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State Bar of California Reports on First-Year Results of New Client Trust Account Protection Program

California attorneys safeguard nearly $14 billion in client funds through their pooled Interest on Lawyers’ Trust Accounts (IOLTAs) and non-IOLTA client trust accounts (CTAs), and proactive efforts through the new Client Trust Account Protection Program (CTAPP) are already helping attorneys ensure they are properly handling those funds, the State Bar reports. In the first year during which California attorneys were required to report and register their CTAs with the State Bar, more than 94 percent complied on time. 

“As envisioned by the Board of Trustees, CTAPP has three goals: education, deterrence, and detection,” said Special Counsel Steve Moawad, who heads the Regulation Division implementing CTAPP. “Our first-year results demonstrate that attorneys are eager for education, and we believe the new requirements are already having an appropriate deterrent effect. Most attorneys want to handle these funds properly and are eager to learn how to do it correctly. We hope in the future to have the resources to implement the third goal, which is detection.” 

While attorneys and banks have been required to report IOLTAs to the State Bar since the early 1980s, the requirement for attorneys to report on non-IOLTA CTAs is new. After an audit of closed discipline cases against now-disbarred attorney Thomas Girardi, the Board created the Committee on Special Discipline Case Audit in mid-2021. That committee developed the CTAPP, and the full Board approved the program in November 2021. After receiving Supreme Court approval, the State Bar implemented CTAPP in a little over a year, launching the new program in December 2022 for the 2023 fee cycle.  

First-year highlights 

Here are data points illustrating CTAPP results in its first year:   

• Over 202,000 attorneys, including all active licensees as well as inactive licensees who were active for any portion of 2022, needed to comply with CTAPP by reporting whether they were responsible for CTAs, and if responsible, completing a self-assessment and registering their accounts with the State Bar.
• Nearly 190,000 complied by the April 2023 deadline.
• Over 100,000 attorneys reported being responsible for at least one trust account.
• Data collected from banks and attorneys indicates that at year-end 2022, more than 48,000 IOLTAs held over $7.8 billion (an increase from $7.1 billion at year-end 2021); however, over 53,000 IOLTAs were open at some point during 2022, with the highest monthly balances totaling over $14.5 billion (an increase from $12.3 billion during 2021). Because the interest in these accounts funds legal aid, the growing balances are a boon to the organizations who receive these funds through the State Bar’s Legal Services Trust Fund Commission.
• Approximately 10,000 IOLTAs reported by banks were not reported by attorneys.
• Attorneys reported more than 11,000 non-IOLTA CTAs, holding more than $6 billion at year-end 2022. Based upon the underreporting of IOLTAs by approximately 20 percent, the State Bar believes that non-IOLTA CTAs may also be underreported.
• In July, the State Bar placed approximately 2,000 attorneys—less than 1 percent—on involuntary inactive status for noncompliance with CTAPP. The agency is following up with those who have yet to meet the requirements to assist them in returning to compliance.

Next steps 

Beyond following up with noncompliant attorneys, in the coming months the State Bar expects to: 

• Expand training, including a new online CTAPP overview eligible for Minimum Continuing Legal Education (MCLE) credit, an online practical skills course on managing and reconciling CTAs, and revisions to the CTA Handbook.
• Reconcile data between banks and attorneys to identify IOLTAs that have not been reported by attorneys and review other inconsistencies in the data, such as reported account balances.
• Work with banks to follow up on what may be hundreds of IOLTAs held by disbarred, resigned or inactive attorneys, judges—or by those who were never licensed.
• Continue to pursue statutory amendments to expand mandatory bank reporting on non-IOLTA CTAs to the State Bar. Mandatory bank reporting of non-IOLTA CTAs would better equip the State Bar to catch attorney underreporting or errors and would allow the agency to conduct targeted outreach to help well-intentioned attorneys get into compliance as well as to prosecute those found to be intentionally misappropriating funds.
• Continue pursuing the funding needed to enable the State Bar to fulfill the detection goal of CTAPP by conducting audits and compliance reviews. The State Bar has estimated this funding need at approximately $7 per active licensee.

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The State Bar of California's mission is to protect the public and includes the primary functions of licensing, regulation and discipline of attorneys; the advancement of the ethical and competent practice of law; and support of efforts for greater access to, and inclusion in, the legal system.