Trust Accounts: Legal Practitioners – updated publications

Trust Accounts: Legal Practitioners – updated publications

• 18 October 2024
• Regulatory Compliance and Legislation
• South African Accounting Academy

Summary:

The LPFF (Legal Practitioners Fidelity Fund) has issued 7 important publications re Engagements on Legal Practitioners' Trust Accounts.

Article:

Registered auditors are advised to take note of the following Legal Practitioners Fidelity Fund (LPFF) publications that are available on its website:

1. Updated list of banks that have entered into banking arrangements with the Legal Practitioners’ Fidelity Fund in terms of Section 63(1)(g) of the Legal Practice Act, No. 28 of 2014
   • The remaining chapters of the Legal Practice Act, No. 28 of 2014 (LPA) came into effect on 1 November 2018, and Legal Practitioners and all relevant stakeholders are reminded that trust accounts that are kept in terms of section 86 of the LPA must be held at a bank that has entered into a banking arrangement with the Legal Practitioners’ Fidelity Fund (LPFF) in terms of section 63(1)(g).
   • This communication serves to inform stakeholders that 13 banks have entered into banking arrangements with the LPFF in terms of section 63(1)(g) of the LPA.
   • All Legal Practitioners referred to in section 84(1), must comply with the requirements of section 86(6) and section 86(7) of the LPA as well as the LPC Rule 54.14.7.2. Legal Practitioners are encouraged to contact their dedicated bankers, should they have any queries relating to the how their bank has implemented the requirements of section 86 of the LPA.
2. Legal Practitioners Paying Section 86(2) And (3) Trust Interest Due to the LPFF to the Incorrect Bank Accounts.
   • Some legal practitioners are still paying trust interest accrued on section 86(2) and (3) trust accounts to the incorrect bank accounts and the Legal Practitioners’ Fidelity Fund (LPFF) advises legal practitioners to use the correct banking details when paying trust interest accrued on section 86(2) and (3) trust accounts to the Fund.
   • Legal Practitioners, who are not using the Automated Monthly Transfer System (AMTS) offered by some of the Banks, are advised to pay trust interest due to the LPFF in terms of Rules 54.14.16.1 and 54.14.16.3 using the banking accounts listed in the table provided in the document.
3. Registered auditors are now required to submit an Agreed-Upon Procedure Report on work conducted on the application for refund of bank charges and audit fees
   • The purpose of this communication is to advise Legal Practitioners, Auditors, and all relevant stakeholders that, on 19 October 2023, the Board of the Legal Practitioners’ Fidelity Fund issued a directive that requires registered auditors to conduct an agreed-upon procedures engagement on the completed application for refund of bank charges and audit fees form.
   • As per the directive, auditors are required to utilise the Agreed-Upon Procedures Report (AUP Report) issued by the South African Institute of Chartered Accountants (SAICA), which is effective for agreed-upon procedures engagements on the Application for a Refund for Application of Bank Charges and Audit Fees beginning on or after 1 November 2023.
4. Requirement for registered auditors to conduct AUP on the application for a refund of bank charges and audit fees form
   • This document sets out How to claim refundable bank charges and audit fees from the Legal Practitioners’ Fidelity Fund, inter alia:
     • This Directive describes the Requirement to claim bank charges and audit fees as per the Legal Practice Act.
     • The Application for a Refund of Bank Charges and Audit Fees Form, issued by the Legal Practitioners’ Fidelity Fund (LPFF) must be utilised for the purpose of claiming refundable bank charges and audit fees referred to in section 57(2)(a) and (c) of the Act. This application for refund form, as well as the list of refundable bank charges can be downloaded from the LPFF’s website.
     • The completed Application for a Refund of Bank Charges and Audit Fees Form must be submitted to the relevant Provincial Legal Practice Council together with the AUP Report.
5. Payment of trust interest accrued on trust accounts held in terms of Section 86 of the Legal Practice Act No. 28 of 2014 (LPA) to the LPFF.
   • The purpose of this communication is to remind the Legal Practitioners, Registered Auditors, and all relevant stakeholders about the requirements of section 86 of the Legal Practice Act, No. 28 of 2014 (LPA) and The South African Legal Practice Council Rules made under the authority of sections 95(1), 95(3) and 109(2) of the LPA (LPC Rules), pertaining to payment of trust interest accrued on section 86 trust accounts.
   • The 3 types of trust accounts, set out in the document, must be held at a bank that has entered into a banking arrangement.
   • There is also a table that explains:
     • How much of the trust interest accrued on the above-mentioned trust accounts is due to the LPFF?
     • When should trust interest accrued on these trust accounts be paid to the Fund?
     • The available methods of payment of trust interest.
6. Payment of Unclaimed and Unknown trust monies in accordance with Section 87(4) of the Legal Practice Act, No. 28 of 2014
   • The remaining Chapters of the Legal Practice Act, No. 28 of 2014 (LPA) came into effect on 01 November 2018, and the Legal Practitioners and all relevant stakeholders are reminded about the requirements of section 87(4)(a), which make it mandatory for Legal Practitioners to pay any unclaimed and unknown monies held in a trust account to the Legal Practitioners’ Fidelity Fund (LPFF).
   • To pay unclaimed and unknown trust monies to the LPFF in accordance with section 87(4)(a) of the LPA, this document sets out the information should be submitted to the LPFF.
   • The Procedure to be followed to claim a refund from the LPFF when the beneficiary of the unknown and unclaimed trust monies has been found, is also set out.
7. Recoverable and Non-Recoverable Bank Charges
   • This is an Exposition of the variety of bank charges levied on Practitioner Trust Accounts
   • This list of recoverable and non-recoverable bank charges, was originally approved by the Board of Control of the Attorneys’ Fidelity Fund on 30 April 2009 and now updated to exclude bank charges pertaining to cheques which are no longer issued.

Should you have any queries, please contact the LPFF by emailing Ms Ida Nchoe at [email protected].

Click here to download the 7 documents:

1. https://www.fidfund.co.za/wp-content/uploads/2024/09/Updated-list-of-banks-that-have-entered-into-a-banking-arrangements-with-the-LPFF.pdf
2. https://www.fidfund.co.za/wp-content/uploads/2024/09/Section-862-and-3-Manual-Trust-Interest-Payments-3.pdf
3. https://www.fidfund.co.za/wp-content/uploads/2024/09/Communication-AUP-report-on-Application-for-refund-of-bank-charges-and-audit-fees-form.pdf
4. https://www.fidfund.co.za/wp-content/uploads/2024/09/LPFF-DIRECTIVE-Requirement-to-conduct-AUP-on-the-Application-of-Refund-of-Bank-Charges-and-Audit-Fees.pdf
5. https://www.fidfund.co.za/wp-content/uploads/2024/09/Payment-of-trust-interest-accrued-on-trust-accounts-to-the-LPFF-in-terms-of-LPA-and-LPC-Rules.pdf
6. https://www.fidfund.co.za/wp-content/uploads/2024/09/Payment-of-Unclaimed-and-Unknown-trust-monies-in-terms-of-Section-87_4-of-the-LPA.pdf
7. https://www.fidfund.co.za/wp-content/uploads/2024/09/List-of-Recoverable-and-Non-Recoverable-Bank-Charges-No-Cheque-Fees.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• The Legal Practitioners Act is yet another piece of legislation that your clients must comply with, and which you must assess compliance with.  If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.
• As an auditor and independent reviewer, you need to consider and assess compliance with the LPA and Guidance documents issued by the LPFF.
• As an accountant, you may need to advise your clients who are legal practitioners on compliance with the LPA and adherence to the latest guidelines issued by the LPFF.
• As an assurance practitioner, you should ensure that you provide the correct revised AUP Report.

Relevance to Your Clients:

• A legal practitioner has a duty to comply with the Legal Practitioners Act.
• Your clients who are legal practitioners, must not only comply with the LPA, but they also have to adhere to the latest guidance documents issued by the LPFF.

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