NY Jud L § 497 (2021)
2021 New York Laws JUD - Judiciary Article 15 - Attorneys and Counsellors 497 - Attorneys Fiduciary Funds; Interest-Bearing Accounts.

§  497.  Attorneys  fiduciary  funds; interest-bearing accounts. 1. An "interest  on   lawyer   account"   or   "IOLA"   is   an   unsegregated interest-bearing  deposit  account  with  a  banking institution for the deposit by an attorney of qualified funds.   2. "Qualified funds" are moneys received by an attorney in a fiduciary capacity from a client or beneficial owner and which, in the judgment of the attorney, are too small in amount or are reasonably expected  to  be held  for  too  short  a  time to generate sufficient interest income to justify the expense  of  administering  a  segregated  account  for  the benefit  of the client or beneficial owner. In determining whether funds are qualified for deposit in an IOLA account, an attorney may use  as  a guide  the  regulation adopted by the board of trustees of the IOLA fund pursuant to subdivision four of  section  ninety-seven-v  of  the  state finance law.   2-a. "Funds received in a fiduciary capacity" are funds received by an attorney from a client or beneficial owner in the course of the practice of  law,  including  but  not  limited  to  funds  received in an escrow capacity, but not including  funds  received  as  trustee,  guardian  or receiver in bankruptcy.   3.  A "banking institution" means a bank, trust company, savings bank, savings  and  loan  association,  credit  union   or   foreign   banking corporation whether incorporated, chartered, organized or licensed under the  laws of this state or the United States, provided that such banking institution conducts its principal banking business in this state.   4. (a) An attorney shall have discretion, in accordance with the  code of  professional responsibility, to determine whether moneys received by an attorney in a fiduciary capacity from a client  or  beneficial  owner shall  be deposited in non-interest, or in interest bearing accounts. If in the judgment of an attorney any moneys received are qualified  funds, such  funds  shall  be  deposited  in  an  IOLA  account  in  a  banking institution of his or her choice offering such accounts.  (b) The decision as to whether funds are nominal in amount or expected to be held for a short period of time rests  exclusively  in  the  sound judgment  of the lawyer or law firm. Ordinarily, in determining the type of account into which to deposit particular funds held for a  client,  a lawyer or law firm shall take into consideration the following factors:  (i) the amount of interest the funds would earn during the period they are expected to be deposited;  (ii) the cost of establishing and administering the account, including the cost of the lawyer or law firm's services;  (iii)   the   capability   of   the   banking   institution,   through subaccounting, to calculate and pay interest  earned  by  each  client's funds, net of any transaction costs, to the individual client.  (c)  All  qualified funds shall be deposited in an IOLA account unless they are deposited in:  (i) a separate interest bearing account for the particular  client  or client's matter on which the interest will be paid to the client; or  (ii)  an  interest bearing trust account at a banking institution with provision by the bank or by  the  depositing  lawyer  or  law  firm  for computation  of  interest  earned by each client's funds and the payment thereof to the client.  (d) Notwithstanding the deposit requirements of this  subdivision,  no attorney or law firm shall be liable in damages nor held to answer for a charge of professional misconduct for failure to deposit qualified funds in an IOLA account.   5.  No  attorney  or  law  firm shall be liable in damages nor held to answer for a charge of professional misconduct because of a  deposit  of  moneys to an IOLA account pursuant to a judgment in good faith that such moneys were qualified funds.   6.  a.  An  attorney or law firm which receives qualified funds in the course of its practice of law and  establishes  and  maintains  an  IOLA account  shall  do  so  by  (1)  designating  the  account  as "(name of attorney/law firm IOLA  account)"  with  the  approval  of  the  banking institution;  and  (2)  notifying  the  IOLA  fund within thirty days of establishing the IOLA account of the account number and name and address of the banking institution where the account is deposited.   b. The rate of interest payable on any IOLA account shall be not  less than  the  rate  paid  by  the  banking  institution on similar accounts maintained at that institution, and the banking  institution  shall  not impose  on  such accounts any charges or fees greater than it imposes on similar accounts maintained at that institution.   c. With respect to IOLA accounts, the banking institution shall:  (i) Remit at least  quarterly  any  interest  earned  on  the  account directly  to  the IOLA fund, after deduction of service charges or fees, if any, are applied.  (ii) Transmit to the  IOLA  fund  with  each  remittance  a  statement showing  at  least  the  name  of  the  account, service charges or fees deducted, if any, and the amount of  net  interest  remitted  from  such account.  (iii)  Transmit  to  each attorney or law firm which maintains an IOLA account a statement showing at least the name of  the  account,  service charges  or  fees  deducted, if any, and the amount of interest remitted from such account.  (iv) Be  permitted  to  impose  reasonable  service  charges  for  the preparation and issuance of the statement.  (v)  Have  no duty to inquire or determine whether deposits consist of qualified funds.   7. a. Payment from an IOLA  account  to  or  upon  the  order  of  the attorney  maintaining  such  account  shall  be  a  valid and sufficient release of any claims by  any  person  or  entity  against  any  banking institution for any payments so made.   b.  Any  remittance  of  interest  to  the  IOLA  fund  by  a  banking institution pursuant to this section shall be  a  valid  and  sufficient release and discharge of any claims by any person or entity against such banking  institution  for  any  payment  so made, and no action shall be maintained against any banking institution solely for opening, offering, or maintaining an IOLA account, for accepting any funds for  deposit  to any such account or for remitting any interest to the IOLA fund.   8. Nothing contained in this section shall be construed to require any banking institution to offer, accept or maintain IOLA accounts.   9.  All papers, records, documents or other information identifying an attorney, client or  beneficial  owner  of  an  IOLA  account  shall  be confidential  and shall not be disclosed by a banking institution except with the consent of the attorney maintaining the account or as permitted by any law, regulation or adminstrative requirement.   10. An attorney or law firm that can establish  that  compliance  with subdivision  six  of  this  section  has resulted in any banking service charges or fees shall be entitled to reimbursement of such expense  from the  interest  on  lawyer account fund by filing a claim with supporting documentation with the fund.