Article 10. IOLTA.
Rule 14-1001. IOLTA.
(a) A lawyer or law firm shall create and maintain an interest or dividend-bearing trust account for client funds ("IOLTA account"). All client funds shall be placed into this account except those funds which can earn net income for the client in excess of the costs to secure such income, except as provided in paragraph (g).
(b) In determining whether a client's funds can earn net income in excess of the costs of securing that income for the benefit of the client, the lawyer or law firm shall consider the following factors:
(b)(1) the amount of the funds to be deposited;
(b)(2) the expected duration of the deposit, including the likelihood of delay in the matter for which funds are held;
(b)(3) the rates of interest or yield at financial institutions where the funds are to be deposited;
(b)(4) the costs of establishing and administering non-IOLTA accounts for the client's benefit, including service charges, and the costs of preparing any tax reports required for income accruing to the client's benefit; and
(b)(5) the capability of financial institutions, lawyers or law firms to calculate and pay income to individual clients and any other circumstances that may affect the ability of the client's funds to earn net income.
(c) The lawyer or law firm shall review its IOLTA account at reasonable intervals, but not less than annually, to determine whether changed circumstances require further action with respect to the funds of a particular client.
(d) The lawyer or law firm shall:
(d)(1) not allow earnings from an IOLTA account to be made available to a lawyer or law firm;
(d)(2) place in the IOLTA account all client funds which cannot earn net income for the client in excess of the costs of securing that income;
(d)(3) establish an IOLTA account with an eligible financial institution that has voluntarily chosen to offer and maintain IOLTA accounts, and:
(d)(3)(A) is authorized by federal or state law to do business in Utah;
(d)(3)(B) is insured by the Federal Deposit Insurance Corporation or its equivalent;
(d)(3)(C) complies with Rule 1.15 (a) of the Utah Rules of Professional Conduct; and
(d)(4) direct the depository institution where the IOLTA account is established:
(d)(4)(A) to remit all interest or dividends, net of allowable reasonable service charges or fees, if any, on the average monthly balance in the account, or as otherwise computed in accordance with the institution's standard practice, at least quarterly, solely to the Utah Bar Foundation ("Foundation"). When feasible, the depository institution shall remit the interest or dividends on all of its IOLTA accounts in a lump sum, however, the depository institution must provide, for each individual IOLTA account, the information to the Foundation required by subparagraphs (d)(4)(B) and (d)(4)(C) of this rule;
(d)(4)(B) to report in a form and through any manner of transmission approved by the Foundation showing the name of the lawyer or law firm and the amount of the remittance attributable to each, account number for each account, the rate and type of interest or dividend applied, the amount and type of allowable reasonable service charges or fees deducted, the average account balance for the reporting period and such other information as is reasonably required by the Foundation;
(d)(4)(C) to report in accordance with normal procedures for reporting to depositors;
(d)(4)(D) that allowable reasonable service charges or fees in excess of the interest earned on the account for any period shall not be taken from interest earned on other IOLTA accounts or any principal balance of the accounts; and
(d)(4)(E) to comply with all other administrative rules for IOLTA accounts as promulgated by the Foundation or the Supreme Court.
(e) The determination of whether or not an institution is an eligible institution and whether it is meeting the requirements of this rule shall be made by the Utah Bar Foundation. The Foundation shall maintain a list of participating eligible financial institutions, and shall provide a copy of the list to any Utah lawyer upon request.
(f) Lawyers may only maintain IOLTA accounts in eligible financial institutions. Eligible financial institutions are those that voluntarily offer IOLTA accounts and comply with the requirements of this rule, including maintaining IOLTA accounts which pay the highest interest rate or dividend generally available from the institution to its non-IOLTA account customers when IOLTA accounts meet or exceed the same minimum balance or other account eligibility qualifications, if any. In determining the highest interest rate or dividend generally available from the institution to its non-IOLTA accounts, eligible institutions may consider factors, in addition to the IOLTA account balance, customarily considered by the institution when setting interest rates or dividends for its customers, provided that such factors do not discriminate between IOLTA accounts and accounts of non-IOLTA customers, and that these factors do not include that the account is an IOLTA account.
(f)(1) An eligible financial institution may satisfy these comparability requirements by electing one of the following options:
(f)(1)(A) establish the IOLTA account as the comparable rate product; or
(f)(1)(B) pay the comparable rate on the IOLTA checking account in lieu of actually establishing the comparable highest interest rate or dividend product;
(f)(1)(C) pay an amount on funds that would otherwise qualify for the investment options noted at (f)(3) equal to 70% of the federal funds targeted rate as of the first business day of the month or other IOLTA remitting period, which is deemed to be already net of allowable reasonable service charges or fees. The safe harbor yield rate may be adjusted once per year by the Foundation, upon 90 days’ written notice to financial institutions participating in the IOLTA program; or
(f)(1)(D) pay a yield rate specified by the Foundation, if the Foundation so chooses, which is agreed to by the financial institution. The rate would be deemed to be already net of allowable reasonable fees and would be in effect for and remain unchanged during a period of no more than twelve months from the inception of the agreement between financial institution and the Foundation.
(f)(2) IOLTA accounts may be established as:
(f)(2)(A) a business checking account with an automated investment feature, such as an overnight and investment in repurchase agreements or money market funds invested solely in or fully collateralized by US government securities, including U.S. Treasury obligations and obligations issued or guaranteed as to principal and interest by the United States or any agency or instrument thereof;
(f)(2)(B) a checking account paying preferred interest rates, such as money market or indexed rates;
(f)(2)(C) a government interest-bearing checking account such as accounts used for municipal deposits;
(f)(2)(D) an interest-bearing checking account such as a negotiable order of withdrawal (NOW) account, or business checking account with interest;
(f)(2)(E) any other suitable interest-bearing deposit account offered by the institution to its non-IOLTA customers.
(f)(3) A daily financial institution repurchase agreement shall be fully collateralized by the United States Government Securities and may be established only with an eligible institution that is "well capitalized" or "adequately capitalized" as those terms are defined by applicable federal statutes and regulations. An open-end money-market fund shall be invested solely in the United States Government Securities or repurchase agreements fully collateralized by United States Government Securities, shall hold itself out as a "money-market fund" as that term is defined by federal statutes and regulations under the Investment Company Act of 1940 and, at the time of the investment, shall have total assets of at least two hundred fifty million dollars ($250,000,000).
(f)(4) Nothing in this rule shall preclude a participating financial institution from paying a higher interest rate or dividend than described above or electing to waive any service charges or fees on IOLTA accounts.
(f)(5) Interest and dividends shall be calculated in accordance with the participating financial institution's standard practice for non-IOLTA customers.
(f)(6) "Allowable reasonable service charges or fees" for IOLTA accounts are defined as per check charges, per deposit charges, a fee in lieu of minimum balances, sweep fees, FDIC insurance fees, and a reasonable IOLTA account administrative fee.
(f)(7) Allowable reasonable service charges or fees may be deducted from interest or dividends on an IOLTA account only at the rates and in accordance with the customary practices of the eligible institution for non-IOLTA customers. No fees or service charges other than allowable reasonable fees may be assessed against the accrued interest or dividends on an IOLTA account. Any fees and service charges other than allowable reasonable fees shall be the sole responsibility of, and may be charged to, the lawyer or law firm maintaining the IOLTA account.
(g) Any IOLTA account which has or may have the net effect of costing the IOLTA program more in fees than earned in interest over a period of any time, may at the discretion of the Foundation, be exempted from and removed from the IOLTA program. Exemption of an IOLTA account from the IOLTA program revokes the permission to use the Foundation's tax identification number for that account. Exemption of such account from the IOLTA program shall not relieve the lawyer and/or law firm from the obligation to maintain the property of client funds separately, as required above, in a non-interest bearing account and also will not relieve the lawyer of the annual IOLTA certification.
(h) In the event a lawyer determines that funds placed in an IOLTA account should have been placed in an interest bearing account for the benefit of the client, the lawyer or law firm shall:
(h)(1) make a request for a refund in writing, in a timely manner, to the Foundation on firm letterhead within a reasonable period of time after the interest was remitted to the Foundation; and
(h)(2) provide verification from the financial institution of the interest amount. In no event will the Foundation refund more than the amount of net interest it received; remittance shall be made to the financial institution for transmittal to the lawyer or law firm, after appropriate accounting and reporting.
(i) On or before September 1 of each year, any lawyer admitted to practice in Utah shall certify to the Foundation, in such form as the Foundation shall provide ("IOLTA Certification Form"), that the member is in compliance with, or is exempt from, the provisions of this rule. If the lawyer or law firm maintains an IOLTA account, the lawyer shall certify the manner in which the lawyer accounts for the interest on clients' trust accounts. The IOLTA Certification Form shall include the financial institution, account numbers, name of accounts and such other information as the Foundation shall require. If the lawyer is exempt from the IOLTA program, the lawyer must still submit an IOLTA Certification Form annually to certify to the Foundation that he or she is exempt from the provisions in this Rule. Each lawyer shall keep and maintain records supporting the information submitted in the IOLTA Certification Form. The lawyer shall maintain these records for a period of five years from the end of the period for which the IOLTA Certification Form is filed, and these records shall be submitted to the Foundation upon written request. Failure by the lawyer to produce such records within thirty days after written request by the Foundation constitutes a rebuttable presumption that the lawyer has not complied with these rules.
(i)(1) If the IOLTA Certification Form is timely filed, indicating compliance, there will be no acknowledgement. Should an IOLTA Certification Form filed by a lawyer fail to evidence compliance, the Foundation shall contact the lawyer and attempt to resolve the non-compliance administratively.
(i)(2) The Foundation shall furnish annually to the Utah Supreme Court a list of all licensed Utah lawyers who have not timely filed an IOLTA Certification Form and any lawyers with whom the Foundation has been unable to administratively resolve an impediment to the proper filing of an IOLTA Certification Form or the proper compliance with Rule 14-1001, IOLTA.
(i)(3) Any lawyer who is not in compliance with IOLTA or who has failed to complete the IOLTA Certification Form by September 1 will be sent, by certified mail, return receipt requested, a non-compliance notice. Should the attorney fail or refuse to rectify the situation within thirty (30) days of such notice, the Foundation shall petition the Utah Supreme Court for the lawyer’s suspension from the practice of law.
(i)(4) A lawyer suspended by the Utah Supreme Court under the provisions of this rule may be reinstated by the Court upon motion of the Foundation showing that the lawyer has cured the noncompliance issue for which the lawyer has been suspended. If a lawyer has been suspended by the Utah Supreme Court for non-compliance with these rules, the lawyer must then comply with all applicable rules to be eligible to return to active or inactive status.
(j) A lawyer may be exempt from having to maintain an IOLTA account for the following reasons:
(j)(1) the lawyer or law firm's client trust account has been exempted and removed from the IOLTA program by the Foundation pursuant to paragraph (g) of this rule; or
(j)(2) the lawyer has certified in his or her most recent annual IOLTA Certification Form that the lawyer:
(j)(2)(A) is not engaged in the private practice of law or does not manage or handle client trust funds and does not have a client trust account (e.g. corporate counsel, judge, employed by local, state or federal government who does not handle client trust funds or in private practice but does not handle client monies and has no client trust account);
(j)(2)(B) does not have an office within Utah and has the client's permission to hold the funds out of state; or
(j)(2)(C) has been exempted by an order of general or special application of this Court which is cited in the certification;
(j)(3) the lawyer or law firm petitions for and receives a written exemption from the Foundation that compliance with this rule would create an undue hardship on the lawyer and would be extremely impractical, based on geographic distance between the lawyer's principal office and the closest depository institution which is participating in the IOLTA program.
(k) Lawyers licensed in Utah must notify the Foundation in writing within thirty (30) days of any change in IOLTA status, including the opening or closing of any IOLTA accounts.
(l) The Foundation is the only entity authorized to receive and administer IOLTA funds in Utah.
(l)(1) The Foundation shall have general supervisory authority over the administration of the IOLTA funds, subject to the continuing jurisdiction of the Supreme Court.
(l)(2) The Foundation shall receive the net earnings from all IOLTA accounts and shall make appropriate investments of IOLTA funds. The Foundation shall maintain proper records of all IOLTA receipts and disbursements, which records shall be audited or reviewed annually by a certified public accountant. The Foundation shall annually present to the Supreme Court a reviewed or audited financial statement of the IOLTA receipts and expenditures for the prior year and a summary thereof shall be made available to anyone requesting copies.
(l)(3) The Foundation shall be responsible to present annually to the Supreme Court a status report on activities of the Foundation and compliance with these rules.
(l)(4) The Foundation shall be responsible to make disbursements from the IOLTA program funds, including current and accumulated net earnings, by grants, appropriations and other appropriate measures, as outlined in the articles and by-laws for the organization.
(l)(5) The Foundation shall promulgate such other rules, procedures, reports and forms that are necessary or advisable for the proper implementation of the foregoing rules.
(m) All lawyers who maintain accounts provided for in this rule must convert their client trust account(s) to interest-bearing account(s) with the interest paid to the Foundation no later than six months from the date of order adopting this rule, unless the lawyer has been granted exemption from this Court as allowed in paragraphs (g) or (j) of this rule. Every lawyer practicing or admitted to practice in Utah shall, as a condition thereof, be conclusively deemed to have consented to the reporting requirements mandated by this rule.