North Carolina Administrative Code › Title 27 - STATE BAR › Chapter 01 - RULES AND REGULATIONS FOR THE NORTH CAROLINA STATE BAR › Subchapter D - RULES OF THE STANDING COMMITTEES OF THE NORTH CAROLINA STATE BAR › Section .1400 - RULES GOVERNING THE ADMINISTRATION OF THE CLIENT SECURITY FUND OF THE NORTH CAROLINA STATE BAR › Section 01D .1401 - PURPOSE; DEFINITIONS

Current through Register Vol. 39, No. 2, July 15, 2024
(a) The
				  Client Security Fund of the North Carolina State Bar was established by the
				  Supreme Court of North Carolina pursuant to an order dated August 29, 1984. The
				  fund is a standing committee of the North Carolina State Bar Council pursuant
				  to an order of the Supreme Court dated October 10, 1984, as amended. Its
				  purpose is to reimburse, in whole or in part in appropriate cases and subject
				  to the provisions and limitations of the Supreme Court's orders and these
				  Rules, clients who have suffered financial loss as the result of dishonest
				  conduct of lawyers engaged in the private practice of law in North Carolina,
				  which conduct occurred on or after January 1, 1985.
(b) As used herein the following terms have
				  the meaning indicated.
(1) "Applicant" shall
				  mean a person who has suffered a reimbursable loss because of the dishonest
				  conduct of an attorney and has filed an application for
				  reimbursement.
(2) "Attorney" shall
				  mean an attorney who, at the time of alleged dishonest conduct, was licensed to
				  practice law by the North Carolina State Bar. The fact that the alleged
				  dishonest conduct took place outside the state of North Carolina does not
				  necessarily mean that the attorney was not engaged in the practice of law in
				  North Carolina.
(3) "Board" shall
				  mean the Board of Trustees of the Client Security Fund.
(4) "Council" shall mean the North Carolina
				  State Bar Council.
(5) "Dishonest
				  conduct" shall mean wrongful acts committed by an attorney against an applicant
				  in the nature of embezzlement from the applicant or the wrongful taking or
				  conversion of monies or other property of the applicant, which monies or other
				  property were entrusted to the attorney by the applicant by reason of an
				  attorney-client relationship between the attorney and the applicant or by
				  reason of a fiduciary relationship between the attorney and the applicant
				  customary to the practice of law.
(6) "Fund" shall mean the Client Security
				  Fund of the North Carolina State Bar.
(7) "Reimbursable losses" shall mean only
				  those losses of money or other property which meet all of the following tests:
(A) the dishonest conduct which occasioned
				  the loss occurred on or after January 1, 1985;
(B) the loss was caused by the dishonest
				  conduct of an attorney acting either as an attorney for the applicant or in a
				  fiduciary capacity for the benefit of the applicant customary to the private
				  practice of law in the matter in which the loss arose;
(C) the applicant has exhausted all viable
				  means to collect applicant's losses and has complied with these
				  Rules.
(8) The following
				  shall not be deemed "reimbursable losses":
(A)
				  losses of spouses, parents, grandparents, children and siblings (including
				  foster and half relationships), partners, associates or employees of the
				  attorney(s) causing the losses;
(B)
				  losses covered by any bond, security agreement or insurance contract, to the
				  extent covered thereby;
(C) losses
				  incurred by any business entity with which the attorney or any person described
				  in Part (b)(8)(A) of this Rule is an officer, director, shareholder, partner,
				  joint venturer, promoter or employee;
(D) losses, reimbursement for which has been
				  otherwise received from or paid by or on behalf of the attorney who committed
				  the dishonest conduct;
(E) losses
				  arising in investment transactions in which there was neither a contemporaneous
				  attorney-client relationship between the attorney and the applicant nor a
				  contemporaneous fiduciary relationship between the attorney and the applicant
				  customary to the practice of law. By way of illustration but not limitation,
				  for purposes of this Rule [Part (b)(8)(E) of this Rule], an attorney authorized
				  or permitted by a person or entity other than the applicant as escrow or
				  similar agent to hold funds deposited by the applicant for investment purposes
				  shall not be deemed to have a fiduciary relationship with the applicant
				  customary to the practice of law.
(9) "State Bar" shall mean the North Carolina
				  State Bar.
(10) "Supreme Court"
				  shall mean the North Carolina Supreme Court.
(11) "Supreme Court orders" shall mean the
				  orders of the Supreme Court dated August 29, 1984, and October 10, 1984, as
				  amended, authorizing the establishment of the Client Security Fund of the North
				  Carolina State Bar and approving the rules of procedure of the Fund.