Monday, February 7, 2011

Transfers from trust to general

By-law 9, s.10. states
A licensee shall withdraw money from a trust account under paragraph 2 or 3 of subsection 9 (1) only,
(a) by a cheque drawn in favour of the licensee;
(b) by a transfer to a bank account that is kept in the name of the licensee and is not a trust account; or
(c) by electronic transfer.
The above list seems fairly straightforward. A trust cheque has the payee filled in and is signed by you or a person you authorize. Likewise, for a transfer to be completed in person at the bank, the teller will require a signature authorizing the transaction.
But, what about the electronic transfers? This transfer occurs online, and while it does require a password, there is no physical proof the the transaction was authorized by the licensee.

It is this step, the proof of authorization, that is often missed by law firms. To overcome this proof issue, By-law 9, s. 12 mandates that documentation be completed and signed by the licensee or an authorized person. This documentation is otherwise known as Form 9A, and it must be completed and signed before you do an electronic transfer. You must then compare the bank confirmation printout to the Form 9A, ensure the information matches, and then on the bank printout write the client name, matter number, then date and sign it.
For those of you doing electronic transfers for real estate transactions, you should already be completing Form 9Bs and Form 9Cs as part of your practice, as well as signing the bank confirmation printouts.

The Financial Reporting section of the Lawyer Annual Report has a specific question dealing with this issue – question 4. For further explanation, please see “Questions about this section” contained within the Annual Report. If you are doing online trust transfers, but not completing and signing the various Form 9’s and bank printouts, you should be answering “No” to question 4. You can use the text box at the end of the section to explain that you were unaware of the forms, but that you will take corrective action for 2011.

As always, I invite your comments and suggestions for future post topics. Next week – Verifying client’s identity.