CTAPP: Enhancing Trust and Compliance in Client Trust Account Management

Trust Account Bookkeeping
December 18, 2023
December 19, 2023

CTAPP: Client Trust Account Protection Program Objectives 

The January 2023 implementation of the Client Trust Account Protection Program follows a scandal that resulted in the State Bar enrolling over 1700 attorneys in inactive status. Due to attorney’s trust account management protocol violations, the new Client Trust Account Protection Program increases public protection with proactive regulation. 

Rule 2.5 (CTAPP) works concurrently with California Rule of Conduct 1.15, “Safekeeping Funds and Property of Clients and Other Persons.” With a clearly defined, updated framework, the goal is to support, educate, and assist attorneys in complying with the accounting and ethical requirements of managing CTAs. 

Client Trust Account Protection Program Key Components 

The updated trust account management framework builds on the statutory mandates outlined in Rule 1.15. Rule 2.5 details an attorney's obligation to properly account for a client's fiscal property in a few major obligations. These include annual reporting requirements for the Client Trust Account Protection Program. They are as listed below: 

The changes signify the extent to which accountability and responsibility are integral to the legal profession in California. The intent of CTAPP is two-fold. It reinforces appropriate trust account management to procure safety for client funds and property and the trustworthiness of attorneys. 

Annual Trust Account Certification 

Rule 2.5(2) defines a trust account as a bank account/accounts opened to comply with the Rules of Professional Conduct 1.15(a). This includes IOLTA accounts and other specified interest-bearing accounts. Any Attorneys or license holders responsible for safekeeping client funds (see Rule 1.15) must complete the following CTAPP Reporting Requirements annually.

A licensed attorney in California must annually report on the status of client trust accounts. One must certify if they were responsible for safekeeping any client funds re Rules of Professional Conduct Rule 1.15 during the reportable time period. If the answer is “yes,” then the following implications must be certified: 

  1. The attorney is knowledgeable of the regulations of client account management 
  2. The attorney is complying with responsibilities and prohibitions applicable to the Safekeeping of Clients’ Funds and Property. 

Annual Trust Account Registration 

Attorneys meeting the specifications of Rule 2.5 (A)(a) are also required by law to follow protocol for registering client trust accounts: 

“(a) a licensee who: (i) represents a client in a matter in which funds have been received by the licensee or licensee’s firm on behalf of the client during the reportable time period; and (ii) has responsibility for complying with any of the requirements or prohibitions in rule 1.15 of the Rules of Professional Conduct— such requirements and prohibitions are not limited to recordkeeping duties and include, for example, the responsibility for giving notice to the client that funds were received on behalf of the client under rule 1.15(d)(1) of the Rules of Professional Conduct; or (b) a licensee who acted as a signatory on a trust account or a licensee who exercised managerial or primary administrative oversight for a trust account.” 

Client trust account registrations are to be completed yearly with the State Bar. This registration references all client trust accounts, not excluding IOLTAs. Each account must be registered individually and through the attorney’s My State Bar Profile. Registration may also be registered via a law firm’s State Bar agency billing system. To complete registration, any and all accounts held during the reportable time period must be identified by financial institution and account number to the State Bar in the manner requested. 

Annual CTAPP Self-Assessment 

Participating attorneys must also complete an assessment of their trust account management practices. This may be done on an individual basis or through a firm but must be completed on a yearly basis. The self-assessment includes affirmations and questions regarding the licensee's practice of trust account record keeping as relates to Rule 1.15 (d). According to the State Bar, the self-assessment is a survey tool supplied to assist attorneys in self-evaluating their practices.

Sample or actual questions may be previewed here. By completing the self-assessment, attorneys are allowed to identify compliance discrepancies and implement the necessary corrective actions. 

CTAPP Reporting Deadlines and Non-Compliance 

Reporting is due each year on the same date attorneys must pay annual licensure fees. Reporting must be completed by eligible attorneys even in the event of non-applicability. Reporting is still required if a licensee is not responsible for any client funds or property at the Time of Reporting. Rule 2.5(E) states that unless an attorney falls under specific guidelines, reporting must be completed. The exemptions are limited to attorneys who are: 

If the Time of Reporting arrives, and an attorney under a law firm was prior responsible for client funds but is no longer, the annual reports must be completed, however, by the firm, not the licensee, if they are still at the firm. Rule 2.5(D). 

“The annual reports required under paragraph (B)(1) and paragraph (B)(3) of this rule must be submitted when a licensee, at any time during the reportable time period, has been a licensee responsible for client funds or funds entrusted by others under the provisions of rule 1.15 of the Rules of Professional Conduct, and this includes circumstances where the licensee at the time of submitting their report is no longer responsible for client funds or funds entrusted by others under the provisions of rule 1.15 of the Rules of Professional Conduct. The registration of a trust account under paragraph (B)(2) of this rule also is required even if a licensee is not responsible for funds held in the trust account at the time of reporting so long as the licensee remains in practice with the firm that controls the trust account. A licensee is not required to register a trust account controlled by a firm with which the licensee no longer practices.” 

What is CTAPP Non-Compliance?

The barometer for noncompliance is set simply if an attorney or law firm fails to complete the annual trust account registration, certification, and self-assessment and pay the required monetary dues. Licensees found noncompliant with CTAPP Reporting will receive a noncompliance penalty. A licensed attorney becomes ineligible to practice law when an inactive notice is served. If noncompliance continues, inactive licensure will be imposed on the attorney from the State Bar Board of Trustees. 

Reinstatement from inactive status from CTAPP reporting non-compliance occurs when a licensee can offer proof of compliance and pays the noncompliance penalty and reinstatement fees. Fees are set in the Schedule of Charges and Deadlines. 

The Future of CTAPP 

While the Client Trust Account Protection Program includes the portions above, the program will likely. Going forward, other portions implemented by the State Bar will consist of: 

Attorneys and law firms are encouraged to stay abreast of the program via the resources offered by the State Bar of California, such as the Client Trust Accounting Handbook

Our uniquely experienced team at SmartBean® can navigate the intricacies of CTAPP compliance and reporting requirements mandated by Rule 2.5. Let us help ensure your ethical obligations to the State Bar of California and your fiduciary responsibilities to clients are met. We offer free consultation for our monthly, affordable Trust Account Bookkeeping (TAB) services

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