LCA update

Financial Assurance Scheme changes

THE Financial Assurance Scheme, introduced in 1998, will, with some minor adjustment, continue when the Lawyers and Conveyancers Act 2006 (the LCA) comes into force.

However new Trust Account Regulations, expected to be made reasonably soon, are likely to involve some changes for lawyers. They will include reference to incorporated law firms and will broaden the scope and functions of the Inspectorate.

Fidelity Fund contributions

Under current legislation, all lawyers practising on own account, whether or not a trust account is operated, are required to contribute to the Fidelity Fund and the Financial Assurance Scheme.

Under s317 of the LCA, a practitioner or incorporated firm who has elected not to receive money or other valuable property in trust for any other person will not be required to contribute to the Fidelity Fund.

Trust account supervisor

Under the draft regulations the existing term "Trust Account Partner" or "TAP" is replaced with the term "Trust Account Supervisor". This recognises the expansion of allowable business structures to include incorporated law firms.

Existing trust account partners, whether sole practitioners or the nominee in a firm, will continue as trust account supervisors. The boards of directors of incorporated firms will be required to appoint a director as trust account supervisor in relation to each office of the incorporated firm having separate trust account records.

As is now the case, the appointment of a trust account supervisor does not diminish the responsibilities or liabilities of any other partner or other directors (in the case of an incorporated firm) for financial matters affecting the practice. Current training requirements are expected to be carried over into the new regime.

Client care

Under the draft Rules of Conduct and Client Care, there are specific requirements relating to client care (see in particular Rules 3.5 and 3.6). Firms need to ensure compliance from the date the LCA comes into force. The NZLS inspectors will be incorporating client care matters into trust account inspection checklists from the date of implementation.

Barristers – incorporated law firms

Rule 14.2 of the draft Rules of Conduct and Client Care does not permit a lawyer who holds a practising certificate as a barrister sole to practise in partnership. However, the lawyer may practise in the structure of an incorporated law firm if the barrister sole is the only voting shareholder of the incorporated law firm.