4.4 Trust Safety Filings
Your first contact with the Law Society’s Trust Safety department will likely be when you apply either for approval to operate a trust account or for an exemption from the requirement that you operate a trust account.
The importance of proper accounting cannot be overemphasized. There are certain costs associated with practising law and hiring an accountant is one of the most essential ones. If client or other third party funds are entrusted to you, you must have rigorous accounting practices that help protect and account for those funds.
Start Up Report
After obtaining Law Society approval to operate a trust account, and where a law firm opens a pooled trust bank account, the law firm must file the Start-Up Report. The Start-up Report must be completed and signed by an accounting firm within four months of the law firm opening its trust bank account. The intent is for the accounting firm to review the first two trust reconciliations to ensure that the law firm is properly accounting for the client trust monies.
Law firms operating a trust bank account are required to complete annual trust safety filings. The Annual Report includes the following:
· Law Firm Self-Report – prepared by the law firm in accordance with subrule 119.30(3)
· Accountant’s Report – prepared by the law firm’s accountant in accordance with subrule 119.30(4)
· Electronic Data Upload – prepared by the law firm in accordance with subrule 119.30(5) or (6)
Law firms operating a trust bank account must submit the Law Firm Self-Report and either the Accountant’s Report or the Electronic Data Upload.
The mandatory Designated Filing Date (“year-end”) for all law firms is December 31 and the Annual Report is due three months after the Designated Filing Date. The completed Annual Report must be submitted to the Law Society by March 31 of the following year (“Due Date”).
You will continue to have to complete the annual filings to Trust Safety until you terminate your law firm and file a final Law Firm Self-Report and the final Trust Safety Accounting Upload or Accountant’s Report.
You must keep a copy of your law firm Self-Report and Accountant’s Report, if applicable, as part of your prescribed accounting records (Rule 119.30(3)). See Module 9 regarding the retention periods for these records
Law Firm Self-Report
Rule 119.30(3) requires law firms to provide a completed Law Firm Self-Report to the Law Society on an annual basis. The report is an attestation of compliance with Part 5 of the Rules. In this report, law firms provide details regarding their practice, trust accounting, and other related activities during the preceding year. In the majority of instances, one report will be completed for the practice and this will satisfy the filing requirements of all the lawyers (associates and partners) of the practice. The Responsible Lawyer is accountable for all filing requirements of the law firm, pursuant to Rule 119.3(1). If a lawyer is uncertain as to whether or not all lawyers will be covered with one filing, contact the Law Society’s Trust Safety department for clarification. The Law Firm Self-Report is comprehensive and divided into four sections. The sections that need to be completed will depend on whether the law firm operates a trust bank account; firms that are approved for an exemption from operating a trust account are only required to complete specified sections of the Law Firm Self-Report. Law firms are now able to e-file a completed Law Firm Self-Report online via the Lawyer Portal. It is mandatory for the Self-Report to be filed online.
Firms with trust accounts that do not participate in the Electronic Data Upload Program must submit an independent accountant’s report as part of their Annual Report filing requirements. Only a public accounting firm under the Regulated Accounting Profession Act (RAPA) may issue an Accountant’s Report. Please note that, if you are retaining an accounting firm to maintain your books and records on a monthly basis, the Accountant’s Report must be completed by a different, qualified accounting firm.
The Accountant’s Report has limited scope and coverage. It involves specified auditing procedures carried out on a test month by an Accountant. The engagement cannot be relied upon to detect defalcations and/or disclose irregularities.
Trust Safety Accounting Upload
If your firm uses approved software (PCLAW™, ESILAW, or Clio), you can complete the Trust Safety Accounting Upload instead of filing the Accountant’s Report. The Trust Safety Accounting Upload improves audit coverage by allowing the Law Society to analyze 100% of your data for compliance with the Rules. The upload data also allows the Law Society to analyze transactions much more quickly - a vital part in managing the risk of fraud by catching frauds early and thus limiting losses.
If you are completing a Trust Safety Accounting Upload for lawyers using approved software, please refer to the appropriate User Guide below:
Late Filing Fee
If the Annual Report is not submitted by the Due Date (March 31 of the following year), late fees are applicable up to a maximum of $1,500 for reporting that is three months late.
The Responsible Lawyer is administratively suspended on July 1 if the Annual Report remains unfiled three months after the Due Date (March 31 of the following year) and any late fees remain unpaid.
For lawyers who are compliant with the rules, the late fees and administrative suspension will have no impact.
Lawyers who are administratively suspended will have to submit the Annual Report and pay the applicable late fees and the reinstatement fee of $225 before they can resume operating their trust accounts. Lawyers will be immediately reinstated when these conditions are met.