1. Pooled Trust Account
If a member is going to handle trust money at any time, the law firm must have a pooled trust account to hold that trust money. The law firm does not open a separate trust bank account for each client or client matter in order to accept trust money. The law firm pools all the clients’ deposits of trust money together in one trust bank account called a pooled trust account.
The interest earned on the pooled trust account is paid to the Manitoba Law Foundation in accordance with a letter of direction that is provided to the savings institution at the time the pooled account is opened.
Every member or law firm that handles trust money must have and maintain a pooled trust account.
Opening a Pooled Trust Account
The trust account supervisor is not expected to personally open every new pooled trust account for the law firm, but the law firm cannot open a new pooled trust account unless the law firm has a trust account supervisor.
The trust account supervisor is responsible for ensuring that all of the rules are followed when any new pooled trust account is opened.
To ensure that the client’s money is protected and tracked, there are specific rules about the pooled trust account that must be followed and the trust account supervisor needs to be familiar with those rules in order to ensure the trust bank accounts conform with the rules.
Directions to the Savings Institution
When it’s time to open a new pooled trust account, you will need to:
1. Ensure that the savings institution you wish to use can provide the services you want while meeting the Law Society’s criteria for the operation of the trust bank account, as follows:
a) The pooled trust account must be opened as a trust bank account at a savings institution. A savings institution is defined as a Manitoba branch of a chartered bank or a trust company that is authorized by law to receive money on deposit and is insured by the Canada Deposit Insurance Corporation, or a credit union or caisse populaire incorporated under The Credit Unions and Caisses Populaires Act.
b) The pooled trust account must be an interest-bearing chequing account.
c) The savings institution must provide the law firm with a monthly account statement for each pooled trust account that corresponds with the calendar month. This is necessary so that the trust account supervisor can ensure the law firm’s accounting records are balanced with the savings institution records each month.
d) The savings institution’s service charges for servicing the pooled trust account must be taken by the savings institution from the law firm’s general operating account and NOT from the pooled trust account.
e) The savings institution must be able to provide legible images of the front and back of all cleared cheques or the actual cleared cheques for the pooled trust account at the end of each calendar month.
f) Online access to the pooled trust account must be limited to “read only”. The law firm is not permitted to have the capability to make any on-line withdrawals, payments out, or transfers from the pooled trust account.
g) Deposits to the pooled trust account may be made through an ATM provided the debit card is set up as a “deposit only” card. Just as with the online access, the law firm is not permitted to make withdrawals, transfers, or bill payments from the pooled trust account using a debit card and therefore, the pooled trust account and bank card must be appropriately restricted.
Once you select a savings institution that can meet the above criteria, you must take steps to ensure the minimum services (b) through e)) and any optional services (f) and g)) are provided correctly.
2. Provide a Letter of Direction to the savings institution, as required by Section 50(2) of the Act, which directs the savings institution to remit the interest earned on that pooled trust account to the Manitoba Law Foundation. The Law Society audit department has created a standard form Letter of Direction to assist in meeting this obligation.
3. Ensure that:
a) the pooled trust account is opened in the name of the law firm (example: Red & Red LLP Pooled Trust Account);
b) the pooled trust account statement from the savings institution states that it is a trust bank account;
c) within 30 days of the opening of any new pooled trust account, the trust account supervisor notifies the Law Society that the new pooled trust account has been opened and the notice must include:
i. the date the new pooled trust account was opened,
ii. the name and branch and address of the savings institution in which the new pooled trust account was opened; and
iii. the account number and type of the new pooled trust account.
The Law Society will also be requesting receipt of a copy of the Letter of Direction, so it is easiest to include a copy with the notification of the new trust account;
d) trust cheques are ordered for each pooled trust account and the stock of trust cheques is securely stored at the law firm and subject to controls;.
e) the cheques used to draw on the pooled trust account must be consecutively numbered; and
f) a decision is made about whether the trust cheques on the pooled trust account will require one or two authorizing signatures. Remember that at least one signature on all trust cheques must be the signature of a lawyer practising at the firm who is a member of the Law Society. Employees who are not lawyers may sign a trust cheque but only if a practising lawyer in the law firm signs in conjunction with the employee.
Some law firms have a special colour for the trust cheques so that they can easily be identified and distinguished from the law firm’s general operating account cheques and other trust bank account cheques.
For cheque stock, it is a good idea to have the words ‘trust account’ printed on the face of the cheque somewhere, so all parties who come into contact with the cheque are aware it’s a trust account cheque subject to the trust account rules. It also helps prevent confusion with the member’s general account cheques.