On January 3, 2008, the Louisiana Supreme Court granted the petition filed by the Louisiana Bar Foundation amending the LSBA Rules of Professional Conduct Rule 1.15 Safekeeping Property, IOLTA Rules.
What is the purpose of the rule amendments?
To increase revenue for the charitable purposes of the IOLTA program established by the Louisiana Supreme Court:
2. Why was a new rule necessary to increase IOLTA revenue?
Because voluntary attempts to secure market rates on high-balance IOLTA accounts were unsuccessful. Despite the best efforts of the Foundation, its grantees and state and local bar leaders, rates paid on IOLTA accounts with balances of $100,000 and higher averaged only .85%.
3. What does the new rule do?
Introduces competition for IOLTA accounts by permitting brokerage houses to participate in IOLTA;
Permits use of government money market funds for IOLTA; and
Defines institutions eligible to hold IOLTA accounts as only those institutions which pay IOLTA account customers the highest interest rate or dividend generally available at their own institution to similarly situated non-IOLTA customers.
4. When is the new rule effective?
The new rule is effective on April 1, 2008. Therefore, banks and savings & loan associations which currently offer IOLTA accounts have approximately 3 months to comply with the new rule.
5. Does the rule require attorneys or law firms to contact their bank or savings & loan association?
No. The Foundation will initiate compliance activity on an institution-by-institution basis and will contact affected attorneys or law firms with specific information and assistance. Affected attorneys and law firms only will need to sign their institutions standard forms for payment of higher interest rates on their existing IOLTA account.
6. Will attorneys or law firms have to move their IOLTA accounts to institutions paying higher rates?
No. The rule only requires institutions to pay IOLTA accounts the highest rate or dividend generally available to similarly-situated non IOLTA account customers at their own institution.
7. Is this voluntary for attorneys and law firms?
No. The new rule requires attorneys and law firms to maintain their IOLTA account only at eligible banks, savings & loan associations or investment companies which comply with the interest or dividend requirement of the new rule.
8. Are attorneys and law firms responsible for monitoring their institutions compliance with the interest or dividend requirement rule?
No. The Foundation will monitor to ensure compliance.
9. Will banks or savings & loan associations stop offering IOLTA accounts?
Its unlikely, based on experience when IOLTA became mandatory in 1990. Before then, banks and savings & loan associations which did not offer IOLTA accounts and had free use of all nominal or short-term client trust funds, had to begin paying interest in order to continue to hold the accounts. No bank or savings & loan association chose not to participate in IOLTA rather than pay interest.
Also, the Foundation worked closely with the Louisiana State Bar Association in developing specific language in this new rule and they did not oppose the rules adoption.
IOLTA accounts are profitable – and still will be under the new rule.
10. What happens if an institution isnt complying with the interest rate or dividend requirement of the new rule?
The Foundation would communicate directly with the institution to confirm the status of its IOLTA accounts with respect to interest and dividend payments, offer any assistance needed and encourage its compliance. If Foundation efforts to secure compliance ultimately are unsuccessful after a reasonable period of time, then the Foundation would contact the institutions attorney and law firm IOLTA account customers and encourage them to urge the institution to comply. Failing that, the Foundation would advise the attorneys and law firms that their institution was no longer eligible to hold any IOLTA accounts and would provide a list of eligible banks, savings & loan associations and investment companies in the attorneys or law firms area.
11. What if an institution doesnt offer sweep products or pay checking account interest rates based on balance size?
Then it is unaffected by the new rule. The rule only requires institutions to treat IOLTA accounts in parity with accounts of its other, similarly situated customers.
12. Where can I get more information about the new rule?
By contacting the Foundation: The Louisiana Bar Foundation 1615 Poydras Street, Suite 1000 New Orleans, LA 70112 Phone: (504) 561-1046 Fax:(504) 566-1926 Email: email@example.com