Delaware IOLTA Program
- Requires lawyers to maintain pooled escrow or trust accounts with financial institutions which pay interest or dividends on IOLTA accounts which are at least as high as the interest or dividends paid by that financial institution on similarly situated non-IOLTA accounts (comparability).
- Makes participation in IOLTA by lawyers and/or law firms mandatory.
- Defines institutions eligible to hold IOLTA accounts as only those institutions which agree to pay IOLTA account customers the highest interest rate or dividend generally available at their own institution to similarly situated non-IOLTA customers. The rule change requires higher rates to be paid to qualifying IOLTA accounts only if those rates are already available to similarly situated non-IOLTA accounts.
- Specifically authorizes the use of U.S. Government money market funds and repurchase agreements collateralized with US Government securities.
- Defines allowable reasonable service charges.
No. The requirements of the Rule regulate the behavior of lawyers, who are required by the Delaware rules to place their IOLTA accounts at financial institutions that pay interest rates on IOLTA accounts comparable to those paid to non-IOLTA customers. The Supreme Court, in the proper course of regulating attorneys, has adopted criteria that lawyers must follow when choosing a financial institution for its IOLTA accounts. However, participation has always been and continues to be voluntary for financial institutions.
The Rule requires that IOLTA accounts earn interest comparable to other bank products with similar balance requirements and which meet other restrictions at that financial institution. Generally, the Foundation will review all interest bearing deposit products with or tied to check writing to determine comparability. The Rule also allows qualifying funds to be invested in repurchase agreements fully collateralized by U.S. Government securities or money market mutual funds which invest solely in U.S. Government securities, and which are considered comparable products for interest rate purposes. A financial institution can also choose to pay a “Safe Harbor” interest rate as defined in the rule (see below).
The election of the Safe Harbor option results in an automatic determination of eligibility under the Rule, without further review by the Delaware Bar Foundation of an institution’s product offerings. However, there is no requirement that a financial institution select this option initially, or having once chosen it, remain with the Safe Harbor option indefinitely. In order to change options, the Foundation requires submission to it of a revised Financial Institution Compliance Statement (for example, documenting and applying the rate of the highest comparable rate product) and an administrative review period of up to 30 days) to evaluate the revised election.
Institutions will be certified as eligible by the Delaware Bar Foundation upon a determination that they are in compliance with the Rule and based on the documentation and ongoing reporting the institution will file with the Foundation.
- To be eligible for IOLTA, a financial institution must first be approved by the Supreme Court’s Lawyers’ Fund for Client Protection. Once approved, please submit the IOLTA Financial Institution Compliance Statement and any necessary supporting documentation to the Delaware Bar Foundation for review and approval as IOLTA-eligible.
- Delaware lawyers and law firms must ensure compliance of existing pooled trust/escrow client accounts annually through the Annual Registration Statement process conducted by the Delaware Supreme Court.
- Delaware lawyers and law firms may only maintain IOLTA accounts in financial institutions certified as eligible by the Delaware Bar Foundation.
For additional information, please contact:Megan Greenberg
Delaware Bar Foundation
100 W. 10th Street, Suite 106
Wilmington, DE 19801