RULE 6. Maintenance of Trust Accounts in Approved Institutions: IOLTA
(a) Clearly Identified Trust Accounts in Eligible Institutions Required. Every lawyer admitted to practice in Maine shall deposit all funds held in trust in this jurisdiction in accordance with Rule 1.15 of the Maine Rules of Professional Conduct in accounts clearly identified as IOLTA accounts in eligible institutions and shall take all steps necessary to inform the depository institution of the purpose and identity of the accounts. Funds held in trust include funds held in any fiduciary capacity in connection with a representation, whether as trustee, agent, guardian, executor or otherwise.
(b) Reporting and Certification Every lawyer admitted to practice in Maine shall annually certify to the Board in connection with the annual renewal of the lawyer's registration, that, to the lawyer's knowledge after reasonable investigation:
(1) (A) the lawyer or the lawyer's law firm maintains at least one IOLTA account; and (B) the lawyer has taken reasonable steps to ensure that all client funds are held in IOLTA accounts meeting the requirements of these Rules; or
(2) the lawyer is exempt from maintaining an IOLTA account because the lawyer:
(A) is not engaged in the private practice of law;
(B) does not have an office within Maine;
(C) is (1) a judge employed full-time by the United States Government, the State of Maine or another state government; (2) on active duty with the armed services; or (3) employed full-time as an attorney by a local, state, or federal government, and is not otherwise engaged in the private practice of law;
(D) is counsel for a corporation or non-profit organization or a teacher or professor employed by an educational institution, and is not otherwise engaged in the private practice of law;
(E) has been exempted by an order of the Court that is cited in the certification; or
(F) holds no client funds.
(c) IOLTA Account Requirements.
(1) An IOLTA account is a pooled trust account earning interest or dividends at an eligible institution in which a lawyer or law firm holds funds on behalf of clients, which funds are small in amount or held for a short period of time such that they cannot earn interest or dividends for the client in excess of the costs incurred to secure such income and the account is:
(A) an interest-bearing checking or share draft account;
(B) a money market account with or tied to check-writing;
(C) an account whose funds are invested solely in repurchase agreements; or
(D) an account whose funds are invested solely in qualified money market funds.
A “qualified money market fund” is an open-end investment company registered under the Investment Company Act of 1940 that is regulated as a money market fund under Rule 270.2a-7 thereof (or any successor regulation) and that, at the time of the investment, has total assets of at least $250,000,000, substantially all of which are invested in U.S. Government Securities. A “repurchase agreement” is a daily overnight repurchase agreement which must be fully collateralized by U.S. Government Securities and may be established only with a bank or other depository institution that is deemed to be “well capitalized” or “adequately capitalized” under applicable regulations of the Federal Deposit Insurance Corporation and National Credit Union Share Insurance Fund. U.S. Government Securities, for the purpose of this section, include securities of Government Sponsored Entities, including but not limited to Federal National Mortgage Association Securities, Government National Mortgage Association Securities, and Federal Home Loan Mortgage Corporation Securities.
Eligible Institutions. An “eligible institution” for trust accounts or IOLTA is a bank, trust company, savings bank, credit union, or savings and loan association authorized by federal or state law to do business in Maine, the deposits of which are insured by an agency of the federal government, and which has been designated by the Maine Justice Foundation as an eligible institution.
(2) The Maine Justice Foundation shall establish guidelines governing approval and termination of eligible status for financial institutions, and shall annually publish a list of eligible financial institutions.
(3) Overdraft Notification Agreement Required. To qualify as an eligible institution, a financial institution must file with the Maine Justice Foundation an agreement, in a form provided by the Maine Justice Foundation, to report to the Board whenever any properly payable instrument is presented against a lawyer trust account containing insufficient funds, irrespective of whether or not the instrument is honored. No trust account shall be maintained in any financial institution that does not agree to so report. Any such agreement shall apply to all branches of the financial institution and shall not be cancelled except upon 60 days’ notice in writing to the Maine Justice Foundation. The overdraft notification agreement shall provide that all reports made by the financial institution shall be in the following format:
(A) In the case of a dishonored instrument, the report shall be identical to the overdraft notice customarily forwarded to the depositor, and shall include a copy of the dishonored instrument, if such a copy is normally provided to depositors;
(B) In the case of instruments that are presented against insufficient funds but which instruments are honored, the report shall identify the financial institution, the lawyer or law firm, the account number, the date of presentation for payment, and the date paid, as well as the amount of overdraft created thereby; and
(C) Timing of Reports. Reports under Rule 6(c)(5)(B) shall be made simultaneously with, and within the time provided by law for notice of dishonor, if any. If an instrument presented against insufficient funds is honored, then the report shall be made within five banking days of the date of presentation for payment against insufficient funds.
(4) IOLTA Requirements. In addition to the requirements above, to qualify as an eligible institution for the maintenance of IOLTA, the institution must meet the following requirements:
(A) remit the interest and dividends on this account, net of any allowable reasonable fees, at least quarterly to the Maine Justice Foundation;
(B) transmit with each remittance a report on a form approved by the Maine Justice Foundation that shall identify each lawyer or law firm for whom the remittance is sent, the amount of remittance attributable to each IOLTA account, the rate and type of interest and dividends applied, the amount of interest and dividends, the amount and type of account-related charges deducted, if any, and the average account balance for the period in which the report is made;
(C) transmit to the depositing lawyer or law firm a report in accordance with normal procedures for reporting to its depositors; and
(D) pay on IOLTA accounts interest or dividends no less than the highest interest rate or dividend generally available from the institution to its non-IOLTA customers on accounts having similar minimum balances and other eligibility qualifications. Interest or dividends and fees shall be calculated in accordance with the eligible institution’s standard practice. In determining the highest interest rate or dividend generally available from the institution to its non-IOLTA customers, an institution may consider in addition to the balance in the IOLTA account, factors customarily considered by the institution when setting interest rates or dividends for its non-IOLTA customers, provided that such factors do not discriminate between IOLTA accounts and other accounts and that these factors do not include the fact that the account is an IOLTA account. The eligible institution shall calculate interest and dividends in accordance with its standard practice for non-IOLTA customers. The eligible institution may choose to pay the higher interest rate or dividend on an IOLTA account in lieu of establishing it as a higher rate product. Nothing contained in this rule will be deemed to prohibit an institution from paying a higher interest rate or dividend on IOLTA accounts than required by this rule or from electing to waive any fees and service charges on an IOLTA account. Lawyers may only maintain IOLTA accounts at eligible institutions that meet this rule’s requirements, as determined from time to time by the Maine Justice Foundation.
Eligible institutions may comply with the rate requirements of this rule by electing to pay an amount on funds that would otherwise qualify for the options noted above, equal to the greater of (1) a 1% interest rate or (2) 65% of the Federal Funds Target Rate in effect on July 1 of each year, which rate remains in effect for twelve months, and which amount is deemed to be already net of allowable reasonable fees.
(d) Verification of Bank Accounts.
(1) Generally. Whenever Bar Counsel has evidence that bank or trust accounts of a lawyer that contain, should contain, or have contained funds belonging to clients have not been properly maintained or that the funds have not been properly handled, Bar Counsel shall request the approval of the Chair of the Board to initiate an investigation for the purpose of verifying the accuracy and integrity of all bank accounts maintained by the lawyer. If approval is granted, Bar Counsel shall proceed to verify the accuracy of the bank accounts.
(2) Confidentiality. Investigations, examinations, and verifications shall be conducted so as to preserve the private and confidential nature of the lawyer’s records insofar as is consistent with these Rules and the lawyer-client privilege.
(e) Maine Justice Foundation Actions.
(1) The Maine Justice Foundation shall publish annually a list of eligible institutions that may hold trust and IOLTA accounts.
(2) By March 1 of each year, the Maine Justice Foundation shall complete a financial report of the IOLTA funds received and distributed by it for the previous calendar year. The financial report shall be conducted according to generally accepted accounting principles and shall include indication of the purposes for which IOLTA funds have been expended in the previous year. Copies of the financial report shall be provided to the Court.
(f) Receipt of Voluntary Contributions. As part of its notification to attorneys to file annual registration statements, the Board may invite attorneys to make a voluntary contribution to the Campaign for Justice to assist in the funding of legal services for low income individuals. The Board may also provide a means for making the voluntary contribution at the same time that the annual fee is paid and is authorized to utilize its administrative staff and facilities to receive these voluntary contributions and forward them to the Campaign for Justice.
(g) Consent by Lawyers. Every lawyer practicing or admitted to practice in Maine shall, as a condition thereof, be conclusively deemed to have consented to the reporting, verification, and production requirements mandated by this rule. Such consent specifically includes authorization to the disclosure by financial institutions of all bank or trust account records and information as requested of them by Bar Counsel for the purposes of verification and investigation pursuant to Rule 6(d).
(h) Costs. Nothing herein shall preclude a financial institution from charging a particular lawyer or law firm for the reasonable cost of producing the reports and records required by this rule.
Reporter’s Notes – June 2015
Rule 6 is based upon IOLTA rules embodied in former Maine Bar Rule 6(a), Maine Rule of Professional Conduct 1.15(b), and ABA Model Rules for Trust Account Overdraft Notification. The latter Rule is incorporated in substance at Rule (6)(c)(3). It requires that participating financial institutions notify the Board if any IOLTA account check issued by the institutions’ customer/lawyer is presented against a lawyer trust account containing insufficient funds, irrespective of whether or not the instrument is honored. Although the overdraft notification provision is a significant departure from current Maine practice, it puts Maine in line with the overwhelming majority of U.S. jurisdictions that currently provide for overdraft notification. Another departure from current Maine practice is Rule 6(d), which allows Bar Counsel, in certain circumstances, to verify the accuracy and integrity of a lawyer’s bank account(s). The committee concluded that both the verification provision and the overdraft notification provisions will serve to protect the public and the interest of the clients.
Advisory Note– January 2017
These various amendments to Rule 6 are necessitated to properly reference the Maine Justice Foundation which in 2016 replaced the Maine Bar Foundation as the bar’s agency that helps those individuals desperate for civil legal aid in Maine.