On June 17, 2014, the Colorado Supreme Court amended and readopted Colorado Rule of Professional Conduct 1.15, which, among other things, governs lawyers’ trust accounts and the COLTAF program. Under the revised Rule, lawyers are required as they have been in the past, to maintain their COLTAF accounts at Approved Financial Institutions. To qualify as an Approved Financial Institution, a bank must agree, as it has in the past, to report any overdraft to the Office of Attorney Regulation Counsel, and to respond to subpoenas issued by Regulation Counsel. Under the revised Rule, in order to qualify as an Approved Financial Institution, a bank must all agree to pay on its COLTAF accounts the highest interest or dividend rate generally available to its similarly situated non-COLTAF account holders (so-called rate comparability requirements).
Lawyers are not required to make independent determinations as to whether their banks satisfy these new comparability requirements. Once the new Rule has been fully implemented, only those banks that satisfy the comparability requirements will be on the list of Approved Financial Institutions. Lawyers need only check that list to insure their accounts are maintained at an eligible depository.
A COLTAF account is for those client funds that are nominal in amount or are expected to be held for a short period of time, and as such would not be expected to earn interest or pay dividends for such clients in excess of the reasonably estimated cost of establishing, maintaining, and accounting for trust accounts for the benefit of such clients.
If a lawyer or a law firm discovers that client funds have mistakenly been held in a COLTAF account in a sufficient amount or for a sufficiently long time so that interest or dividends on the funds exceeds the reasonably estimated cost of establishing, maintaining, and accounting for a trust account for the benefit of such client, the lawyer or law firm should request a refund from COLTAF for the benefit of such client. Click here for COLTAF’s refund procedure.
Click here for a COLTAF Enrollment Form (the form you should give to your bank, authorizing it to establish your COLTAF account).
Lawyers are required to certify their compliance with Rule 1.15 each year on their annual Attorney Registration Statement.
FDIC Insurance Coverage for IOLTA Accounts
The standard FDIC deposit insurance amount is $250,000 per depositor at each separately-chartered insured depository institution. IOLTA accounts typically hold deposits for multiple clients, and under the rules the insurance coverage “passes through” to each client’s share of the account for up to $250,000 per client.
Scams Directed at Colorado Lawyers
There are continuing reports of scams (via e-mail, the internet, or otherwise) directed at Colorado lawyers, many of which potentially involve their COLTAF accounts. Don’t fall victim to these schemes. For more information, go to http://www.cobar.org/index.cfm/ID/21934