Compliance Journal June 2023
Special Focus Amended Wisconsin Supreme Court Rules Affect Lawyer Trust Accounts As further outlined below, Wisconsin Supreme Court Rules (SCR) have been amended to allow greater flexibility for electronic transactions in lawyer trust accounts. The rules are effective July 1, 2023. WBA has received permission from the Wisconsin State Bar to run the article below by the State Bar and the Office of Lawyer Regulation (OLR) which summarizes the amendments. In addition, IOLTA participating financial institutions should have received a letter from OLR regarding the amendments. The letter briefly outlines the new rule. In addition, the letter addresses amended SCR 20:1.15(f)(1) which requires lawyers to maintain commercially reasonable security measures in their trust accounts and requires lawyers to cover any negative balance caused by a chargeback, surcharge, or ACH reversal. The letter recommends lawyers should arrange with their banks for any surcharge, fee, reversal, or chargebacks to be withdrawn from an operating account rather than from a trust account. Banks should be prepared for the potential ask from their lawyer customers and to determine how operationally this may be accomplished. It remains the responsibility of the lawyer to select the appropriate type of lawyer trust account. No changes need be made to bank procedures other than to know there is now greater flexibility for electronic transactions and that lawyers may request to combine certain lawyer trust accounts. 2023 Amendments to the Trust Account Rule: Electronic Transactions Permitted On March 30, 2023, the Wisconsin Supreme Court issued an order amending the lawyer trust account rule, SCR 20:1.15, removing prohibitions on electronic transactions and providing lawyers greater flexibility in handling client funds. The newly amended SCR 20:1.15 will become effective July 1, 2023 (2023 Rule) and represents a major change in the regulation of lawyer trust accounts in Wisconsin. Going forward, Wisconsin lawyers, like lawyers in most other jurisdictions, will be able to make electronic transactions into and out of their trust accounts without the use of additional specialized trust accounts, like the E-Banking Trust Account. Moreover, the new amendments to the rule do not prohibit lawyers from doing anything they are currently permissibly doing, so the amendments will not serve as a “gotcha” for those who are not timely aware. Before addressing the implications of the new amendments to the trust account rule, it is helpful to review the landscape of electronic payments under the version of SCR 20:1.15 in effect from July 1, 2016, through June 30, 2023 (2016 Rule). Electronic Transactions in the Pre-July 2023 Trust Account Rule The 2016 Rule had arguably the most restrictive prohibitions on electronic transactions in the United States.1 This was problematic both for lawyers and clients wishing to use modern banking methods for payment of legal fees and costs and to disburse funds from lawyer trust accounts for filing fees and other purposes. 1 For more information, see Timothy J. Pierce, E-banking: Modernizing Trust Account Rules, 89 Wis. Law. (July/Aug. 2016). https://www.wisbar.org/NewsPublications/WisconsinLawyer/Pages/Article.aspx?Volume=89&Issue=7&ArticleID=24966.