Rule 16-601. Applicability.
The Rules in this Chapter apply to all trust accounts required by law to be maintained by attorneys for the deposit of funds that belong to others, except that these Rules do not apply to a fiduciary account maintained by an attorney as personal representative, trustee, guardian, custodian, receiver, or committee, or as a fiduciary under a written instrument or order of court. Adopted effective January 1, 1997.
Source: This Rule is former Rule BU1.
Rule 16-602. Definitions.
In these rules, the following definitions apply, except as expressly otherwise provided or as necessary implication requires:
a. Approved Financial Institution. "Approved financial institution" means a financial institution approved by the Commission in accordance with these Rules.
b. Attorney. "Attorney" means any person admitted by the Court of Appeals to practice law.
c. Attorney Trust Account. "Attorney trust account" means an account, including an escrow account, maintained in a financial institution for the deposit of funds received or held by an attorney or law firm on behalf of a client or third person.
d. Bar Counsel. "Bar Counsel" means the person appointed by the Commission as the principal executive officer of the disciplinary system affecting attorneys. All duties of Bar Counsel prescribed by these Rules shall be subject to the supervision and procedural guidelines of the Commission.
e. Client. "Client" includes any individual, firm, or entity for which an attorney performs any legal service, including acting as an escrow agent or as a legal representative of a fiduciary. The term does not include a public or private entity of which an attorney is a full-time employee.
f. Commission. "Commission" means the Attorney Grievance Commission of Maryland, as authorized and created by Rule 16-702 (Attorney Grievance Commission).
g. Financial Institution. "Financial institution" means a bank, trust company, savings bank, or savings and loan association authorized by law to do business in this State, in the
h. Law Firm. "Law firm" includes a partnership of attorneys, a professional or nonprofit corporation of attorneys, and a combination thereof engaged in the practice of law. In the case of a law firm with offices in this State and in other jurisdictions, these Rules apply only to the offices in this State. (Adopted effective January 1, 1997.)
Source: This Rule is former Rule BU2.
Rule 16-603. Duty to maintain account.
An attorney or the attorney's law firm shall maintain one or more attorney trust accounts for the deposit of funds received from any source for the intended benefit of clients or third persons. The account or accounts shall be maintained in this State, in the
Source: This Rule is former Rule BU3.
Rule 16-604. Trust account – Required deposits.
Except as otherwise permitted by rule or other law, all funds, including cash, received and accepted by an attorney or law firm in this State from a client or third person to be delivered in whole or in part to a client or third person, unless received as payment of fees owed the attorney by the client or in reimbursement for expenses properly advanced on behalf of the client, shall be deposited in an attorney trust account in an approved financial institution. This Rule does not apply to an instrument received by an attorney or law firm that is made payable solely to a client or third person and is transmitted directly to the client or third person. (Adopted effective January 1, 1997.)
Source: This Rule is former Rule BU4.
Rule 16-605. Duty of attorney to notify institution.
An attorney may not exercise any authority to sign checks or disburse or withdraw funds from an attorney trust account until the attorney in writing:
a. Requests the financial institution to designate the account on its records as an attorney trust account, and
b. Authorizes the financial institution to report to Bar Counsel any dishonored instruments or overdrafts in the account as required by the agreement under Rule 16-610 between the institution and the Commission. (Adopted effective January 1, 1997.)
Source: This Rule is former Rule BU5.
Rule 16-606. Name and designation of account.
An attorney or law firm shall maintain each attorney trust account with a title that includes the name of the attorney or law firm and that clearly designates the account as "Attorney Trust Account", "Attorney Escrow Account", or "Clients' Funds Account" on all checks and deposit slips. The title shall distinguish the account from any other fiduciary account that the attorney or law firm may maintain and from any personal or business account of the attorney or law firm. (Adopted effective January 1, 1997.)
Source: This Rule is former Rule BU6.
Rule 16-607. Commingling of funds.
a. General Prohibition. An attorney or law firm may deposit in an attorney trust account only those funds required to be deposited in that account by Rule 16-604 or permitted to be so deposited by section b. of this Rule.
b. Exceptions.
1. An attorney or law firm shall either (A) deposit into an attorney trust account funds to pay any fees, service charges, or minimum balance required by the financial institution to open or maintain the account, including those fees that cannot be charged against interest due to the Maryland Legal Services Corporation Fund pursuant to Rule 16-610 b 1 (D), or (B) enter into an agreement with the financial institution to have any fees or charges deducted from an operating account maintained by the attorney or law firm. The attorney or law firm may deposit into an attorney trust account any funds expected to be advanced on behalf of a client and expected to be reimbursed to the attorney by the client.
2. An attorney or law firm may deposit into an attorney trust account funds belonging in part to a client and in part presently or potentially to the attorney or law firm. The portion belonging to the attorney or law firm shall be withdrawn promptly when the attorney or law firm becomes entitled to the funds, but any portion disputed by the client shall remain in the account until the dispute is resolved.
3. Funds of a client or beneficial owner may be pooled and commingled in an attorney trust account with the funds held for other clients or beneficial owners. (Adopted effective January 1, 1997. Amended June 10, 1997, effective July 1, 1997; January 20, 1999, effective July 1, 1999.)
Source: This Rule is former Rule BU7.
Rule 16-608. Interest on funds in attorney trust accounts.
a. Generally. Any interest paid on funds deposited in an attorney trust account, after deducting service charges and fees of the financial institution, shall be credited and belong to the client or third person whose funds are on deposit during the period the interest is earned, except to the extent that interest is paid to the Maryland Legal Services Corporation Fund as authorized by law. The attorney or law firm shall have no right or claim to the interest.
b. Duty to Report IOLTA Participation. Each attorney admitted to practice in
Source: Section a of this Rule is former Rule BU8. Section b is new.
Rule 16-609. Prohibited transactions.
An attorney or law firm may not borrow or pledge any funds required by these Rules to be deposited in an attorney trust account, obtain any remuneration from the financial institution for depositing any funds in the account, or use any funds for any unauthorized purpose. An instrument drawn on an attorney trust account may not be drawn payable to cash or to bearer. (Adopted effective January 1, 1997.)
Source: This Rule is former Rule BU9.
Rule 16-610. Approval of financial institutions. [See Rule 16-610 revised Dec. 3, 2007.]
a. Written Agreement to Be Filed With Commission. The Commission shall approve a financial institution upon the filing with the Commission of a written agreement, complying with this Rule and in a form provided by the Commission, applicable to all branches of the institution located in this State.
b. Contents of Agreement.
1. Duties to Be Performed. The agreement shall provide that the financial institution, as a condition of accepting the deposit of any funds into an attorney trust account, shall:
(A) Notify the attorney or law firm promptly of any overdraft in the account or the dishonor for insufficient funds of any instrument drawn on the account.
(B) Report the overdraft or dishonor to Bar Counsel as set forth in subsection b 1(C) of this Rule.
(C) Use the following procedure for reports to Bar Counsel required under subsection b 1(B) of this Rule:
(i) In the case of a dishonored instrument, the report shall be identical to the overdraft notice customarily forwarded to the institution's other regular account holders. The report shall be mailed to Bar Counsel within the time provided by law for notice of dishonor to the depositor and simultaneously with the sending of that notice.
(ii) If an instrument is honored but at the time of presentation the total funds in the account, both collected and uncollected, do not equal or exceed the amount of the instrument, the report shall identify the financial institution, the attorney or law firm maintaining the account, the account name, the account number, the date of presentation for payment, and the payment date of the instrument, as well as the amount of the overdraft created. The report shall be mailed to Bar Counsel within five banking days after the date of presentation, notwithstanding any overdraft privileges that may attach to the account.
(D) Not deduct from interest on the account that otherwise would be payable to the Maryland Legal Services Corporation Fund any fees for wire transfers, presentations against insufficient funds, certified checks, overdrafts, deposits of dishonored items, and account reconciliation services.
(E) Allow reasonable access to all records of an attorney trust account if an audit of the account is ordered pursuant to Rule BV18 (Audit of Attorney's Accounts and Records).
2. Service Charges for Performing Duties Under Agreement. Nothing in the agreement shall preclude an approved financial institution from charging the attorney or law firm maintaining an attorney trust account (1) a reasonable fee for providing any notice or record pursuant to the agreement or (2) the fees listed in subsection b 1(D) of this Rule.
3. Provide reasonable access to all records of an attorney trust account if an audit of the account is ordered pursuant to Rule 16-718 (Audit of Attorney's Accounts and Records).
c. Termination of Agreement. The agreement shall terminate only if:
1. The financial institution files a petition under any applicable insolvency law or makes an assignment for the benefit of creditors; or
2. The financial institution gives thirty days' notice in writing to Bar Counsel that the institution intends to terminate the agreement on a stated date and that copies of the termination notice have been mailed to all attorneys and law firms that maintain trust accounts with any branch of that institution; or
3. The Commission finds, after prior written notice to the institution and adequate opportunity to be heard, that the institution has failed or refused without justification to perform a duty required by the agreement. (Adopted effective January 1, 1997; amended June 10, 1997, effective July 1, 1997; January 20, 1999, effective July 1, 1999.)
Source: This Rule is former Rule BU10.
Rule 16-611. Notice of approved institutions.
The Commission shall cause to be published in the Maryland Register, at six- month intervals, a list that identifies:
1. All currently approved financial institutions; and
2. Any financial institution whose agreement has terminated since the previous list was published. (Adopted effective January 1, 1997, amended effective January 1, 1997.)
Source: This Rule is former Rule BU11.
Rule 16-612. Enforcement.
Upon receipt of a report of overdraft on or dishonored instrument drawn on an attorney trust account, Bar Counsel shall contact the attorney or law firm maintaining the account and request an informal explanation for the overdraft or dishonored instrument. The attorney or law firm shall provide any records of the account necessary to support the explanation. If Bar Counsel has requested but has failed to receive a satisfactory explanation for any overdraft or dishonored check, or if good cause exists to believe that an attorney or law firm has failed to perform any duty under these Rules, Bar Counsel may secure compliance with these Rules by appropriate means approved by the Commission, including application for an audit pursuant to Rule 16-718 (Audit of Attorney's Accounts and Records). (Adopted effective January 1, 1997.)
Source: This Rule is former Rule BU12.