The Advisory: Volume 8, Issue 5, December 2010
Rule Approvals Launches Law Society’s Trust Safety Initiative
By Janet Dixon, QC, Senior Counsel, Law Society of Alberta
ON NOVEMBER 26, 2010, the Benchers approved the Rule changes to formally launch the trust safety initiative. This program will be administered by the trust safety department, which will assume all prior audit functions in addition to the new elements of the trust safety program.
The Law Society has been committed to supporting lawyers in maintaining efficient and effective accounting systems to ensure trust funds held by Alberta lawyers remain safe from fraudulent schemes and losses due to weak internal accounting systems.
In the last few years Alberta lawyers have brought numerous risks to our attention; the trust safety initiatives will enable lawyers to develop and maintain internal accounting systems to protect against those risks and will permit the Law Society to conduct timely and effective audits to confirm the adequacy of the accounting systems.
How will the new rules affect me as a practitioner?
For most lawyers, the rule changes may have little impact on their day to day operations. Lawyers in Alberta have maintained a high level of vigilance over trust property and have experienced few difficulties. The new program will support these lawyers through an education program, risk management tools and regular audits with timely feedback to ensure the continued safety of trust money. While there are some new mandatory requirements with respect to trust property, these requirements reflect existing best practices. For these lawyers, key elements of the new trust safety program include the following:
- Every firm will have to designate a “responsible lawyer” who is accountable for overseeing the internal accounting systems and all firm filings. A LESA program has been designed to fully inform the responsible lawyer of his or her obligations.
- While there is no requirement to have computerized accounting software, firms with approved accounting software will have the option to participate in automated audits in place of annual external accountant trust audits.
If lawyers have experienced difficulty in the past in complying with accounting rules or statutory obligations, have been involved in risky activities or have experienced losses or shortage of trust property, the new trust safety program will provide support and structure to ensure these lawyers have future success in complying with accounting rules and safeguarding trust property. Conditions may be imposed on these lawyers or firms requiring computerized accounting software or other risk management systems to better ensure the safety of trust property held by these lawyers.
When are the new Trust Safety rules effective?
The Rules are effective January 1, 2011. The new filing requirements come into effect based on the designated filing date of each existing firm. Every lawyer who maintains a trust account in Alberta has declared a designated filing date. This is the date that firms have used in past years to calculate the due date for the old Form S and T. Lawyers seeking to set up a new firm will do so under the new rules.
The trust safety department will be contacting every firm in advance of its designated filing date to explain the requirements of the new Rules. Letters for January and February designated filing dates have already been sent to the firms.
What can I do to prepare for the new requirements?
All lawyers are encouraged to review the Law Society website www.lawsociety.ab.ca for more detailed information about the program. A “Frequently Asked Questions” area is set up and will be regularly updated to reflect areas of interest expressed by lawyers. The updated Rules are on the website. Lawyers are encouraged to contact the Trust Safety department for further information at 403-229-4740 or by email.
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