Proposed Rule Amendments

The Process and Your Comments

Proposed amendments to the Rules of the North Carolina State Bar are published for comment during the quarter after the council of the North Carolina State Bar approves their publication. The proposed amendments are published in the North Carolina State Bar's Journal and on this website. After publication for comment, the proposed rule amendments are considered for adoption by the council at its next quarterly meeting. If adopted, the rule amendments are submitted to the North Carolina Supreme Court for approval. Amendments become effective upon approval by the court. Unless otherwise noted, proposed additions to rules appear in in bold and underlined print, deletions are interlined. Proposed amendments to the Rules of Professional Conduct appear at the end of the page.

The State Bar welcomes your comments regarding proposed amendments to the rules. Please send a written response to L. Thomas Lunsford II, The North Carolina State Bar, PO Box 25908, Raleigh, NC 27611, or comments@ncbar.gov, by March 30, 2015.

 

Amendments Pending Approval by the Supreme Court

At its meetings on July 25, 2014, October 24, 2014, and January 23, 2015, the council of the North Carolina State Bar voted to adopt the following rule amendments for transmission to the North Carolina Supreme Court for approval (for the complete text see the Fall 2014 and Winter 2014 editions of the Journal or visit the State Bar website):

Proposed Amendments to the Discipline and Disability Rules
27 N.C.A.C. 1B, Section .0100, Discipline and Disability of Attorneys

The proposed amendments change the name of the Trust Accounting Supervisory Program to the Trust Account Compliance Program. There are no changes to the substance of the rule other than the name change.

Proposed Amendments to the Rules Governing the Board of Law Examiners and the Training of Law Students
27 N.C.A.C. 1C, Section .0100, Board of Law Examiners

The proposed amendments will allow graduates of law schools that are not accredited by the American Bar Association to qualify for admission to the North Carolina State Bar under certain circumstances.

Proposed Amendments to the Rules Governing the Administration of the CLE Program
27 N.C.A.C. 1D, Section .1500, Rules Governing the Administration of the Continuing Legal Education Program

The proposed amendments change the name of the mandatory CLE program for new lawyers from “Professionalism for New Admittees” to “Professionalism for New Attorneys” (PNA program) and permit the Board of Continuing Education to approve alternative timeframes for the PNA program, thereby giving CLE providers more flexibility to be creative in their presentations of the program.

Proposed Amendments to The Plan of Legal Specialization
27 N.C.A.C. 1D, Section .1700, The Plan of Legal Specialization

The proposed amendments will eliminate the possibility of one person serving as board chair for an excessive period of time, and will enable a logical succession of the chairmanship among the members of the board.

Proposed Amendments to the Standards for Certification as a Specialist
27 N.C.A.C. 1D, Section .2500, Certification Standards for the Criminal Law Specialty, and Section .2700, Certification Standards for Workers’ Compensation Law Specialty

The proposed amendments to the criminal law standards reduce the number of practice hours required to meet the substantial involvement standard for the juvenile delinquency subspecialty and allow for additional forms of practice equivalents for the subspecialty. In the standards for the workers’ compensation specialty, the proposed amendments will add insurance as a related field in which a lawyer may earn CLE credits for certification and recertification.

Proposed Amendments to the Standards for Certification of Paralegals
27 N.C.A.C. 1G, Section .0100, The Plan for Certification of Paralegals

The proposed amendments permit a degree from a foreign educational institution to satisfy part of the educational requirements for certification if the foreign degree is evaluated by a qualified credential evaluation service and found to be equivalent to an associate’s or bachelor’s degree from an accredited US institution.

Proposed Amendments to the Rules of Professional Conduct to Address Bullying and Intimidation
27 N.C.A.C. 2, The Rules of Professional Conduct, Rule 1.0, Terminology, Rule 3.5, Impartiality and Decorum of the Tribunal, Rule 4.4, Respect for Rights of Third Persons, and Rule 8.4, Misconduct

The proposed amendment to Rule 1.0 clarifies that the term “tribunal” encompasses any proceeding of a court including a deposition. The proposed amendments to the comments to Rule 3.5, Rule 4.4, and Rule 8.4 confirm that conduct that constitutes bullying and attempts to intimidate are prohibited by existing provisions of the Rules of Professional Conduct.

Proposed Amendments to the Rules of the Board of Law Examiners
Rules Governing Admission to the Practice of Law in the State of North Carolina, Section .0100, Organization

The proposed amendments to Rules Governing Admission to the Practice of Law change the street and mailing address listed for the offices of the Board of Law Examiners to reflect the board’s recent move to a new location.

Proposed Amendments
Below are the rule amendments from the most recent meeting of the State Bar Council in October 2014.


Proposed Amendments to the Rule on Pro Bono Practice by Out of State Lawyers

27 N.C.A.C. 1D, Section .0900, Procedures for Administrative Committee

 

The proposed amendments allow an out-of-state lawyer employed by a nonprofit corporation rendering legal services to indigent persons to obtain pro bono practice status during the pendency of the lawyer’s application for admission to the North Carolina State Bar. In addition, the proposed amendments clarify that an out-of-state lawyer employed as in-house counsel for a business organization with offices in North Carolina may petition and qualify for pro bono practice status.

 

.0905 Pro Bono Practice by Out of State Lawyers

 

(a) A lawyer licensed to practice in another state but not North Carolina who desires to provide legal services free of charge to indigent persons may file a petition with the secretary addressed to the council setting forth:

 

(1) ...

 

(d) Upon receipt of a petition and other information satisfying the provisions of this rule, the council may, in its discretion, enter an order permitting the petitioner to provide legal services to indigent persons on a pro bono basis under the supervision of a member employed by a nonprofit corporation qualified to render legal services pursuant to G.S. 84-5.1...

 

(e) A petitioner may be a compensated employee of a nonprofit corporation qualified to render legal services pursuant to G.S. 84-5.1 and, if granted pro bono practice status, may provide legal services to the indigent clients of that corporation subject to the following conditions:

 

(1) the petitioner has filed an application for admission with the North Carolina Board of Law Examiners (BLE) and has never previously been denied admission to the North Carolina State Bar for any reason; a copy of the petitioner’s application shall be provided with the petition for pro bono practice;

 

(2) if the petitioner is granted pro bono practice status, that status will terminate when the BLE makes its final ruling on the petitioner’s application for admission; and

 

(3) the petitioner is supervised in the provision of all legal services to indigent persons as set forth in paragraph (d).

 

(f) A lawyer who is paid in-house counsel for a business organization with offices in North Carolina may petition under this rule to provide legal services to indigent persons on a pro bono basis under the supervision of a member employed by a nonprofit corporation qualified to render legal services pursuant to G.S. 84-5.1.

(e) (g) ...

 


Proposed Amendments to the Hearing and Appeal Rules of the Board of Legal Specialization

27 N.C.A.C. 1D, Section .1800, Hearing and Appeal Rules of the Board of Legal Specialization

The proposed amendments make clear that an “incomplete application” does not include an application with respect to which fewer than five completed peer review forms have been timely filed with the Board of Legal Specialization.

 

.1801 Incomplete Applications; Reconsideration of Applications Rejected by Specialty Committee; and Reconsideration Procedure

 

(a) Incomplete Applications. The executive director of the North Carolina State Bar Board of Legal Specialization (the board) will review every application to determine if the application is complete. An application is incomplete if it does not include complete answers to every question on the application and copies of all documents requested on the application. The applicant will be notified in writing if an application is incomplete. The applicant must submit the information necessary to complete the application within 21 days of the date of the notice. If the applicant fails to provide the required information during the requisite time period, the executive director will return the application to the applicant together with a refund of the application fee less a fifty dollar ($50) administrative fee. The decision of the executive director to reject an application as incomplete is final unless the applicant shows good cause for an extension of time to provide the required information. This provision does not apply to an application with respect to which fewer than five completed peer review forms have been timely filed with the board.

 

(b) Denial of Application by Specialty Committee.

 

...


Proposed Amendments to the Rules on Trust Accounting and Misconduct in the Rules of Professional Conduct

27 N.C.A.C. 2, Rules of Professional Conduct

 

Amendments to Rule 1.15, Safekeeping Property (and its subparts, Rule 1.15-1, Rule 1.15-2, and Rule 1.15-3) and to Rule 8.5 Misconduct, are proposed primarily to add requirements that will  facilitate the early detection of internal theft and errors. The proposed amendments also provide clearer explanations of existing record keeping and reconciliation requirements. A proposed new subpart, Rule 1.15-4, Trust Account Management in Multiple-Lawyer Firm, will create a procedure whereby a firm with two or more lawyers may designate a firm principal to serve as the trust account oversight officer to oversee the administration of the firm’s general trust accounts in conformity with the requirements of Rule 1.15.

 

More specifically, the proposed amendment to Rule 1.15-1 adds credit unions to the list of possible depositories for trust accounts in light of the extension of FDIC insurance coverage to individual client deposits in such accounts. In Rule 1.15-2, the proposed amendments do the following: clarify how a lawyer indicates on a trust account check the name of the client whose balance is being used to pay the lawyer’s fees; specify that cash and bearer withdrawals from a trust account are not allowed by any means and that debit cards may not be used to withdraw funds from a general trust or fiduciary account; clarify the duty to report misappropriation; and limit signature authority on trust account checks to (1) lawyers who have taken an approved one-hour course on trust account management or (2) supervised employees who do not perform monthly or quarterly reconciliations and who have also taken the approved course. In Rule 1.15-3, the proposed amendments do the following: revise the quarterly reconciliation requirement to state exactly how a three-way reconciliation is done; add monthly and quarterly reviews to facilitate early detection and correction of errors and internal theft; and allow for electronic storage of certain trust account records. In Rule 8.3, the proposed amendments to the comment explain that the duty to report under Rule 8.3 does not require a lawyer to report her own misconduct, but the duty to report under Rule 1.15-2(p) does require self-reporting.

 

Rule 1.15 Safekeeping Property

 

This rule has three four subparts: Rule 1.15-1, Definitions; Rule 1.15-2, General Rules; and Rule 1.15-3, Records and Accountings; and Rule 1.15-4, Trust Account Management in Multiple-Lawyer Firm. The subparts set forth the requirements for preserving client property, including the requirements for preserving client property in a lawyer’s trust account. The comment for all three four subparts as well as the annotations appear after the text for Rule 1.15-3 1.15-4.

 

Rule 1.15-1 Definitions

 

For purposes of this Rule 1.15, the following definitions apply:

 

(a) “Bank” denotes a bank, or savings and loan association, or credit union chartered under North Carolina or federal law.

 

(b) ...

 

Rule 1.15-2 General Rules

 

(a) Entrusted Property.

 

...

 

(f) Segregation of Lawyer’s Funds. Funds in Trust Account. A trust account may only hold trust funds. Third party funds that are not received by or placed under the control of the lawyer in connection with the performance of legal services may not be deposited or maintained in a trust account. Additionally, No no funds belonging to a lawyer shall be deposited or maintained in a trust account or fiduciary account of the lawyer except:

 

(1) funds sufficient to open or maintain an account, pay any bank service charges, or pay any tax levied on the account; or

 

(2) funds belonging in part to a client or other third party and in part currently or conditionally to the lawyer.

 

(g) Mixed Funds Deposited Intact. When funds belonging to the lawyer are received in combination with funds belonging to the client or other persons, all of the funds shall be deposited intact. The amounts currently or conditionally belonging to the lawyer shall be identified on the deposit slip or other record. After the deposit has been finally credited to the account, the lawyer may shall withdraw the amounts to which the lawyer is or becomes entitled. If the lawyer’s entitlement is disputed, the disputed amounts shall remain in the trust account or fiduciary account until the dispute is resolved.

 

(h) Items Payable to Lawyer. Any item drawn on a trust account or fiduciary account for the payment of the lawyer’s fees or expenses shall be made payable to the lawyer and shall indicate on the item by client name, file number, or other identifying information the client from whose balance on which the item is drawn. Any item that does not include capture this information may not be used to withdraw funds from a trust account or a fiduciary account for payment of the lawyer’s fees or expenses.

 

(i) No Bearer Items. No item shall be drawn on a trust account or fiduciary account made payable to cash or bearer and no cash shall be withdrawn from a trust account or fiduciary account by any means of a debit card.

 

(j) Debit Cards Prohibited. Use of a debit card to withdraw funds from a general or dedicated trust account or a fiduciary account is prohibited.


(j)
(k) No Personal Benefit to Lawyer or Third Party. A lawyer shall not use or pledge any entrusted property to obtain credit or other personal benefit for the lawyer or any person other than the legal or beneficial owner of that property.


(k)
(l) Bank Directive.

 

...

 

[Re-lettering intervening paragraphs.]


(o)
(p) Duty to Report Misappropriation. A lawyer who discovers or reasonably believes that entrusted property has been misappropriated or misapplied shall promptly inform the Trust Account Compliance Counsel (TACC) in the North Carolina State Bar Office of Counsel. Discovery of intentional theft or fraud must be reported to the TACC immediately. When an accounting or bank error results in an unintentional and inadvertent use of one client’s trust funds to pay the obligations of another client, the event must be reported unless the misapplication is discovered and rectified on or before the next quarterly reconciliation required by Rule 1.15-3(d)(1). This rule requires disclosure of information otherwise protected by Rule 1.6 if necessary to report the misappropriation or misapplication.


(p)
(q) Interest on Deposited Funds.

 

...


(q)
(r) Abandoned Property.

 

...


(s) Signature on Trust Checks.


(1) Checks drawn on a trust account must be signed by a lawyer, or by an employee who is not responsible for performing monthly or quarterly reconciliations and who is supervised by a lawyer. Prior to exercising signature authority, a lawyer or supervised employee shall take a one-hour trust account management continuing legal education (CLE) course approved by the State Bar for this purpose. The CLE course must be taken at least once for every law firm at which the lawyer or the supervised employee is given signature authority.

(2) Trust account checks may not be signed using signature stamps, preprinted signature lines on checks, or electronic signatures.

 

Rule 1.15-3 Records and Accountings

 

(a) Check Format...

 

(b) Minimum Records for Accounts at Banks. The minimum records required for general trust accounts, dedicated trust accounts, and fiduciary accounts maintained at a bank shall consist of the following:

 

(1) ...;

 

(2) all canceled checks or other items drawn on the account, or printed digital images thereof furnished by the bank, showing the amount, date, and recipient of the disbursement, and, in the case of a general trust account, the client name, file number, or other identifying information of the client from whose client balance against which each item is drawn, provided, that:...

 

...

 

(d) Reconciliations of General Trust Accounts.

 

(1) Quarterly Reconciliations. At least quarterly, the individual client balances shown on the ledger of a general trust account must be totaled and reconciled with the current bank statement balance for the trust account as a whole. For each general trust account, a printed reconciliation report shall be prepared at least quarterly. Each reconciliation report shall show all of the following balances and verify that they are identical:


(A)
 The balance that appears in the general ledger as of the reporting date;


(B) The total of all subsidiary ledger balances in the general trust account, determined by listing and totaling the positive balances in the individual client ledgers and the administrative ledger maintained for servicing the account, as of the reporting date; and


(C)  The adjusted bank balance, determined by adding outstanding deposits and other credits to the ending balance in the monthly bank statement and subtracting outstanding checks and other deductions from the balance in the monthly statement.

 

(2) Monthly Reconciliations. Each month, the balance of the trust account as shown on the lawyer’s records shall be reconciled with the current bank statement balance for the trust account.

 

(3) The lawyer shall review, sign, date, and retain a printed copy of the reconciliations of the general trust account for a period of six years in accordance with Rule 1.15-3(g).

 

(e) Accountings for Trust Funds.

 

...


(i) Reviews.


(1) Each month, for each general trust account, dedicated trust account, and fiduciary account, the lawyer shall review the bank statement and cancelled checks for the month covered by the bank statement.

(2) Each quarter, for each general trust account, dedicated trust account, and fiduciary account, the lawyer shall review the statement of costs and receipts, client ledger, and cancelled checks of a random sample of representative transactions completed during the quarter to verify that the disbursements were properly made. A sample of three representative transactions shall satisfy this requirement, but a larger sample may be advisable.

(3) The lawyer shall take the necessary steps to investigate, identify, and resolve within ten days any discrepancies discovered during the monthly and quarterly reviews.

(4) A report of each monthly and quarterly review, including a description of the review, the transactions sampled, and any remedial action taken, shall be prepared. The lawyer shall sign, date, and retain a printed copy of the report and associated documentation for a period of six years in accordance with Rule 1.15-3(g).

(j) Retention of Records in Electronic Format. Any printed or paper report required by this rule may be saved, for the required period, in an electronic format provided the original paper report was signed and dated at the time of preparation and the electronic copy is retained in a format that cannot be electronically manipulated such as PDF.

 

Rule 1.15-4, Trust Account Management in Multiple-Lawyer Firm


(a) Trust Account Oversight Officer (TAOO).


Lawyers in a law firm of two or more lawyers may designate a partner in the firm to serve as the trust account oversight officer (TAOO) for any general trust account into which more than one firm lawyer deposits fiduciary funds. The TAOO and the partners of the firm, or those with comparable managerial authority (managing lawyers), shall agree in writing that the TAOO will oversee the administration of any such trust account in conformity with the requirements of Rule 1.15, including, specifically, the requirements of this Rule 1.15-4. More than one partner may be designated as a TAOO for a law firm.


(b) Limitations on Delegation.


Designation of a TAOO does not relieve any lawyer in the law firm of responsibility for the following:


(1) oversight of the administration of any dedicated trust account or fiduciary account associated with a legal matter for which the lawyer is primary legal counsel; and


(2) review of the disbursement sheets or statements of costs and receipts, client ledgers, and trust account balances for those legal matters for which the lawyer is primary legal counsel.


(c) Training of the TAOO.


(1) Within the six months prior to beginning service as a TAOO, a lawyer shall,


(A) read all subparts and comments to Rule 1.15, all formal ethics opinions of the North Carolina State Bar interpreting Rule 1.15, and the North Carolina State Bar Trust Account Handbook;


(B) complete one hour of accredited continuing legal education (CLE) on trust account management approved by the State Bar for the purpose of training a lawyer to serve as a TAOO;


(C) complete two hours of training (live, online, or self-guided) presented by a qualified educational provider on one or more of the following topics: (i) financial fraud, (ii) safeguarding funds from embezzlement, (iii) risk assessment and management for bank accounts, (iv) information security and online banking, or (v) accounting basics; and


(D) become familiar with the law firm’s accounting system for trust accounts.


(2) During each year of service as a TAOO, the designated lawyer shall attend one hour of accredited continuing legal education (CLE) on trust account management approved by the State Bar for the purpose of training a TAOO or one hour of training, presented by a qualified educational provider, on one or more of the subjects listed in paragraph (c)(1)(C).


(d) Designation and Annual Certification.


The written agreement designating a lawyer as the TAOO described in paragraph (a) shall contain the following:


(1)  A statement by the TAOO that the TAOO agrees to oversee the operation of the firm’s general trust accounts in compliance with the requirements of all subparts of Rule 1.15, specifically including the mandatory oversight measures in paragraph (e) of this rule;


(2) Identification of the trust accounts that the TAOO will oversee;


(3) An acknowledgement that the TAOO has completed the training described in paragraph (c)(1) and a description of that training;


(4) A statement certifying that the TAOO understands the law firm’s accounting system for trust accounts; and


(5) An acknowledgement that the lawyers in the firm remain professionally responsible for the operation of the firm’s trust accounts in compliance with Rule 1.15.


Each year on the anniversary of the execution of the agreement, the TAOO and the managing lawyers shall execute a statement confirming the continuing designation of the lawyer as the TAOO, certifying compliance with the requirements of this rule, describing the training undertaken by the TAOO as required by paragraph (c)(2), and reciting the statements required by subparagraphs (d)(1), (2), (4), and (5). During the lawyer’s tenure as TAOO and for six years thereafter, the agreement and all subsequent annual statements shall be maintained with the trust account records (see Rule 1.15-3(g)).


(e) Mandatory Oversight Measures.


In addition to any other record keeping or accounting requirement set forth in Rule 1.15-2 and Rule 1.15-3, the firm shall adopt a written policy detailing the firm’s trust account management procedures which shall annually be reviewed, updated, and signed by the TAOO and the managing lawyers. Each version of the policy shall be retained for the minimum record keeping period set forth in Rule 1.15-3(g).


Comment [to follow Rule 1.15-4]

 

[1] ...


Fraud Prevention Measures


[21] The mandatory monthly and quarterly reviews and oversight measures in Rule 1.15-3(i) facilitate early detection of internal theft and early detection and correction of errors. They are minimum fraud prevention measures necessary for the protection of funds on deposit in a firm trust or fiduciary account from theft by any person with access to the account. Internal theft from trust accounts by insiders at a law firm can only be timely detected if the records of the firm’s trust accounts are routinely reviewed. For this reason, Rule 1.15-3(i)(1) requires monthly reviews of the bank statements and cancelled checks for all general, dedicated, and fiduciary accounts. In addition, Rule 1.15-3(i)(2) requires quarterly reviews of a random sample of three transactions for each trust account, dedicated trust account, and fiduciary account including examination of the statement of costs and receipts, client ledger, and cancelled checks for the transactions. Review of these documents will enable the lawyer to verify that the disbursements were made properly. Although not required by the rule, a larger sample than three transactions is advisable to increase the likelihood that internal theft will be detected.


[22] Another internal control to prevent fraud is found in Rule 1.15-2(s) which addresses the signature authority for trust account checks. The provision prohibits an employee who is responsible for performing the monthly or quarterly reconciliations for a trust account from being a signatory on a check for that account. Dividing the check signing and reconciliation responsibilities makes it more difficult for one employee to hide fraudulent transactions. Similarly, signature stamps, preprinted signature lines on checks, and electronic signatures are prohibited to prevent their use for fraudulent purposes.


[23] In addition to the recommendations in the North Carolina State Bar Trust Account Handbook (see the chapter on Safeguarding Funds from Embezzlement), the following fraud prevention measures are recommended:


(1) Enrolling the trust account in an automated fraud detection program;


(2) Implementation of security measures to prevent fraudulent wire transfers of funds;


(3) Actively maintaining end-user security at the law firm through safety practices such as strong password policies and procedures, the use of encryption and security software, and periodic consultation with an information technology security professional to advise firm employees; and


(4) Insuring that all staff members who assist with the management of the trust account receive training on and abide by the security measures adopted by the firm.

Lawyers should frequently evaluate whether additional fraud control measures are necessary and appropriate.

Duty to Report Misappropriation or Misapplication


[24] A lawyer is required by Rule 1.15-2(p) to report to the trust account compliance counsel of the North Carolina State Bar Office of Counsel if the lawyer knows or reasonably believes that entrusted property, including trust funds, has been misappropriated or misapplied. The rule requires the reporting of an unintentional misapplication of trust funds, such as the inadvertent use of one client’s funds on deposit in a general trust account to pay the obligations of another client, unless the lawyer discovers and rectifies the error on or before the next scheduled quarterly reconciliation. A lawyer is required to report the conduct of lawyers and nonlawyers as well as the lawyer’s own conduct. A report is required regardless of whether information leading to the discovery of the misappropriation or misapplication would otherwise be protected by Rule 1.6. If disclosure of confidential client information is necessary to comply with this rule, the lawyer’s disclosure should be limited to the information that is necessary to enable the State Bar to investigate. See Rule 1.6, cmt. [15].


Designation of a Trust Account Oversight Officer


[25] In a firm with two or more lawyers, personal oversight of all of the activities in the general trust accounts by all of the lawyers in the firm is often impractical. Nevertheless, any lawyer in the firm who deposits into a general trust account funds entrusted to the lawyer by or on behalf of a client is professionally responsible for the administration of the trust account in compliance with Rule 1.15 regardless of whether the lawyer directly participates in the administration of the trust account. Moreover, Rule 5.1 requires all lawyers with managerial or supervisory authority over the other lawyers in a firm to make reasonable efforts to ensure that the other lawyers conform to the Rules of Professional Conduct. Rule 1.15-4 provides a procedure for delegation of the oversight of the routine administration of a general trust account to a firm partner, shareholder, or member (see Rule 1.0(h)) in a manner that is professionally responsible. By identifying, training, and documenting the appointment of a trust account oversight officer (TAOO) for the law firm, the lawyers in a multiple-lawyer firm may responsibly delegate the routine administration of the firm’s general trust accounts to a qualified lawyer. Delegation consistent with the requirements of Rule 1.15-4 is evidence of a lawyer’s good faith effort to comply with Rule 5.1.


[26] Nevertheless, designation of a TAOO does not insulate from professional discipline a lawyer who personally engaged in dishonest or fraudulent conduct. Moreover, a lawyer having actual or constructive knowledge of dishonest or fraudulent conduct or the mismanagement of a trust account in violation of the Rules of Professional Conduct by any firm lawyer or employee remains subject to professional discipline if the lawyer fails to promptly take reasonable remedial action to avoid the consequences of such conduct including reporting the conduct as required by Rule 1.15-2(p) or Rule 8.3. See also Rule 5.1 and Rule 5.3.


Limitations on Delegation to TAOO


[27] Despite the designation of a TAOO pursuant to Rule 1.15-4, each lawyer in the firm remains professionally responsible for the trust account activity associated with the legal matters for which the lawyer provides representation. Therefore, for each legal matter for which the lawyer is primary counsel, the lawyer must review and approve any disbursement sheet or settlement statement, trust account entry in the client ledger, and trust account balance associated with the matter. Similarly, a lawyer who establishes a dedicated trust account or fiduciary account in connection with the representation of a client is professionally responsible for the administration of the dedicated trust account or fiduciary account in compliance with Rule 1.15.


Training for Service as a TAOO


[28] A qualified provider of the educational training for a TAOO described in Rule 1.15-4(c)(1)(C) need not be an accredited sponsor of continuing legal education programs (see 27 NCAC 1D, Rule .1520), but must be knowledgeable and reputable in the specific field and must offer educational materials as part of its usual course of business. Training may be completed via live presentations, online courses, or self-guided study. Self-guided study may consist of reading articles, presentation materials, or websites that have been created for the purpose of education in the areas of financial fraud, safeguarding funds from embezzlement, risk management for bank accounts, information security, and online banking, or basic accounting.

 

Rule 8.3 Reporting Professional Misconduct

 

(a) A lawyer who knows that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness, or fitness as a lawyer in other respects, shall inform the North Carolina State Bar or the court having jurisdiction over the matter.

 

(b) ...

 

(c) This Rule does not require disclosure of information otherwise protected by Rule 1.6.

 

(d) ...

 

(e) ...

 

Comment

 

[1] Self-regulation of the legal profession requires that members of the profession initiate disciplinary investigation when they know of a violation of the Rules of Professional Conduct. Lawyers have a similar obligation with respect to judicial misconduct. An apparently isolated violation may indicate a pattern of misconduct that only a disciplinary investigation can uncover. Reporting a violation is especially important where the victim is unlikely to discover the offense. A lawyer is not generally required by this rule to report the lawyer’s own professional misconduct; however, to advance the goals of self-regulation, lawyers are encouraged to report their own misconduct to the North Carolina State Bar or to a court if the misconduct would otherwise be reportable under this rule. Nevertheless, Rule 1.15-2(p) requires a lawyer to report the misappropriation or misapplication of entrusted property, including trust funds, to the North Carolina State Bar regardless of whether the lawyer is reporting the lawyer’s own conduct or that of another person.

 

[2] ...

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