replaced by section 86 of the Legal Practice Act and states that the underlying reason for depositing money into a lawyer`s bank account determines in which bank account the money is to be held. 4. An escrow account practice may, at the direction of a person, open a separate trust savings account or other interest-bearing account to invest the funds deposited in the trust account of that practice in the name of the person over whom it exercises sole control as trustee, agent, shareholder or other fiduciary capacity. [Formerly s. 78(2A)] (6) An advocate referred to in section 84 (1) shall not place money within the meaning of subsection (2) or money within the meaning of subsections (3) and (4) in accounts with a bank that is not a party to an agreement under section 63 (1) (g) unless the Fund has given its prior written consent.
(c) funds deposited in an escrow account or other interest-bearing account in accordance with section 86; and It should be noted that, under Article 84(6), the CPA `may withdraw a trust fund certificate and, if necessary, obtain a ban on the lawyer concerned if he does not comply with the provisions of the [AHR Act] or acts unlawfully or unethically`. In addition, a lawyer operating a receivership firm may, within the meaning of Article 86(4) LPA, open a separate investment account at the express direction of a client in order to invest the funds received in the escrow account on behalf of a client over whom the fiduciary account firm exercises sole control as trustee. Agent, intervener or other fiduciary capacity. Legal practitioners should take note of the fact that interest on funds deposited under section 86(4) LPA accrues to the person for whom such money was invested, provided that 5% of the accrued interest is to be paid to the LPFF and reverts to the LPFF. Under sections 84 and 85 of the PCPA, a lawyer operating an escrow practice is required to apply for and hold a Fidelity Fund Certificate (FFC). For the purposes of Article 84(2), no lawyer may `receive or hold funds or property from a person unless the lawyer concerned is in possession of a trust fund certificate`. This also applies to persons employed or supervised by such a lawyer and to deposits made on the basis of fees or costs for the legal services to be provided. An FFC is valid until 31 December of the year for which it was issued. Legal practitioners who open a practice on their own account must complete a PLC-approved Legal Practice Management course within the time limit set by the Legal Practice Council (CPL) and after payment of fees set by the Legal Practice Council (CPA) (see Rampela Mokoena “Dealing with trust money – dealing with the duties of an escrow account lawyer” 2019 (May) CD 6). 5. Interest on funds deposited under this Division shall, in the case of funds deposited in accordance with subsections (2) and (3), be paid into and transferred to the Fund; and In respect of an investment under Article 86(4), the bank concerned must communicate directly with a lawyer regarding the procedure for declaring such investments and their accrued interest to the Fund. SARS then requires banks to issue the legal advisor or client with an IT3b tax certificate for 95% of the rand value of the interest earned.
A separate IT3b certificate is issued to the fund for 5% of the rand value of interest earned on the account. The AHR Act under section 87 states that lawyers who operate an escrow account firm have a duty and obligation to keep proper accounting records that list things like – CPA. Previously, the legal profession was regulated by four state bars. One of the biggest changes is that the LPC regulates all lawyers at all levels. Therefore, not only lawyers, but also lawyers. Article 86(4) of the Law replaced its predecessor, Article 78(2A) of the Law on lawyers. Again, such an investment account must be opened with one of the Fund`s licensed banks listed above. These accounts are opened in the name of another person and the legal advisor has exclusive control over the account as trustee, agent or stakeholder or performs a fiduciary function. A lawyer must obtain a client mandate in order to invest money within the meaning of section 86(4).
