Rule 221. Funds of clients and third persons. Mandatory overdraft notification.

 For purposes of this rule, a Trust Account of an attorney is an account in which an attorney, in accordance with Rule 1.15 of the Pennsylvania Rules of Professional Conduct, deposits funds received from a client or a third person in connection with a client-lawyer relationship, excluding funds which the attorney receives while acting as fiduciary for an estate, trust, guardianship or conservatorship.

 (b)  An attorney shall maintain a Trust Account with respect to his/her practice in this Commonwealth only in a financial institution approved by the Supreme Court of Pennsylvania for the maintenance of such accounts. Subject to the provisions set forth herein, the Disciplinary Board shall establish regulations governing approval and termination of approval for financial institutions, shall make appropriate recommendations to the Supreme Court of Pennsylvania concerning approval and termination, and shall periodically publish a list of approved financial institutions.

 (c)  A financial institution shall be approved as a depository for Trust Accounts of attorneys if it shall file with the Disciplinary Board an agreement (in a form provided by the Board) to make a prompt report to the Lawyers Fund for Client Security Board whenever any check or similar instrument is presented against a Trust Account when such account contains insufficient funds to pay the instrument, regardless of

   (1)  whether the instrument is honored, or

   (2)  whether funds are subsequently deposited that cover the overdraft or the dishonored instrument is made good.

 (d)  For purposes of this Rule, a Trust Account shall not be deemed to contain insufficient funds to pay a check or similar instrument solely because it contains insufficient collected funds to pay the instrument, and no report shall be required in the case of an instrument presented against uncollected or partially uncollected funds. This provision shall not be deemed an endorsement of the practice of drawing checks against uncollected funds.

 (e)  The term ‘‘financial institution’’ means banks, bank and trust companies, trust companies, savings and loan associations, credit unions, savings banks or foreign banking corporations, whether incorporated, chartered, organized or licensed under the laws of the Commonwealth of Pennsylvania or the United States, doing business in Pennsylvania and insured by the Federal Deposit Insurance Corporation, the National Credit Union Administration or an alternative share insurer.

 (f)  The responsibility for identifying an account as a Trust Account shall be that of the attorney in whose name the account is held.

 (g)  The following books and records shall be maintained for each Trust Account:

   (1)  bank statements and check registers (which shall include the payee, date, amount and the client matter involved);

   (2)  all transaction records returned by the financial institution, including canceled checks in whatever form and records of electronic transactions;

   (3)  records of deposits and a ledger separately listing each deposited item and the client or third person for whom the deposit is being made.

 (h)  The records required by this rule may be maintained in electronic or other form if they can be retrieved in printed hard copy. Electronic records must be regularly backed up by an appropriate storage device.

 (i)  The records required by this rule may be subject to subpoena in connection with an investigation or hearing pursuant to these rules. Failure to produce such records may result in the initiation of proceedings pursuant to Rule 208(f) (relating to emergency temporary suspension orders and related relief), which permits disciplinary counsel to commence a proceeding for the temporary suspension of a respondent-attorney who refuses to comply with a valid subpoena.

 (j)  For purposes of this rule, funds deposited in an account prior to the close of business on the calendar date of presentation of an instrument shall be considered to be in the account at the close of business on that date notwithstanding the financial institution’s treatment of such funds, for other purposes, as being received at the opening of the next banking day pursuant to 13 Pa.C.S. §  4107(b) (relating to items or deposits received after cutoff hour).

 (k)  For purposes of this rule, a check or draft against a Trust Account shall be deemed to be presented at the close of business on the date of presentation.

 (1)  No report need be made when the financial institution determines that the instrument presented against insufficient funds had been issued in reliance on a deposited instrument that was ultimately dishonored. This provision shall not be deemed an endorsement of the practice of drawing checks against uncollected funds.

 (m)  A failure on the part of a financial institution to make a report called for by this rule may be cause for termination of approval by the Supreme Court, but such failure shall not, absent gross negligence, give rise to a cause of action, by any person who is proximately caused harm thereby.

 (n)  Financial institutions shall be immune from suit for the filing of any reports required by this Rule or believed in good faith to be required by this Rule.

 (o)  A financial institution shall be free to impose a reasonable service charge upon the attorney in whose name the account is held for the filing of the report required by this rule.

 (p)  A report filed pursuant to this rule shall not, in and of itself, be considered a disciplinary complaint.

 (q)  A designated representative of the Lawyers Fund for Client Security Board shall conduct a preliminary inquiry and shall, where appropriate, refer the matter to the office of Disciplinary Counsel for further investigation. Neither a report filed with the Lawyers Fund for Client Security Board pursuant to this rule nor a referral of such report to the Office of Disciplinary Counsel shall, in and of itself, be considered a disciplinary complaint.

 (r)  Reports required to be made under this rule shall be made to the Lawyers Fund for Client Security Board within five business days of the presentation of the instrument.

   The provisions of this Rule 221 adopted April 18, 1995, effective immediately, 25 Pa.B. 1766; amended April 3, 1996, effective July 1, 1996, 26 Pa.B. 1806; amended July 17, 1996, effective September 1, 1996, 26 Pa.B. 3624; amended August 29, 1996, effective September 1, 1996, 26 Pa.B. 4519; amended April 5, 2005, effective upon publication, 35 Pa.B. 2386. Immediately preceding text appears at serial pages (280357) to (280359).