Attorneys Need to Voice Their Concerns Over the Proposed Rules for Implementation of CTAPP

August 2025

By Erin Joyce and Natalie Manoukian

Starting in August of 2025, the State Bar will begin implementing reviews of client trust accounting. These proposed changes will greatly impact attorneys’ individual practices in California, and it is imperative that all legal professionals, especially solo practitioners, educate themselves on the new requirements.

Attorneys selected for compliance reviews will have to pay hefty fees to State Bar approved CPAs to audit their trust accounts, and the audits are not limited to reviewing that the bank statements reflect the account journals maintained by the attorneys. Instead, these audits or compliance reviews will demand on a short turnaround that attorneys provide evidence in the form of client communications to show that they notified clients and third parties of receipt of funds within 14 days and distributed undisputed funds within 45 days as required by Rule of Professional Conduct 1.15(d).

The Client Trust Account Protection Program (CTAPP), approved by the Supreme Court in January of 2023, provides that the State Bar must establish and administer CTAPP, ensuring that “client funds be held in trust by a licensee that facilitates the State Bar’s detection and deterrence of client trust account misconduct.” Cal. Rules of Court, rule 9.8.5. As a result, the State Bar is granted authority to conduct compliance reviews of client trust accounting. Id.

CTAPP reviews are broken up into four phases: Planning, Compliance, Accounting, and Supervision. Each phase is governed by applicable statutes and rules. Id. As discussed below, Rule 2.6 with respect to compliance reviews and investigatory audits is outlined under the Planning phase of CTAPP. Id.

In February 2025, the State Bar adopted new Rule 2.6, which outlines compliance review and investigative audit procedures. Rules of State Bar of Cal., rule 2.6. Under Rule 2.6, if selected, a licensee must comply with the State Bar and complete a trust account compliance review, investigative audit, and subject to any findings, fulfill any requirements mandatory of a corrective action plan. Id. Licensees are responsible for designating a State Bar approved Certified Public Accountant (CPA) to conduct the review at their own expense and provide any requested trust account records. Id. This expense will likely cost upwards of $10,000 and can even cost up to $25,000. Those attorneys grossing under $150,000 and who qualify for financial relief can request an in-house audit from the auditors on the State Bar’s payroll. If a licensee is selected, it not only affects the individual licensee, as all licensees of their firm may become subject to “requests for information, requests for responses to questions, and must comply with any mandatory corrective action plan.” Rule 2.6.

Compliance Review Requirements: A compliance review will review no less than one year of trust account activity. Rule 2.6. If selected, the licensee must report the name of the State Bar approved CPA selected following State Bar specifications within 30 days of receipt of notice. Id. If the selected individual is not the designated licensee per Rule 2.4, they must provide names, license numbers, and contact information for the designated licensee. Id. If no designated licensee exists, they must provide names, license numbers, and contact information for the account holder or signatory and the individual responsible for monthly trust account reconciliation. Id. Licensees must also fully comply with and respond to all questions and requests for additional documentation from the State Bar and State Bar approved CPA. Id. After all records have been provided, the selected licensee must provide a signed statement of representation on a State Bar provided form. Id. Finally, within 14 days of completion of the compliance review, licensees must submit an acknowledgment of receipt of any findings. Id.

Investigative Audit Requirements: A licensee may be selected to participate in an investigative audit review based on findings during a compliance review. Rule 2.6. An investigative audit will review no less than three years of trust account activity. Id. If selected, a licensee has 14 days to submit any requested trust account records following State Bar specifications, cooperate with and respond to all questions and requests for additional information by the State Bar related to the safekeeping of client or third-party funds, produce records related to non-trust accounts if entrusted funds are held in an account other than a trust account, and provide a signed statement of representation on a State Bar provided form after all required records have been submitted. Id.

The requirement for licensees to provide evidence that notice of receipt of funds has been provided to clients and third parties within 14 days and that undisputed funds for identified clients be distributed within 45 days goes beyond ensuring trust records are in accordance with bank records. These communications will necessarily invade attorney-client privilege communications, and the rule changes attempt to abrogate the confidentiality and privileged status of such communications if the State Bar is to make such requests.

Additionally, there is a valid concern of the unlawful practice of law for a CPA to provide expert legal opinions as to whether a lawyer has complied with a rule of professional conduct by notifying clients within 14 days without any rules or regulations as to the scope of work that the CPA is retained to do. Without any parameters governing CPA conduct, there is a potential for abuse and overreach.

The proposed set of rules on CTAPP compliance will disproportionally affect small firms and solo practitioners. It is highly recommended that solo practitioners seek resources to help ensure they have a solid understanding of their CTAPP obligations, including keeping up with reporting deadlines and changes in requirements. Both the Solo and Small Firm Summit as well as the State Bar are offering courses to provide guidance for attorneys when navigating CTAPP requirements. The Solo and Small Firm Summit offers a course on Client Trust Accounting for 1.25 hours of MCLE credit. The State Bar currently offers a training course on Practical Trust Account Reconciliation for 1 hour general and 1 hour ethics MCLE credit. More information on these resources can be found on the State Bar of California’s website. Taking the time to solidify your understanding of what these changes will mean in your individual practices is key in avoiding a situation where one may find themselves in violation of the new CTAPP rules.