According to the Delaware Office of Disciplinary Counsel’s Digest of Lawyer Discipline, approximately 60 percent of complaints against lawyers in 2016 involve, either directly or indirectly, books and records violations. Delaware is not alone. In fact, books and records violations represent a significant percentage of attorney incidents of misconduct across the country.
In Delaware, books and records guidelines are covered in Rule 1.15, which explains requirements for safekeeping property and records. More specifically, lawyers “must maintain financial books and records on a current basis, and shall preserve the books and records for at least five years following the completion of the year to which they relate, or, as to fiduciary books and records, five years following the completion of that fiduciary obligation.”
Rule 1.15 also provides a number of specific rules for maintaining books and records, primarily financial statements and related documentation. While some states require hard copies, electronic copies are usually acceptable. Lawyers must be able to provide financial books and records to auditors each year to prove compliance. Lawyers also must promptly reply to client requests for this information as per American Bar Association Rules of Professional Conduct Rule 1.4(4).
The Consequences of Books and Records Violations
In many of this year’s cases involving books and records violations in Delaware, attorneys were privately admonished. Some violations resulted in public reprimands and probationary periods.
In one case, a solo practitioner was suspended for 18 months for a number of violations of the Delaware Lawyers’ Rules of Professional Conduct, including the failure to safeguard client funds and maintain his law practice’s books and records as required by Rule 1.15. This attorney also violated Rules 1.1 and 1.3 by failing to competently and diligently represent 11 clients, as well as Rule 8.4 by misrepresenting the status of books and records.
Of course, books and records violations don’t just have consequences in Delaware. In Florida, a St. Petersburg attorney was publicly reprimanded and placed on probation after failing to properly monitor and supervise trust accounting practices and procedures.
Why Does This Continue to Be an Issue?
Comment on Rule 1.15 in the American Bar Association’s Model Rules of Professional Conduct states, “A lawyer should maintain on a current basis books and records in accordance with generally accepted accounting practice and comply with any recordkeeping rules established by law or court order.”
Unfortunately, many law practices, particularly small and solo firms, struggle to properly maintain financial books and records. Smaller firms typically don’t have robust IT systems and software for maintaining books and records, or the in-house staff to manage them. As a result, manual processes are the norm, and human error is all too common.
Books and records violations can often be traced back to the lack of a formal policy governing records management (RM), document retention, and document destruction, which have become more complex with the emergence of mobile devices and cloud-based services. In addition to reducing the risk of compliance violations, such a policy can help a law practice improve productivity and operational efficiency.
A Simple Solution
Rather than trying to manage financial books and records in-house, more and more law firms are seeking the help of service providers focused on managing the financial records of the firm. A knowledgeable and experienced law firm bookkeeper can help you manage monthly reconciliation statements, store documents electronically, print hard copies if necessary, and maintain all records according to ABA and state bar guidelines. This allows the attorneys to focus on providing the best possible legal services instead of getting bogged down with tasks that don’t produce revenue.
Let Virtual Paralegal Services manage your books and records to minimize the risk of non-compliance and improve the business operations of your law firm. Contact us today for a consultation.