If a lawyer places his client's funds in an interest-bearing bank account, he must account to the client for the interest-earned on the funds, and may not retain it for his own use.
Facts: A lawyer inquires whether his "clients' funds account" may be maintained in a bank as an interest-bearing account, with the interest earned on the account to be used to defray expenses of maintaining the account, to pay general expenses of the lawyer, and to pay state and federal income taxes on the interest.
Discussion: Disciplinary Rule DR 9-102(A) of the Code of Professional Responsibility (SJC Rule 3:22) requires that all funds of clients paid to a lawyer, other than advances for costs and expenses, shall be maintained in one or more identifiable bank accounts, separate from the general funds of the lawyer. DR 9-102(B)(3) requires that a lawyer shall "Maintain complete records of all funds ... of a client coming into the possession of the lawyer and render appropriate account to his client regarding them."
The import of these disciplinary rules is similar to that of former ABA Canon 11, which provided: "Money of the client or collected for the client or other trust property coming into the possession of the lawyer should be reported and accounted for promptly, and should not under any circumstances be commingled with his own or be used by him."
In construing the provisions of Canon 11, the ABA Standing Committee on Professional Ethics had rendered two relevant informal opinions. Informal Opinion No. 545 issued in 1962 stated that it would be a violation of Canon 11 for a lawyer to place clients' funds in an interest-bearing account and keep for his own use the interest earned on the account, unless he was specifically authorized to keep the interest for his own use. Informal Opinion No. 991, issued in 1967, stated that it would be unethical for a lawyer to place clients' funds in an interest-bearing savings account and to use the interest earned to defray the expenses of handling the account.
We believe that the same construction should be placed upon the provisions of present DR 9-102.
A lawyer who receives funds of his client to hold for the client is in a position analogous to that of a trustee, and when a trustee invests trust funds in an interest-bearing bank account, he must account to the owner of the funds for the interest. Thompson v. Knapp, 223 Mass. 277, 279 (1916); see also New England Trust Co. v. Triggs, 337 Mass. 482, 483-484 (1958).
If all of the clients whose funds were deposited in an interest-bearing bank account gave informed consent to the lawyer, it might be proper for the lawyer to use the interest earned for purposes specifically approved by those clients, but we think it would be difficult to avoid an appearance of impropriety even in that situation.
We would see no impropriety in making reasonable charge to a client for the actual expenses incurred in keeping his funds on deposit in a clients' funds account if the client so agrees.
Permission to publish granted by the Board of Delegates, 1974. As stated in the Rules of the Committee on Professional Ethics, this advice is that of a committee without official governmental status.