Regulations respecting Lawyers´ Trusteeship Accounts et al.
TRANSLATED FROM THE ICELANDIC
15 December 2005
respecting Lawyers' Trusteeship Accounts et al.
Sphere of Applicability
A lawyer is in duty bound to keep funds which he receives for the benefit of others separate from own funds, unless he has obtained an exemption from duties in accordance with para. 1, Art. 12 of the Act respecting Lawyers. He is also in duty bound to grant the Board of the Icelandic Bar Association information about custodial funds as further stipulated in the present Regulations.
The present Rules apply to lawyers having own operations and lawyers working with legal persons, unless they have obtained an exemption in accordance with para. 1, Art. 12 of the Lawyers? Act.
Where lawyers are dealt with in the present Rules this also refers to legal person, cf. para. 1, as applicable.
A lawyer preserving his Client?s funds shall enter a special business account in his book-keeping showing the Client?s deposit at each given time. In the account there shall be entered all funds which the lawyer receives for custody, including advance payment of costs and security for payment of the lawyer?s costs and remuneration. A lawyer is not in duty bound to enter in the account funds which he receives and returns during the selfsame day.
A lawyer shall also enter a special joint business account, a trusteeship account, showing at each given time the balances of all of his Clients in the business account in accordance with para. 1. When special circumstances so recommend it is therefore permitted to enter trusteeship accounts for individual Clients.
An amount corresponding to the status of the trusteeship account in a lawyer?s book-keeping shall be preserved in special bank account(s) in a commercial bank or a savings bank, a trusteeship account.
A trusteeship account shall be established in the name of a lawyer and he has formal disposal authority of the account. A lawyer is not the owner of a deposit in an account according to the present Article and the deposit is not a qualified object of execution with him or a basis of security for his dealings or those of others. This account shall be separate from a lawyer?s own funds and the balance of the account is extraneous from the order of priority of claims for settlement upon administration of a lawyer?s estate.
Financial trusteeship accounts may be established only in commercial banks or savings banks having, by means of notification to the Board of the Icelandic Bar Association which the Board deem satisfactory, undertaken to adhere to the following rules:-
(a) A bank or a savings bank is not permitted to debit on a trusteeship account any costs on account of business with a lawyer or to use the balance deposit for debt equalization of claims against him or his individual Clients.
(b) A bank or a savings bank shall not be permitted to withdraw moneys from a trusteeship account except against written or electronic instructions from a lawyer. Such instructions shall be preserved with the depository institution concerned like book-keeping data.
(c) A bank or a savings bank is in duty bound to send to the Board of the Icelandic Bar Association certified statements of the status and movements on a trusteeship account whenever the Board call for such a statement.
(d) A bank or a savings bank is in duty bound to be subject to stoppage of the use of a trusteeship account by the Board of the Icelandic Bar Association. In case the use has been stopped it is prohibited to pay out of the account without authority from a confidant nominated by the Board of the Icelandic Bar Association.
A lawyer shall without undue delay deposit all funds which he receives and which he shall enter into trusteeship account in his book-keeping in accordance with Art. 3 into a trusteeship account in a bank or a savings bank.
Withdrawals from a trusteeship account may be effected only if and when:-
(a) funds are paid to a Client or are used for payment for and on his behalf;
(b) a lawyer has money due from a Client according to a correctly entered status of his business account, provided that conditions for debt equalization be met;
(c) a correct settlement and checking of trusteeship account have been undertaken and it has been proved that the account has funds which are in excess of liabilities.
A lawyer shall at least at three months? intervals compare and check that the balance on the trusteeship account be consonant with the entered status of the trusteeship account in the book-keeping records. He shall likewise compare and check that the total of his Client?s business accounts be consonant with the status of the trusteeship account in the book-keeping records. In case it be revealed that the balance of the trusteeship is lower than the lawyer?s overall obligations according to the trusteeship account in his book-keeping records he shall make immediate amends accordingly. Data showing checking of trusteeship account in bank and book-keeping shall be preserved by the lawyer like other accounting data.
Securities in Lawyers? Custody
A lawyer who preserves and arranges securities for his Clients or who is authorized to appropriate securities, deposits on bank accounts and related matters owned by a third party shall keep a record of these valuables. The duty to keep records extends to securities and debit and credit accounts in any debit and credit establishments, thus extending i.a. to bonds, share certificates, partnership certificates as well as bank, savings bank and giro accounts, including overdraft accounts.
A list in accordance with para. 1 shall be accurate and therein shall be contained a clear specification of the valuables wherein it may clearly be checked from whom these originate and who is the owner thereof. These valuables shall be kept separate from the lawyer?s own funds.
Prior to 1 March each year a lawyer shall send to his Clients whom he serves in accordance with Art. 9 a list of and information on these securities and financial transactions on account thereof. The data shall cover the immediate past calendar year and shall be confirmed with a date and the lawyer?s signature. A lawyer shall preserve copies of information despatched in accordance with the present Article as well as other accounting data.
A lawyer to whom the present Rules apply shall before 1 October each year send to the Board of the Icelandic Bar Association in a form prepared for the purpose a declaration certified by a Chartered Accountant to the effect that the status of a trusteeship account in a bank on 31 December of the past year be no lower than the status of trusteeship funds as per book-keeping. At the same time a lawyer shall send to the Board of the Icelandic Bar Association a summary and conclusion figures of the list as per Art. 9, certified by a Chartered Accountant.
A lawyer who opens a new Law office or takes over one which another lawyer has operated shall notify the Board of the Icelandic Bar Association accordingly within a month.
Before six months have passed since a lawyer commences the operation of a Law office he shall send the Board of the Icelandic Bar Association a declaration on the total amount of trusteeship funds for his Clients based on data determined by the Board.
A lawyer who takes over a Law office which another lawyer has operated shall in addition to the foregoing give the Board of the Icelandic Bar Association notice within a month to the effect that he has checked and verified the correct status of trusteeship accounts and securities in accordance with Section II which he took over, but else give notice of decisions.
Notifications in accordance with the present Article shall be prepared and certified in the same manner as notices in accordance with Art. 11.
The Board of the Icelandic Bar Association may at any time require that a lawyer furnish them at advance notice determined by the Board with a declaration and accompanying data referred to in Art. 11 and 12.
In case there be shortcomings to a lawyer?s entry and handling of a trusteeship account or securities or if a lawyer does in other respect violate the present Rules concerning the handling of trusteeship funds and securities the Board of the Icelandic Bar Association may require a lawyer to send the Board at quarterly intervals or more frequently a declaration and requisite attachments concerning trusteeship funds for his Clients.
Under circumstances described in Art. 14 or if the Board of the Icelandic Bar Association deem there to be special reason therefor they may decide to charge their trusted Chartered Accountant with investigating as to whether the lawyer abide by these Rules and adhere to the Accounting Laws in other respects. In case the investigation give occasion therefor the Board of the Icelandic Bar Association may decide that he be not permitted to appropriate deposits on trusteeship accounts or in securities except with the permission of a confidant nominated by the Board.
A lawyer at whom the Board of the Icelandic Bar Association have decided to direct an investigation or notifications is in duty bound to furnish the Board or their confidants with all information concerning their operations and financial standing which may be required and also to grant access to all book-keeping data and other documentation which the party conducting the investigation considers to be of importance for the investigation.
The Icelandic Bar Association will sustain the costs of the investigation in accordance with Art. 15 and 16. The Association is authorized to require the lawyer at whom the investigation is directed to pay the costs of the investigation, provided it be extensive and reveal flaws in the lawyer?s work.
In case a lawyer violate the provisions of the present Rules and does not heed a challenge to work in conformity therewith the Board of the Icelandic Bar Association shall suggest to the Minister of Justice that he invalidate the lawyer?s licence to practice in accordance with para. 3, Art. 13 of Act No. 77/1998 respecting Lawyers.
Rules relating to financial trusteeship accounts and securities apply until the balance on account as per Art. 4 and securities have been fully appropriated in conformity with the present Rules.
Entry into Force
The present Regulations being laid down in accordance with para. 3, Art. 23 of the Act respecting Lawyers No. 77, 15 June 1998, cf. Art. 14 of Act No. 93/2004, enter into force forthwith.
As of the same time there are repealed Regulations respecting Lawyers? Trusteeship Accounts et al., No. 201/1999.
Ministry of Justice and Ecclesiastical Affairs 15 December 2005
B Division, Date of issue 5 January 2006